Foreign Direct Investment (FDI) in Land in developing countries

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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
11The third restriction concentrates on the distributionof potential available land. The potentialavailable land for crop production mainly concentrateson South America and Sub-Saharan Africa.90% of potential available land is located in SouthAmerica and Sub-Saharan Africa and 50% of thepotential is spread among only seven countries(Brazil, Democratic Republic of the Congo,Angola, Sudan, Argentina, Colombia and Bolivia).This estimated potential does not consider theimportant fact of ecological and economic constraints.Due to ecological fragility and in somecases toxicity of land, not all potential areas couldbe exploited for crop production. On the otherhand, in many cases the cultivation with crops onthese areas is not profitable, because infrastructureto these areas does not exist or the fertility isrelatively low and, therefore, the cost benefit ratiois too high. According to Fischer (2002) 70% ofpotential available lands in Sub-Saharan Africa areaffected by at least one ecological or economicconstraint. When considering preceding reasons,it is forecasted that in developing countries anadditional 120 million ha for crop productionwill be activated. The increase of arable land willtake place mainly in Sub-Saharan Africa (64million ha) and in South America (52 million ha).In contrast to Sub-Saharan Africa and SouthAmerica, it is forecasted that arable land in somecountries in Asia (e.g. China, Rep. Korea) willdecrease until 2050. The main reasons for theincreasing arable land will be the price incentivesfor the production of agricultural commodities.According to Lopez (1998) and Deininger andMinten (1999), an expansion of crop cultivationareas correlates with agricultural commodityprices. Besides economic incentives, ecologicaleffects are also responsible for expansion of arableland. Regeneration of soil fertility with fertilizer isoften more expensive than the evasion on so farnot used land.Going over these facts, it could be that the potentialfor land expansion exists but the potentialsare often overestimated and land availability isconstrained due to ecological and economicrestrictions. The resulting amount of potentialavailable land area for crop production is, therefore,in some regions scarce and FDI in land couldlead to further scarcity of land.2.2. Overview of the magnitude oflarge-scale FDI in landA comprehensive set of data allowing for a preciseoverview of the extent and the contractual detailsof FDI in land is not available. Well-documentedexamples are scarce, details on the deals are oftenunclear and some reports are contradictory.However, some organisations gather informationprovided by the media in order to outline themagnitude and the relevance of the emergingphenomenon. 3A table in the annex assembles currently availableinformation about FDI in land exceeding 5,000ha per project. It is mainly based on studiesconducted by Grain (2008), by IFPRI (v. Braunand Meinzen-Dick, 2009), and the GTZ casestudies for Cambodia, Laos, Madagascar, Mali onbehalf of BMZ and a working group of IIED,3 For example see: http://farmlandgrab.org/ and http://www.landcoalition.org/cpl-blog/.
Page 2 and 3: ImprintPublished by:Deutsche Gesell
Page 4 and 5: 4Acknowledgement:List of figures an
Page 6: 6PrefaceLand acquisitions by foreig
Page 9: 9Definition of FDI in landFDI in la
Page 13 and 14: 13• Climate change (due to weathe
Page 15 and 16: 15they usually set up investment co
Page 17 and 18: 17• The access to logistic infras
Page 19 and 20: 19In the context of land use rights
Page 21 and 22: 21developing countries as well as t
Page 23 and 24: 23However, such lands are often imp
Page 26 and 27: 26scale, with 0 being the best scor
Page 28 and 29: 28MADAGASCAR MADAGASCAR MADAGASCAR
Page 30 and 31: 30Table 3: Country profile Madagasc
Page 32 and 33: 32Table 4: Demand for FDI in Madaga
Page 34 and 35: 34MALI MALI MALI MALI MALI MALI MAL
Page 36 and 37: 36Table 5: Country profile Republic
Page 38 and 39: 38market, the other example present
Page 40 and 41: 40LAOS LAOS LAOS LAOS LAOS LAOS LAO
Page 42 and 43: 42Table 7: Country profile LaosPatt
Page 44 and 45: 44The screening of the submitted pr
Page 46 and 47: 46COOPERATIONS DRIVING FACTORS WEAK
Page 48 and 49: 48Table 10: Country profile Cambodi
Page 50 and 51: 50To acquire land use rights, forei
Page 52 and 53: 525. Conclusions and recommendation
Page 54 and 55: 54distribution of land and on event
Page 56 and 57: 56Regarding the principles of inter
Page 58 and 59: 58ReferencesAlexandratos, N. (2009)
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60Gopinath, M., Pick, D., and Vasav
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62U.S. Department of State (2009e):
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64GlossaryAgro-fuelsAgro-fuels are
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66Reported FDI in land (2000-2009)
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Deutsche Gesellschaft fürTechnisch
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Foreign Direct Investment (FDI) in Land in developing countries

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