Investors should work with farmers, not grab their land
Industrialised countries should do more to persuade companies that
investing in, and working with, farmers makes more business sense than
buying their land
Land grabbing has become a hot topic in the international development
community and beyond. The term usually refers to the acquisition of
large areas of land by powerful investors, without respecting the rights
and interests of the local users like farmers, herders and foresters.
Estimates vary widely because of the difficulty of collecting reliable data, but it can be assumed that at least 30m hectares have been targeted by large-scale land transactions over the past decade.
While not all large-scale land acquisitions can be defined as land grabbing, research by the Food and Agriculture Organisation (FAO) shows they carry risks for local communities and their environment, especially in countries where governance is weak and land rights unclear. Displacement of small farmers, loss of incomes and livelihoods for rural people and depletion of productive resources are all reported, with consequences including increased poverty and food insecurity, social fragmentation and conflicts.
The land rush was fuelled by the food price hike of 2007-08 – wealthier countries with a food deficit tried to secure supplies by buying land in developing countries with abundant natural resources. Other factors were the rise of biofuels and portfolio diversification by investors worried by the fall of real estate, equity and bond markets.
But the land grabbing phenomenon is also a reflection of an investment gap in developing country agriculture that has persisted for decades. Filling that gap with productive investment is urgently needed to stop land grabbing and reduce hunger and poverty.
The world faces the formidable challenge of feeding a population that will exceed 9 billion in 2050. Today, one person in eight suffers from chronic hunger. To eradicate hunger and reduce poverty, the FAO estimates that more than $80bn (£49.8bn) per year of net investments in agriculture in developing countries are needed. Achieving the goal in a sustainable manner that preserves natural resources will cost even more.
Farmers are the largest investors in agriculture, far ahead of any other sources. They also constitute the majority of the world's poor. Helping them invest more is essential to meet the twin challenge of feeding the world and reducing poverty. To this end, governments should put in place supportive policies and invest in key public goods such as infrastructure, education and agricultural research and development.
Even then, farmers and governments will struggle to meet the enormous investment needs. Businesses also have an important role to play. They can contribute to increasing the productivity of agriculture in many ways such as transfer of technology, value addition and more efficient management. But unfortunately not all corporate investments will have this positive effect. So the question is: what type of investment is more likely to increase agricultural productivity and reduce hunger?
FAO research shows that investments that involve local farmers as equal business partners, leaving them in control of their land, have the most positive effects on local development. In Zambia, for example, a partnership between a co-operative of farmers producing sugar cane and a processing company gives farmers shares in the company and representation on its board. Inclusive investments combine the strengths of the investor with those of local farmers. The investor brings capital, technology and expertise in management and marketing, while farmers provide labour, land, traditional know-how and knowledge of local conditions.
However, to succeed, inclusive investments may still need external support to build the investor-farmers relationship. They also need "patient capital", as financial returns are unlikely to materialise in the first years. Above all, they need supportive policies, laws and institutions, but these are often missing in developing countries. Their governments should improve the investment climate and give priority to inclusive investments.
At their summit in Lough Erne, G8 leaders promised to help developing countries improve land governance, including by implementing the guidelines on the governance of tenure adopted by the Committee on World Food Security last year.
This is good news. G8 countries are home to many of the world's largest investors. They should give them clear incentives to apply internationally recognised standards for responsible investment. And encourage them to invest with farmers, rather than purchase vast tracts of land which are then often left idle.
Sensible investors do not look for profit only, they want sustainable profit. They can be persuaded that investing with farmers makes more business sense than investing in their lands.
• Pascal Liu is a senior economist at the Food and Agriculture Organisation
Estimates vary widely because of the difficulty of collecting reliable data, but it can be assumed that at least 30m hectares have been targeted by large-scale land transactions over the past decade.
While not all large-scale land acquisitions can be defined as land grabbing, research by the Food and Agriculture Organisation (FAO) shows they carry risks for local communities and their environment, especially in countries where governance is weak and land rights unclear. Displacement of small farmers, loss of incomes and livelihoods for rural people and depletion of productive resources are all reported, with consequences including increased poverty and food insecurity, social fragmentation and conflicts.
The land rush was fuelled by the food price hike of 2007-08 – wealthier countries with a food deficit tried to secure supplies by buying land in developing countries with abundant natural resources. Other factors were the rise of biofuels and portfolio diversification by investors worried by the fall of real estate, equity and bond markets.
But the land grabbing phenomenon is also a reflection of an investment gap in developing country agriculture that has persisted for decades. Filling that gap with productive investment is urgently needed to stop land grabbing and reduce hunger and poverty.
The world faces the formidable challenge of feeding a population that will exceed 9 billion in 2050. Today, one person in eight suffers from chronic hunger. To eradicate hunger and reduce poverty, the FAO estimates that more than $80bn (£49.8bn) per year of net investments in agriculture in developing countries are needed. Achieving the goal in a sustainable manner that preserves natural resources will cost even more.
Farmers are the largest investors in agriculture, far ahead of any other sources. They also constitute the majority of the world's poor. Helping them invest more is essential to meet the twin challenge of feeding the world and reducing poverty. To this end, governments should put in place supportive policies and invest in key public goods such as infrastructure, education and agricultural research and development.
Even then, farmers and governments will struggle to meet the enormous investment needs. Businesses also have an important role to play. They can contribute to increasing the productivity of agriculture in many ways such as transfer of technology, value addition and more efficient management. But unfortunately not all corporate investments will have this positive effect. So the question is: what type of investment is more likely to increase agricultural productivity and reduce hunger?
FAO research shows that investments that involve local farmers as equal business partners, leaving them in control of their land, have the most positive effects on local development. In Zambia, for example, a partnership between a co-operative of farmers producing sugar cane and a processing company gives farmers shares in the company and representation on its board. Inclusive investments combine the strengths of the investor with those of local farmers. The investor brings capital, technology and expertise in management and marketing, while farmers provide labour, land, traditional know-how and knowledge of local conditions.
However, to succeed, inclusive investments may still need external support to build the investor-farmers relationship. They also need "patient capital", as financial returns are unlikely to materialise in the first years. Above all, they need supportive policies, laws and institutions, but these are often missing in developing countries. Their governments should improve the investment climate and give priority to inclusive investments.
At their summit in Lough Erne, G8 leaders promised to help developing countries improve land governance, including by implementing the guidelines on the governance of tenure adopted by the Committee on World Food Security last year.
This is good news. G8 countries are home to many of the world's largest investors. They should give them clear incentives to apply internationally recognised standards for responsible investment. And encourage them to invest with farmers, rather than purchase vast tracts of land which are then often left idle.
Sensible investors do not look for profit only, they want sustainable profit. They can be persuaded that investing with farmers makes more business sense than investing in their lands.
• Pascal Liu is a senior economist at the Food and Agriculture Organisation
