Foreign investment in developing country agriculture – evidence for inclusivity

ID-10052509Evidence that investing in agriculture in developing countries as a way of tackling poverty and hunger is growing. Given the sheer number of people working in the agricultural sector, investments can have benefits on a large-scale but there are also risks and big investments can, in some cases, harm the rural sector, taking land and resources away from local people. Aiming to illustrate these risks and benefits are a couple of recent reports.

A paper from the UN Food and Agriculture Organisation, Impacts of foreign agricultural investment on developing countries: evidence from case studies, brings together FAO case studies on “the impacts of foreign agricultural investment on host communities and countries”. These studies show that large-scale land acquisitions, particularly where land rights are tenuous and governance poor, can have detrimental consequences for local communities, depleting natural resources and harming livelihoods, factors which increase rather than reduce poverty. Such investments will also generate conflict between investors and inhabitants. More inclusive investment models, which involve local people in business decisions and are respectful of existing land rights are found to be more likely to yield positive impacts for both businesses and societies alike. Factors required for an inclusive business model are stated as “strong external support for supporting farmers and facilitating the investor-farmers relationship” and “patient capital”, understanding that returns on investment may take time. The enabling environment in the recipient country is also critical, comprising a strong and fair legal and institutional framework. As such building this enabling environment through “strengthening the governance and capacity of institutions in host developing countries” is vital if foreign agricultural investment is to have the proposed developmental impacts.

Despite evidence that foreign investment in developing countries can be beneficial, when done responsibly, there remains much polarity in debates around its utility. On the one hand, hoping to spur large-scale economic development as investment opportunities in agriculture increase. On the other, a sense that these money-making opportunities are a new form of colonialism, particularly where natural resources of a country are purchased with little concern for people’s rights. To help promote inclusive investments in developing countries, the Inter-Agency Working Group of the Food and Agriculture Organization, the International Fund for Agricultural Development, the United Nations Conference on Trade and Development (UNCTAD), and the World Bank have the aim of creating “a body of empirical knowledge” that will guide investments to being more responsible. A recent joint UNCTAD-World Bank report, The Practice of Responsible Investment Principles in Larger Scale Agricultural Investments, summarises a field-based survey conducted, which looked at the agricultural investment approaches of 39 large agribusinesses in sub-Saharan Africa and South East Asia, and in particular their attitude to social, economic and environmental concerns.

The results show that investments have generated both positive and negative impacts. The positive being job creation, market creation, the introduction of new technologies, increased rural incomes, and, in some cases, the provision of rural services such as education, healthcare, infrastructure, and access to finance. On the negative, poor outcomes for environmental resources and conflict over land was significant, particularly where formal land rights were conferred to investors despite existing claims to informal land rights. Lack of communication, unclear processes of land acquisition and rights, and poor consultation with inhabitants underlie these conflicts and resettlement was rarely a fair deal for local people. Investments did vary in their impact, however, as well as with regards to their profitability. A clear message from the report is that investments with positive economic, social and environmental benefits are possible, and indeed those that were positive for the local area were more likely to be successful. [Read more…]