The Search for Food Security Gains Momentum
India, which doesn’t allow corporate farming domestically, has joined the growing list of countries going overseas to look for food security, with more than 80 Indian agribusiness companies investing more than Rp10.8 billion (US$211.2 million*) in African countries including Rwanda, Uganda, Kenya, Ethiopia, Congo, Madagascar, Liberia and Ghana.
India is far from alone in looking for food security overseas, nor are the African nations where India is investing unique. Many developing countries, according to the Food and Agriculture Organization of the United Nations “are making strenuous efforts to attract and facilitate foreign investment into their agriculture sectors.” That has dovetailed with increasing nervousness on the part of countries which, either because of population pressures, lack of arable land or climate change problems, have begun to look overseas for land on which to grow their food.
Critics say this has raised concern whether food security FDI has the potential to harm the host countries, distorting their local markets, taking food away from poverty-stricken domestic citizens, distorting production, pushing people off customary lands or forcing them into seasonal labor, increasing the dependence of the poor on commercial foodstuffs, taking water or other natural resources that the poor used for their own production, and other issues.
For investment-strapped governments such as Sri Lanka, Laos and many others, however FDI in any segment of the economy is generally regarded by traditional economists as important, providing technology transfer, infrastructure development and other important attributes.
For them, FDI is regarded as a “potentially important contributor to filling the investment gap and providing developmental benefits, for example through technology transfer, employment creation and infrastructure development,” the FAO said in a recent study. “Whether these potential developmental benefits are actually likely to be realized is a key concern, as FDI has also the potential to harm host countries.”
With the global transport network now providing the ability to move vast amounts of food around the planet cheaply, and with the world population having reached 7.023 billion, both the need and the ability to do so have overlapped. According to a 60-page July 2011 report titled Land Tenure and International Investment in Agriculture by the Committee on World Food Security, over the past 50 years, “Multinational companies have extended their global reach on supplies of food, animal feed, biofuels, timber and minerals.”
Deals, according to the report, occur at multiple levels, both within and between regions. In particular, as Asia Sentinel reported in May 2009, the major players were China, South Korea and countries in the Gulf States. However, today the deals have spread far beyond those countries, with the South African Commercial Farmers Association acquiring 200,000 ha in Congo and negotiating with another 22 African governments for more land, for instance. Brazilians are expanding their holdings in Bolivia, Vietnamese and Chinese interests are moving into Laos, UK interests are acquiring land in Eastern Europe. Kuwait has obtained 50,000 hectares of Cambodian farmland. Indian companies are growing oilseeds, cereals, flowers and tea in seven countries across Africa.
“The search for fertile and cheaper lands and labor are taking us to Africa. The governments in most of the African countries are gradually getting more democratic and stable. They are also proactive towards promoting industries, especially agriculture to meet the demand for food,” an official of Karuturi Global told India’s Financial Chronicle.
Although Indian companies are looking thousands of kilometers away in Africa for land on which to produce food, Sri Lanka is practically begging agricultural investors to enter the country, now recovering slowly from decades of sectarian violence and outright war. The government recently held a Sri Lanka Expo in Colombo at which the country’s farmlands were marketed aggressively to Arabian Gulf-based businesses. The island’s consul general in Dubai was quoted in media recently as urging the acquisition of Sri Lankan land for agricultural export.
“The UAE’s imports of food products have significantly increased over the recent years. Investing in agricultural land will greatly benefit in preventing steep increase in prices and ensuring steady supply,” according to Invest Sri Lanka, a government publication.
That has raised concerns because despite the lush tropical climate of the Indian Ocean country, it can’t meet demand for fruits and vegetables and other staples foods, authorities say. And in fact there is growing concern that extends well beyond Sri Lanka.
It many never come off in any case. Many eager developing countries simply don’t have the ability to absorb large-scale investment. A venture capitalist who recently visited Sri Lanka told Asia Sentinel that much of the land that is under-utilized is in territory previously held by the Liberation Tigers of Tamil Eelam, with well-connected Sinhalese taking Tamil land for corporate farming, causing some corporations to shy away from investment.
Equally, As Asia Sentinel reported in 2009, Saudi Arabia’s Binladen Corporation walked away from a proposed US$4.3 billion scheme to plant rice on a half-million hectare area of Indonesia’s Papua, apparently privately blaming red tape, overlapping regulations, corruption and inadequate infrastructure. A million-hectare oil palm plantation proposed by the Chinese in Kalimantan also has never materialized. The South Korean company Daewoo was forced to drop plans to plant more than 400,000 hectares of Madagascar land in corn in the face of political opposition in 2008.
Still, it appears that agricultural colonization is gaining pace although according to the Committee on World Food Security, the amount of hectarage being purchased across the world is shrouded in secrecy and estimates vary wildly. As an example, one 2011study cited by the committee estimated that 46.6 million hectares were taken over by foreign interests in 81 countries across the globe between 2005 and 2009 while another puts the figure between 51 and 63 million ha which reportedly was taken over in 27 African countries up to 2010.
“While there clearly is much uncertainty about how much land is changing hands, all sources agree that the trend is markedly upward and is likely to continue,” the authors note. “Large-scale land investments involve a complex, interlocking global system of interests. Investments may be direct or indirect, international and domestic, productive or speculative, corporate, public or farmer investments.”
The direct players include companies seeking land to grow food, feed and biofuels. However, as Asia Sentinel reported in November 2011, there is growing concern over the “financialization” of agricultural products as indirect players such as pension funds, hedge fund managers, real estate groups and other equities funds pile into the market, not only on land but on commodities, for speculation purposes.
“Evidence suggests that many land deals have not been followed by productive investment, with only 20 percent of investments that have been announced actually being followed through with agricultural production happening on the ground.”
*Corrected 18 April 2012