ACQUISITION OF FARMLANDS BY FOREIGN NATIONS

TARIQ AHMED SAEEDI
(tariqsaeedi@hotmail.com)

Apr 06 - 12, 2009

Global food shortage is bringing shift in agriculture investment trends that are now directing towards possession of agriculture lands in different agriculture based countries by non-agriculture countries to lock in supply of crops and to set in self-sufficiency for long term. Many of the non-agriculture developed countries are seeking farmlands in agro-based countries to grow crops and to establish agro processing industries in order to ensure food security in their countries.

Rise in food prices in international market haunting significantly net food importing nations brought about this paradigm shift, made these nations respond to export restrictions imposed by agriculture exporting economies in the form of increasing direct participation in agriculture production. Some of these countries are signing agreements with agro-based countries to acquire farmlands to avert ill effects in their markets of supply contraction due such export restrictions. Yet, the move is also being navigated by the desire of multinational and transnational companies to hold share in as many as possible future lucrative businesses. For example, UAE-based investment companies had plans of acquiring large swaths of agriculture lands in Pakistan. Abraaj Capital and other UAE companies and institutions have acquired 800,000 acres of farmlands in Pakistan, Gulf News reported citing media reports. The Ministry of Economy (Abu Dhabi) was said to be considering buying farmlands in Pakistan worth US$500 million (Dh1.8bn), according to a news report published in The National. It said Abu Dhabi based investment company had planned to get hold of 400,000 hectares of farmlands in various countries that included Pakistan in the first quarter of this year. UAE-based companies are also planning to have farmlands for fodder production in the hinterlands of Balochistan and interior Sindh.

Governments are focussing on acquisition of agriculture lands to offset the impact of global price hikes of wheat, rice, and other crops and to control cost-pulling factors by entering into crops production in host countries. With vast tracts of cultivable lands that despite its arability are not tilled because of lack of financial and other resources, Pakistan has an exploitable land mass eyed by Middle East countries many of which have to import agriculture produce to meet their local needs. Such as gulf countries that have only one percent arable land, according to an estimate, import an average 60 percent food. Similarly, Saudi Arabia with three percent arable lands sees India and Indonesia for importing rice and other food crops and has been a largest food importer in Mideast region. Saudi investors will purchase two million hectares of farmlands in Indonesia for rice, sugarcane, soybean cultivation, reported Saudi Gazette last year adding, "Saudi BinLadin Group planned to invest $4.3 billion in Indonesia's 500,000 hectares of lands".

Internal strife because of domestic food shortage and overseas exports made Indonesian government to tighten exports of crude palm oil. Reportedly, Indonesia slapped high tariffs on palm oil exports in a response to public protest over abnormal tendency of companies to sale crude palm oil in international market without considering domestic shortage of cooking oil since crude palm oil was said to have good rate in foreign market than domestic one.

One reason behind non-agriculture developed countries looking for self-sufficiency in food production was these export restrictions that some other countries like India and Vietnam are also resorting to assuage seemingly irritation of public over inconsiderate exports of agriculture produces. Chinese reported investment of $5 billion in Philippines to grow crops including corn, rice, and sorghum could not foment consents of capital starved Filipino farmers who saw lands handover to foreign ventures actually as an omen of future shortage of foods in local markets. China with sumptuous appetite of soybean and palm oil are also purchasing farmlands in Africa and Southeast Asia.

Advocates see this paradigm shift as an opportunity for developing economies to increase their agro exports, but will that exports be more than just a number game? For companies, permission of farming in host countries means establishment of stations for growing international demanding exportable foods and fodders. In some countries, farmers' community has not welcomed this development by ascribing it with neo-colonialism. Social scientists are worried about possible exploitation of locals' rights at the behest of capitalists and production that will finally be of no use for local population.

The time will tell the pros and cons. Yet, the World Bank is also taking serious interest in boosting overall global agriculture lending to $6 billion over the next year. By March 20, 2009, it has disbursed agriculture lending of $732.8 million in 30 countries under Global Food Response Programme. The highest amount of $200 million was disbursed to Philippines. However, the issue is not just financing but fast delivery of agriculture inputs and that is not of the world only but of Pakistan too, said World Bank in a press communiquÈ. If the issue is financing then what is the best option amongst loan or investment. Definitely, investment is preferred over financing by international financial institutions by countries even though foreign investment in agriculture farms could not detach the concerns of farmers about immense domestic competition posed by hi-tech foreign agriculturists and of public about local food security.

For meeting investment needs, remittances can be mobilized. The World Bank says migrants can play a key role in their countries of origin through financial support in agriculture development. According to the Bank, remittances by migrants to developing countries peaked to $283 billion in 2008, higher than foreign aids and foreign direct investment. Food & Agriculture Organization of United Nations and International Organization for Migration recently reached an understanding to collaborate on agro projects proposed by migrant communities in Europe and other nations of OECD (organization for economic cooperation and development) for Asia, Africa, Middle East, and Latin America. These sorts of initiatives are important to increase investments in Pakistan's agriculture sector. Foreign acquisition of farmlands in the country may augur well with penetration of agriculture technology and expertise.