TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

The findings of the studies presented in this
publication confirm the increasing trend of
foreign investment into the agricultural sector
of the surveyed countries. Resource-seeking
investment accounts for a substantial share of the
increase, although it was not possible to quantify
it more precisely due to the lack of recent
disaggregated data. In spite of the increasing
trend, the share of total FDI that is directed to
agriculture remains low with respect to other
sectors. In almost all the surveyed countries it was
under 5 percent of total FDI inflows and in the
majority of them it was even below 2 percent.
The case studies provide indications on the
various types of impacts (economic, social and
environmental) of foreign agricultural investment
at national and local levels in the host country,
although it is difficult to draw general conclusions
due to the limitations inherent in the case study
approach. There are substantial differences in
the analysed contexts and models. The observed
impacts were very diverse and depended on a
range of factors as discussed below. Also, the
time frame of agricultural investment is very long
and the full impacts may only materialize after
decades.
1. National impacts of
agricultural FDI
At the national level, the studies found some
evidence that FDI contributed positively to
increase in agricultural production and yields.
In Ghana, investment by a single transnational
company was expected to contribute significantly
to the increase of the nation’s total palm oil
output. In Uganda, companies such as Tilda (U)
Ltd contributed to the production of rice, which
nearly doubled over the last decade due to the
introduction of a new rice variety (Nerica 4).
Some case studies suggest that FDI favours
the diversification of crops. In Senegal FDI
contributed positively to the production of
some high quality fresh fruits. In the cases
This chapter was prepared by Pascal Liu, Trade and Markets
Division, FAO
Part 5: Synthesis of findings
where the investment targeted export markets,
evidence of higher export earnings was found
for some countries. For example, in Ghana,
exports earnings of non-traditional agricultural
commodities (e.g. fruits and vegetables)
increased four-fold between 2000 and 2009
due to FDI. A positive effect was also observed
in Senegal, where for example, the volume of
mango exports grew rapidly. These findings
are consistent with those of another study by
FAO which found that, in Egypt and Morocco,
agricultural production projects to which foreign
investment contributed had considerable positive
impacts on agricultural exports. In Morocco, for
example, foreign companies have contributed
to the development of early tomato exports to
Western Europe, a high-value market. The studies
suggest that FDI contributed to an increase in
value added. In some cases, foreign investments
led to the adoption of higher standards. A
variety of standards was adopted. Some were
product-related standards, while other standards
addressed the production and/or processing
process (e.g. use of the ISO 9000 series and
GlobalGAP standards in Uganda). Certification
to widely-recognized voluntary standards can
increase market access and value-added for
farmers and export businesses.
Employment creation, in particular in
rural areas, where most of the poor live, is
often presented as an expected advantage of
international investment in agriculture. The study
observed this effect in Ghana, where employment
creation by FDI in agriculture was estimated to
exceed 180 000 jobs in the period 2001-2008
and Uganda where an estimated 3 000 jobs were
provided by eleven transnational corporations in
the agricultural sector in 2009. These findings
complement those of another study by FAO
which found that in Sudan over 6 500 jobs were
created over the period 2000-2008. Beyond the
observed effects, some surveyed projects expect
to have high employment creation effects in the
future.
The country studies show mixed results on
technology transfer. There are some positive
examples of adoption of new production
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