Just a few thousand hectares of your land, please

by Nairi Porter

"Buy land, they're not making it anymore", Mark Twain famously urged his audience. These words have been the motto of the markets for agricultural land for a long time, and they describe the mindset of the active land buyers across the developing world.

During the last decade, agricultural land (mostly across Africa and South-East Asia) roughly equivalent to the territory of Germany (33 million hectares, according to the most conservative estimates) has been purchased by foreign governments and companies. They develop enormous estates for food-growing and biofuel processing, the bulk of that production either returning directly to the original market or being exported on the international markets.

Unsurprisingly, most of the countries selling land are among the poorest in the world. The very fact that countries like DR Congo, South Sudan or Liberia, which are just beginning to recover from decades-long conflicts, are now hosting an array of major foreign investors, looks encouraging. This could open the gates to the urgently needed modern agricultural technologies, and new, more efficient crops, and agricultural crediting, and funds for developing infrastructure that would help modernise the archaic agricultural industry which in most cases is the main sector of these economies. In the meantime though, there is growing concern that the mass purchasing of agricultural land is leading to the repetition of neo-colonial practices that would only deepen some chronic local problems such as poverty, unemployment and corruption - which would then backfire on the rest of the world in a myriad of ways.

In hindsight, we could say at this point that when the tendency for mass purchasing of agricultural land in the developing countries first became news, it was in fact just the next mania that had engulfed the markets. The next balloon, even. Back then, the main concern was with countries like Saudi Arabia, UAE, China and South Korea which during the food-price crisis of 2007/8 faced serious problems with meeting their food needs.

In 2007 the drought hit the five topmost grain producers in the world. The international stock markets started to panic and the food prices soared. Many analysts now posit that this largely contributed to the turbulent events across the Middle East. In mid 2008, the prices did eventually fall back drastically and the crisis passed, but the major importing countries had already realised that they could no longer fully rely on the international markets, so they started looking for alternatives. At first sight, the most logical solution was to direct their efforts to domestic production. But for the predominantly arid countries in the Middle East that wasn't an option, simply because there wasn't enough irrigable land. China found itself in a similar situation, pressured by the growing demands of its urban middle class which the country was no longer able to meet on its own, due to the chronic droughts and the soil erosion caused by decades of extensive use of aggressive agricultural methods. So it turned out that the wealthy food importers were suddenly in a dire need of more agricultural land which they would only be able to acquire abroad.

Of course there are many factors that turned the Third World countries into the preferred target for these investors: large areas of cheap fertile land, considerable water resources that remain yet untapped, weak governments and inadequate regulations, low taxes... and of course, cheap labour. So, as early as 2008, various representatives of Arab and Asian state funds started criss-crossing Africa and South-East Asia and negotiating for huge land purchase deals, or long-term land lease contracts.

The state funds of Saudi Arabia and China set the pace, and they were soon followed by a myriad of private investors from various countries, who wanted to both grow foods and produce biofuels. It's telling that today companies from the USA and UK are among the top purchasers. Behind this mass buying of land and the creation of enormous plots of arable land there is a broader economic logic, led by the relatively highly volatile prices of the grain foods worldwide, and also EU's and the US policy on biofuels.

The influx of international investors means that these developing countries are now gaining real production facilities, they're potentially becoming competitive on the world markets, and all in all good things are happening that should at least help them wrap up their national budgets. But in reality, the development of such sort of mechanised agriculture is posing the risk of creating serious problems to the local populations.

Here is how it goes. When a foreign investor arrives to buy local land, they want particular plots, and in turn the local governments are more than willing to indulge their preferences. Usually, at the end of the day the investor acquires the desired land which at least on paper is regarded free for access. But the problem is that in these parts of the world, land of such status is very scarce, and moreover, when we talk of a plot of several thousand hectares, it's simply impossible to prevent the mass removal of local inhabitants who have lived on these lands and relied on them for their subsistence for centuries and generations. Very often the investor would promise to grant jobs to the local population, but in reality that seldom happens. The traditional local communities being completely dismantled in the process.

Right now I can think of at least one case where an European company promised the local people 2000 jobs in return for getting the right to grow biofuel crops on 40 thousand hectares (in Sierra Leone). Three years later the number of employees was 50, and the local government dared not (or had no desire to) make the company fulfill their commitment in any way. This means that the locals remained unemployed and without any viable options for sustaining themselves. Which could easily lead to tensions. Or undesired internal migration to the big cities, with all the problems that come with it.

We shouldn't be too surprised, then, then communities like the Tuareg in Northern Mali would easily fall for populist demagoguery preached by fundamentalist religious extremists from abroad, and join forces with them to create a huge mess right in the middle of the Sahara.

The case in Madagascar in 2009 is also very telling. A contract for 1.3 million hectares of agricultural land (half of the country's entire agricultural territory) was leased to South Korean corporation Daewoo Logistics, which caused a wave of protests that eventually toppled the government, and the contract was annulled. This vaguely reminds me of the case with the 2000 attempt to privatise water supply in parts of Bolivia, which is largely what contributed to the political ascent of Evo Morales. You know, unintended consequences.

That said, the big corporations are vastly economically efficient, exactly because they use modern mechanisation and little labour. And their very arrival in such corners of the world is generally being met with hostility by the local populations, which is to be expected, as these are being directly threatened by the new system of production that is being forcefully imposed upon their communities from outside. You can understand the complaint about neo-colonialism that emerges from this situation. All of this is a prerequisite for serious conflicts, and extremism, and social imbalances, and all sorts of mess in otherwise already very messy and fragile societies. But the bottom-line of the "investors" is of course the interests of their customers, most of which are far away overseas. And those of a few local government barons who regularly get their coffers filled as they do the internationals' bidding like the good lapdogs that they are.

And the process is going in full force as we speak. According to most calculations, presently negotiations for acquiring thousands of hectares are taking place.

Granted, the long-term motivations for the increased food production (population growth, the diet shift of the growing global middle class, especially in the emerging economies), are problems that are not from yesterday, and neither will they magically disappear tomorrow. The same is valid for rampant soil erosion, and chronic drought in some regions, and extreme climatic phenomena in other regions that could potentially have a long-term impact on the food production in entire regions of the world. And these are exactly the stimulae for the ongoing global scramble for more and more agricultural land, and the current situation in the developing countries is only part of the bigger picture. It's telling that for the 1997-2007 period alone, about 1.9 million hectares of land has been transformed into agricultural land worldwide. Since it has been forecast for a long time that the world's major food production will be gradually shifting towards the Equator, this wave of mass purchasing of land in the region can be viewed as just another stage in that process. And if the countries in the region are unable or have tried and failed to use their resources, it is normal to expect that investors from abroad would flock in and say, "I'd like to have a few thousand hectares of your land, please".

The reasons for this failure of the developing world can vary. Indonesia has been developing its heavy industry and industrialisation for years. Meanwhile, a large part of Africa remains witness to a combination of ad-hoc economics plus weak governments plus corruption. And we shouldn't forget the multiple armed conflicts in the region. We could say that these societies and governments are still unclear about what they prefer: small farms or large farms, bioproducts or intensive agriculture. That's why these problems are looking particularly hard to tackle in Africa, because in Indonesia and the Philippines for example, the landless rural folks can still find jobs in the vibrant production sector of their economies, while in large parts of this continent this is almost impossible - with some exceptions, like relative regional juggernauts such as South Africa.

Still, the local societies do have some options for reaction to the situation. For example, they could craft local-specific rules for investment - similarly to Brazil or Argentina, they could put limits to the size of the plots of land that are being leased or sold to foreign entities, or introduce a requirement that part of the produce of these farms would be realised at the local market. Creating some clear and simple market rules and enforcing that everyone follows them would be extremely helpful too. Particularly rules that would guarantee transparency in signing the contracts. And also an adequate plan for recompensing the rural people who have been stripped of their land. It's not like we Africans do not like good business and economic development. It's not like we are just some hostile, inhospitable people. We just do not want to be continuously treated as a pesky liability that would rather be bypassed or "dealt with" than, you know, be a rightful part of the equation. After all, we are giving our land so everyone could have cheap food, no?

Original posting on Talk Politics on Livejournal