TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

The available data confirm that there has been
a marked rise in FDI into the agri-food sector
of developing countries since 2007. Although
agricultural FDI flows contracted after their peak
of 2009, their level in the 2010-2011 period
was still higher than the average for 2003-2007.
The flows are characterized by regional patterns
whereby intra-regional flows are greater than
inter-regional flows except for Africa. The share
of FDI that goes to the agri-food sector almost
doubled between the periods 2000-2005 and
2006-2008 but is still low compared to other
economic sectors, accounting for less than 5
percent over the period 2006-2008. The bulk
of agricultural FDI flows is directed to the food
manufacturing sector, while primary agricultural
production accounted for less than 10 percent
over the period 2006-2008. More recent trends
for foreign investment in the primary agricultural
sector are difficult to track due to the lack of
recent disaggregated data.
The case studies presented in this book
provide some evidence on the various types of
impacts (economic, social and environmental) of
foreign agricultural investment at national and
local levels in the host country. The observed
impacts were very diverse and the studies shed
light on the various factors that condition the
success or failure of agricultural investments.
Overall, their findings are consistent with those
of other studies, although it is difficult to draw
general conclusions due to the limitations
inherent in the case study approach.
1. Large-scale land acquisition
Over the last four years many analysts,
development agencies, NGOs and the media
have focused on one specific category of primary
agricultural investment, namely acquisition of
agricultural land on a large scale. This emphasis
is due to the numerous economic, political,
social and environmental implications that
land acquisition has, especially if it is done by
foreigners or for them. Estimates of the area
This Chapter was prepared by Pascal Liu, Trade and Markets
Division, FAO
Part 6: Conclusions and recommendations
acquired by foreign firms vary substantially across
sources due to methodological differences.
The more reliable cross-checked figures are not
as high as what the media headlines suggest.
Nevertheless, they do show that foreign
investment in agricultural land in developing
countries has increased markedly over the past
decade. More importantly, the lands acquired
by foreign investors tend to be among the best
ones, with good soil quality, high production
potential, irrigation and proximity to infrastructure
and markets. As a majority of foreign investment
projects aim at export markets or the production
of biofuels, they may pose a threat to food
security in low-income food-deficit countries,
especially if they replace food crops that were
destined for the local market. The net effect on
food security will also depend on the additional
income generated by the project, its sustainability
and how it is distributed in the local economy.
Large-scale acquisition of agricultural land
can have other adverse impacts, especially
in countries where there is a lack of good
governance, rule of law, transparency and clear
land tenure rights. These negative effects include
the displacement of smallholder farmers, the
loss of grazing land for pastoralists, the loss of
incomes and livelihoods for rural people, the
depletion of productive resources, and in general,
negative impacts on local livelihoods due to
reduced access to resources, which may lead to
social fragmentation. There is also evidence of
adverse environmental impacts, in particular the
degradation of natural resources such as land,
water, forests and biodiversity. The case studies
show that when such impacts arise they generate
opposition to the project by local people, which
at times translate in occupation of part of the
land or hostile action such as damage to the
company’s property. Opposition can force the
investor to engage in costly and time-consuming
litigation and lawsuits; it increases transaction
costs and reduces the return to the investment.
The negative effects are likely to be worse when
the company only utilizes a small share of the
land it has acquired in areas where land is high in
demand.
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