The global land grab

The global land grab

Diverse countries like oil-rich Saudi Arabia and UAE, natural resource poor South Korea and overpopulated China and India are all acquiring huge tracts of land, mostly from poor countries in Africa, to grow food and other agricultural products using cheap land and labour. They are then shipping the agricultural products to their own countries or trading them on world markets.

Many western colonial powers did the same for centuries in Third World countries and developed plantation crops like tea, coffee, rubber, banana, cotton and oilseeds.
So, what is new? First, the players. This time, the new ‘colonisers’ are mostly from the so-called South, or the developing countries, which were at one time the colonies of the western world. Second, the scale. For example, Sudan has reportedly kept 20 per cent of its cultivable land for Arab governments. Third, the mode of acquisition. Along with private companies buying land from private parties or governments, many governments  are involved in buying or leasing land directly from other governments.

What are the driving forces behind this new wave of global land acquisition?
Oil-rich Arab countries have been trying for some time to grow food on their desert lands by extracting water for irrigation by various new technologies. But it was proving increasingly costly, as it was dangerously pushing down the water table under the sandy lands. So, they had to look for imports of food as a water-saving device. The rising food prices in 2007-08 was not a big issue for the Arab countries with bulging foreign exchange reserves. But they became deeply alarmed when some of the food exporting countries restricted exports of food during the last bout of ‘agflation’. The Arab countries were now afraid that they may not be able to buy food at any price in the global market in the future if a global food shortage develops. So, they are looking to produce their own food but on other countries’ captive land at lower cost.

For China, the major drivers are the adverse land-labour ratio getting worse by rapid industrialisation eating into agricultural land and causing severe water shortage. They are also keen to have control over natural resources, including additional sources of bio-fuel as a buffer against future rise in oil prices. Similar considerations are important for Japan and South Korea.

For India, land acquisition in Africa (and also in Myanmar and Indonesia and Latin American countries like Paraguay and Uruguay) is by private agri-business companies. Guided by the profit motive, their major concerns are developing a more efficient and bigger scale agricultural production and distribution system abroad  than what they are able to do in India. Though the Indian government denies it, some analysts find evidence of GoI providing incentives (like soft loans to African countries and aid to the military junta in Myanmar) so that the foreign country governments allow Indian firms to grow pulses, oilseeds, sugarcane and maize and export these to India at concessional duties to achieve the national food security objective. These are the commodities which are in short supply in India.

Though the gains for the governments and the private firms acquiring land by outright purchase or long lease are fairly obvious, the gains for the poor African nations are being fiercely debated.

The supporters basically cite the benefits that are usually associated with any foreign direct investment coming to a country. These consist of improving the yield per acre of land by introducing more resources and better technologies in the production and distribution infrastructure in agriculture which have been woefully inadequate in such countries. To the extent productivity of land improves, the net availability of food may go up — despite more exports — in those food-starved poor countries like Ethiopia, Sudan or Somalia. In addition, there will be more employment opportunities for the local people and more tax revenues for the local governments.

The critics point to the forcible purchase of land from small farmers by corrupt government officials in league with musclemen at much below fair prices. Many  nomadic people and locals using communal land for generations in Africa have no documented legal rights on land and hence they are often deprived of any fair compensation. In some cases, even additional employment generation for local people is suspect as, for example, some Chinese firms are reportedly bringing Chinese workers to work in foreign farms. A lot of tax concessions and tax holidays are being offered by local governments to attract foreign investment, which undermines the additional tax revenue argument. It is also alleged that the export of food from these chronically food-scarce countries may create famine-like situations by raising the price of food to international levels without a corresponding rise in incomes.

A lot hinges on the power and good intentions of the local governments vis-à-vis the foreign companies and foreign governments. Herein lies the problem. Many African governments are insecure non-democratic regimes that can give away valuable resources for exploitation by powerful foreign countries and companies at throwaway pries, provided they and their cronies get sufficient private compensation. Their actions are not usually subject to legislative or judicial scrutiny, till they are overthrown by another ruler.

The problem underlines the need for an international code of conduct over acquiring big chunks of land in other countries, to ensure transparency in contracts, to protect the customary rights of locals and sharing of benefits with the local people and communities. There should also be an international body (like WTO) to which the aggrieved parties can bring cases of possible violation of such international codes.
(The writer is a former professor of economics, IIM, Calcutta)