Foreign Direct Investment (FDI) in Land in developing countries

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26scale, with 0 being the best score (no hunger) and100 being the worst, though neither of theseextremes is achieved in practice. Values less than4.9 reflect low hunger, values between 5 and 9.9reflect moderate hunger, values between 10 and19.9 indicate a serious problem, values between 20and 29.9 are alarming, and values exceeding 30are extremely alarming. Though the proportion ofpeople who are calorie deficient is integrated in theGHI, this information is also listed separately inthe country profiles.Additionally, the relevance of agriculture isaddressed by its share of GDP and overall employment.The higher its relevance especially as anemployment option, the larger a potential burdento rural livelihood, if foreign investments displaceslocal employers.Moreover, food security is described by theamount of food aid, the food import bill and theclassification of the countries according to theFAO as a country in crisis.Biodiversity and overall environmental conditionsare addressed with indicators representing the areain each country that is protected area, the deforestationrate and overall share of forests in totalarea. The deforestation rate can only serve asproxy variable for loss of biodiversity as it primarilyindicates the annual loss of forest area and,therefore, the ongoing loss of area relevant forclimate and soil and groundwater quality. The useof fire cultivation can give a hint whether thispotential damage to the environment is an appliedcultivation habit within a country. Additionally, itindicates the already existing pressure to accedenew land.Overall economyAll case countries belong to the category of leastdeveloped countries (LDC), which have a GDPper capita below 900 US$ and/or are highlyeconomically vulnerable e.g. due to low diversificationand/or have weak human assets like education.The share of population living below thepoverty line of 2 US$ lies in all countries higherthan 65% and is the highest in Madagascar withnearly 90% in 2000-2006. If economic developmentis a goal of the society, there is an urgentneed for investments. Especially Mali attracts alarge amount of ODA for agriculture with 72million US$ in 2007.Relevance of agricultureIn all cases, agriculture plays a very relevant rolefor the overall economy. Especially as regards toemployment, agriculture plays an important rolein all of the countries. The share of agriculturein GDP reaches from about 30% in Cambodia,Madagascar and Mali to 45% in Lao PDR. Inlight of this, FDI in land affects a sector that isof outstanding importance for employment in allof the four countries (in the EU it is 4%).Food securityData on food security reveals a need for improvement,even though the countries are not classifiedas “countries in crisis” according to the FAO.However, all four countries can be seen as vulnerableto food insecurity. The GHI states an alarmingstatus for all countries. All receive food aidand all except Mali paid large food bills in 2006,most in Cambodia (FAO 2009b). Taking intoaccount the percentage of people living below thepoverty line, it is obvious that FDI in land mayworsen the situation of the poor if it does notcreate additional income opportunities.Environment and BiodiversityWith respect to the environmental conditions andbiodiversity, the share of protected areas differsconsiderably between the Asian and the Africancountries. The forestry area is the highest in LaoPDR. Forests are an important source of income.Official data from 2002 (MAFF) reported that42% of land area was covered with forest. A morecurrent estimate by the end of 2007 from theNational Land Management Authority reported35%. Even though a high protection rate canbe found for Cambodia, their deforestation rateis the largest with 2% per year. In Mali – forexample – fire cultivation destroying about 14million ha pasture per year.Investment climateSome information characterising the overallclimate for FDI in the case study countries issummarised in the country profiles. The investmentindicators of the World Bank reflect howattractive a target country is for foreign investors.They rank a single country’s position withinan overall list of 181 evaluated countries – thelarger the position, the worse the investmentattractiveness.
27With respect to “ease of doing business”, thefour countries are ranked into the last quarter ofthe surveyed countries. Concerning corruption,Madagascar and Mali are much less affected thanCambodia and Lao PDR.Regarding the degree of how target countriesprotect foreign investors’ rights, there areremarkable differences between the countries:Madagascar and Cambodia are perceived asprotecting investors much better compared toMali or Lao PDR. But Lao PDR is perceivedto be best in “enforcing contracts”.The corruption perception index (CPI), puttogether by Transparency International, ranksmore than 180 countries by their perceived levelsof corruption, as determined by expert assessmentsand opinion surveys. Scores assigned remainbetween 0 and 10 as best score. All case countriesreceived bad scores. Madagascar ranks best amongthe case countries.In all countries, extracting and mining play thedominant role in all FDI, but in Cambodia andLao PDR the share in agricultural FDI is veryhigh too.Regarding the specific share of FDI for agriculture,here there is no comprehensive datasetprovided by the UNCTAD or by other organisations.More specific information on the FDI climate isprovided by the 2009 Investment Climate Statementsof the US Bureau of Economic, Energyand Business Affairs of the US State Department.It assesses the investment climate in about 150countries. 12Legal multi- and bilateral environmentThe four case countries differ greatly in theirinvolvement in legal arrangements at multi- andbilateral level. Cambodia, Madagascar and Maliare members of the WTO, so that the multilateralprovisions of WTO are applicable. This does nothold for Laos which is not a WTO member.All of the four countries have signed a largenumber of BITs. However, agreements do notcover all countries that investors come from. 13This lack of a bilateral frame may be a risk and achance: In the absence of a BIT, the risk for theinvestor increases that no compensation is guaranteedin the case of expropriation. This leads to aloss in attractiveness in investing in the targetcountry. On the other hand it may raise thebargaining power for the target country byoffering such provisions by requiring own conditionsat the same time. In any case, the negotiationof new BITs should carefully balance the existingoutlook for protecting their own interests.Legal domestic environmentThe description on the legal domestic frameworkfocuses on land law, because domestic land law isof special relevance for FDI in land.Data on the size of FDI in land and risks andopportunitiesThe lack of transparency in FDI in land affectsthe attempt to give a comprehensive overview ofthe amount and size of land devoted to foreigninvestors. However, some relevant informationwas gathered.Rice harvest12 For general information compare U.S. State Dpartment, 2009a; for country specific information see U.S. State Dpartment, 2009b-d.13 The most relevant investing countries for FDI in land in Cambodia, Laos, Mali and Madagascar are summarised in the tables of the respective country profiles.
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 and 10: 9Definition of FDI in landFDI in la
Page 11 and 12: 11The third restriction concentrate
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 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)
Page 60 and 61: 60Gopinath, M., Pick, D., and Vasav
Page 62 and 63: 62U.S. Department of State (2009e):
Page 64 and 65: 64GlossaryAgro-fuelsAgro-fuels are
Page 66 and 67: 66Reported FDI in land (2000-2009)
Page 76:
Deutsche Gesellschaft fürTechnisch
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Foreign Direct Investment (FDI) in Land in developing countries

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