LONDON (AlertNet) - Foreign investors looking to grow crops in developing countries should avoid buying land that is already in use and try approaches that leave local farmers in control of their land, says a new U.N. report.
"For investments involving large-scale land acquisition in countries where land rights are unclear and insecure, the disadvantages often outweigh the few benefits to the local community," says the report from the United Nations' Food and Agriculture Organization (FAO).
International investments where local farmers get an active role and continue to manage their land have the most positive economic and social effects, it notes. Suggested alternatives to "land grabbing" include contract farming, schemes that offer farmers production and marketing services and a share of capital, and joint ventures between investing companies and farmer cooperatives.
The report, which examines foreign agricultural investment in Asia, Africa and Latin America, says the most successful projects combine the strengths of investors - capital, technology and management, and marketing expertise - with those of local farmers - labour, land and local knowledge.
"Even from the investor’s perspective, business models that do not involve the transfer of land control are likely to be more profitable," says the report, adding that leaving local farmers in charge gives then an incentive to invest in improving the land.
There are doubts over the extent to which large-scale land acquisitions have created decent jobs for local people, the report says. "In several projects the number of jobs was lower than what was initially announced ... and in some projects even low-skilled worker jobs were mainly taken up by non-locals," it notes.
And where foreign investment is aimed at producing biofuels or crops for export, it can pose a threat to food security, especially if the new crops replace food crops that were destined for the local market, the report warns.
Other problems include displacement of smallholder farmers from their land, loss of grazing land for pastoralists, a drop in income for rural people, and degradation of natural resources including land, water and biodiversity.
According to the Land Matrix, an online public database run by the International Land Coalition, 924 transnational land deals have been recorded since 2000, amounting to more than 48.8 million hectares of land, with 35 percent of it in Africa. The FAO says, however, that while there is ample evidence of increasing investment in developing country agriculture, it is difficult to quantify due to the lack of reliable data.
WIN-WIN OR NEO-COLONIALISM?
Despite the challenges, the FAO report says additional investment in agriculture of at least $83 billion annually is needed to meet global targets for cutting the number of malnourished people and reducing poverty. That represents an increase of about 50 percent a year over current levels, and needs to come from both the public and private sectors, the report says.
Some developing countries are making major efforts to attract foreign investment into their agricultural sectors, believing it can fill the gap left by shrinking development aid and limited domestic budgets, while at the same time creating employment and promoting technology transfer, the report says.
But to realise benefits, care must be taken in formulating investment contracts and selecting business models, and the right laws and policies need to be in place in the host countries, the report notes.
"It is important that any international investment should bring development benefits to the receiving country... if those investments are to be 'win-win' rather than 'neo-colonialism'", writes David Hallam, director of the FAO's trade and markets division, in a foreword to the report.
On the downside, business models that include local farmers take longer to implement and show results, and are more costly at the outset - which could lead to the demise of the investment project, the report says. But government agencies, donors, international development banks and non-government groups can provide financial and other support to keep things on track, and social investors can also play a role, it adds.
There is some international guidance available for countries seeking foreign investment in their farm sectors, though there are no legally binding rules.
Earlier this year, the Committee on World Food Security, a high-level international forum, adopted voluntary guidelines on responsible governance of the tenure of land, fisheries and forests to protect national food security. And last month it launched a two-year consultation process to develop principles for responsible investment in agriculture that respect rights, livelihoods and resources.