World Investment Report 2009: Transnational Corporations - Unctad

CHAPTER IV 137
Box IV.3. The significance of FDI in China’s agriculture
China has received significant inflows of FDI in
agriculture since 1998: they ranged from $600 million
to over $1.2 billion annually between 1998 and 2008
(box figure IV.3.1). During the entire period, China
registered 10,622 FDI projects in agriculture (or 3% of
the total number of FDI projects) and nearly $10 billion
of cumulative FDI inflows (or 1.5% of total accumulated
inflows).
Significant FDI to agriculture in the country
supplements domestic capital for investment, brings
advanced technologies and equipment, introduces
new products and advanced management, promotes
development of the food processing industry, and
accelerates reform in rural areas and in agriculture in
general (Ge, 2009).
Source Source: : UNCTAD.
important i when h farmers f have h to make k substantial b i l
investments (e.g. in heavy machinery).
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credit and investment capabilities of farmers by
increasing their income. Contract farmers have
significantly higher incomes than other farmers:
from 10% to as much as 100% higher in Guatemala,
Indonesia and Kenya (World Bank, 2007). In two
cases of contract farming examined in India, one
concerning milk and another vegetables, revenues
of farmers were two to four times higher than those
of non-contract farmers (Birthal, Joshi and Gulati,
2005). Indeed, most empirical studies suggest that
contract farming schemes have raised the income
of participating farmers (e.g. Little and Watts,
1994; Porter and Phillips-Howard, 1997; Minot,
2007).
On the other hand, participating farmers can
come under considerable financial pressure when
dealing with large agribusiness firms. It is common
practice by companies such as supermarkets to delay
payments to suppliers; for example, in Latin America,
horticultural producers face payment delays of 15 to
90 days (Reardon and Berdegué, 2002).
While the provision or facilitation of access to
finance for local farmers through contract farming is
common, data concerning the amounts involved are
difficult to ascertain. Sometimes, for an individual
farmer these amounts are relatively small, but they
can make a big difference (Setboonsarng, 2008), as
illustrated by Olam Nigeria’s support to rice farmers
(box IV.4). Other examples indicate that the amounts
can be significant. For example, Bunge, a United States
agribusiness TNC, provided the equivalent of nearly
$1 billion worth of inputs to Brazilian soya farmers
in 2004 (Greenpeace, 2006). Overall, United States
TNCs are responsible for 60% of the total financing
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Box figure IV.3.1. FDI in agriculture in China,
inflows and number of projects, 1998–2008
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Source Source: : Ministry of Commerce of China.
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of f soya production d i in i Brazil B il (Milieudefensie (Mili d f i and d
Friends of the Earth, 2006). 5
2. Technology and innovation
Technological progress is crucial for
agricultural development. Throughout the twentieth
century, improvements in agricultural productivity
were closely linked to policies towards and
investments in agricultural R&D (Alston, Pardey
and Smith, 1999). Agricultural development through
innovation is vital for reducing poverty in the
developing world, but agricultural R&D remains
concentrated in developed countries and is grossly
underfunded in most developing countries (IAASTD,
2008). Due partly to weaknesses in their agricultural
innovation systems, developing countries as a whole
invested only 0.56% of their agricultural value added
in R&D in 2000, compared with 5.16% invested by
developed countries (Pardey et al., 2007).
Public research programmes have in the past
produced important results, including scientific and
technological breakthroughs. 6 They contributed to
the “Green Revolution”, the first wave of agricultural
technology development in the developing world, in
which an explicit strategy for technology development
and diffusion targeting poor farmers in low-income
countries made improved technologies freely
available as a public good (Pingali and Raney, 2005).
However, total public spending on R&D has slowed
down significantly in developing regions in the past
decade or so (chapter III). This has widened the
knowledge divide between developing and developed
countries, and, within the developing world, between
a handful of “star performers” (e.g. Brazil, China,
India and Malaysia) and most of the others (World
Bank, 2007; chapter III). In the meantime, the locus
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