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, ) Saudis Set Aside $800m to Secure Overseas Food (Financial Times, ) UAE Stepping Up Agricultural Investment in Sudan (Sudan Tribune, ) Food Is Gold So Billions Invested in Farming (New York Times, ) Daewoo Leases African Plantation (BBC, ) Land Leased to Secure Crops for South Korea (Financial Times, ) Korea’s Daewoo Logistics Leases Madagascar Land for Feed, Fuel (Bloomberg, ) Short of Food? Rent Half a Country (New York Times, ) Pakistan Offers Farmland to Foreign Investors (Reuters, ) UN Warns Of Neo-Colonialism (Financial Times, ) Manufactured Famine: A New Wave of Food Colonialism Is Snatching Food from the Mouths of The Poor (Guardian, ) Dispute Erupts Over Plans to Invest Millions in Rice Farming (Economist, )

Outline Recent trends and patterns in international investments in agriculture Recent trends and patterns in international investments in agriculture Motivations for international investments in agriculture Motivations for international investments in agriculture Impacts of international investments in agriculture Impacts of international investments in agriculture Policy implications Policy implications Outstanding issues Outstanding issues

Recent investment trends and patterns focus on investment for agricultural production focus on investment for agricultural production available information – WIR, media – plans versus realized investments, inadequate national statistics available information – WIR, media – plans versus realized investments, inadequate national statistics not a new development but is there an increasing trend (land grab)? 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 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 destinations of investment flows – Africa, S.E. Asia but also S. America

Recent investment trends and patterns nature of investments – land acquisitions predominate? nature of investments – land acquisitions predominate? many land acquisitions in excess of ha and up to 1 million ha many land acquisitions in excess of ha and up to 1 million ha examples 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 vertical integration against recent trends in FDI

Motivations – investing countries Motivations depends on investor – private sector, government, sovereign funds Motivations depends on investor – private sector, government, sovereign funds food security food security  (worsening) natural resource constraints – land and water  international trade policies and the reliability of international markets biofuel production biofuel production portfolio diversification – financial gain portfolio diversification – financial gain

Motivations – host countries need for investment – foreign direct investment needed to supplement other sources of investment funds need for investment – foreign direct investment needed to supplement other sources of investment funds financial benefits of asset transfers small? financial benefits of asset transfers small? developmental benefits – technology transfer, employment creation, infrastructural developments developmental benefits – technology transfer, employment creation, infrastructural developments

ODA to agriculture

Impacts of international investments economic, political, social, environmental impacts economic, political, social, environmental impacts “win-win” or “neo-colonialism”? - ethical concerns “win-win” or “neo-colonialism”? - ethical concerns positive developmental effects of foreign direct investment 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 investments negative developmental effects 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 the record on foreign direct investment in agriculture

Policy implications encouraging inward investment – recent policy reforms but land raises particular issues encouraging inward investment – recent policy reforms but land raises particular issues creation of receptive domestic sector creation of receptive domestic sector investment climate and incentives investment climate and incentives trade policy commitments trade policy commitments consistency with food security strategies consistency with food security strategies establishing clear property rights establishing clear property rights limiting adverse social and environmental impacts limiting adverse social and environmental impacts land use rights, involvement and compensation of stakeholders strengthen or maintain weak? land use rights, involvement and compensation of stakeholders strengthen or maintain weak?

Policy implications international codes of conduct and global corporate social responsibility initiatives international codes of conduct and global corporate social responsibility initiatives international investment agreements international investment agreements dispute settlement dispute settlement WTO disciplines (URAA, SPS-TBT, TRIPS) WTO disciplines (URAA, SPS-TBT, TRIPS)

Some outstanding issues Investing country issues Investing country issues  why vertical integration? alternatives to equity investments – non-equity investments; trade Host country issues Host country issues  policy and legal frameworks to minimise risks and maximise benefits International issues International issues  international regulation and codes of conduct  matching capital to opportunities but how to devise investment programmes to meet investment needs?