Foreign Direct Investment (FDI) in Land in developing countries

102. Overview of FDI in land and analysis ofrecent developments and trends2.1. Global land resources:a short overviewIn order to better understand FDI in land, a roughoverview about global land resources is necessary.This chapter investigates the potential availableland area for crop production and forecasts thedevelopment of arable land. The chapter reliesmainly on a study by Bruinsma (2009).The worldwide land surface covers 13.4 billion ha.Of these 13.4 billion ha 12 % is currently used forthe cultivation of crops which translates into anestimated area of 1.5 billion ha. Arable land hasincreased over the last decades and higher demandfor agricultural commodities will lead to a furtherincrease of cultivated land area. The main driversof this development will be on one hand theincreasing demand for food and on the other theincreasing demand for agricultural raw materialsfor energy and other industrial purposes (e.g.rubber). From 1967 until 2005, the global areaused for crops increased by 187 million ha. Theincrease occurred mainly in developing countries(227 million ha), while in developed countries thecultivated area decreased by 40 million ha. Primaryreasons for this development in developed countrieswere the continual growth of yields and thedeceleration of agricultural commodity demand.When discussing FDI in land, the central questionhas to be answered whether land is a scarceresource.According to calculations, a wider range of globalland surface for the cultivation of crops could beused. An estimation by Fischer et al. (2002)shows a potential of 4.5 billion ha which can beused for crop production. Consequently only 36%of potential land areas for crop production are inuse and the remaining 2.7 billion ha could be usedin the future to satisfy the increasing demand.These potentials are unequally distributed.Whereas great potentials mainly exist in developingcountries, in developed countries potentials arerare. According to Fischer et al. (2002) potentialland area for crop production in developingcountries is estimated at 2.8 billion ha. At themoment 970 million ha are in use which impliesthat 1.8 billion ha could be activated. However,this calculation is often overestimated and potentialsare in reality far lower due to a number ofrestrictions:First, this estimation ignores all other possibleland use opportunities besides crop production.The need for forest, protection areas as well assettlement and industrial areas is not considered.According to Alexandratos (2009) only 40%of the potential 2.7 billion ha available is underconsideration for forests (45%), protection areas(12%) as well as settlement and industrialareas (3%). Similar to Alexandratos (2009),Nachtergaele and George (2009) also restrictthe potential land use to crop production on 55%of potential available land.A further point of criticism exists in the varyingland qualities. The estimated potential of 2.7billion ha does not consider that not on all of theseareas a wide variety of crops could be cultivated.For example, in this calculation land areas inNorth Africa are also considered, which could beonly used for the cultivation of olive trees.Rice Harvest