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Seven Principles for Ensuring Responsible Agro-investments

New York Times story: African Farmers Displaced as Investors Move In (12/21/2010)

Attachments

RisingGlobalInterestinFarmland-WB-2011_0.pdf

Authors/Partners

The report was prepared by a team led by Klaus Deininger, World Bank. Support was provided by PROFOR , the Swiss Agency for Cooperation and Development (SDC), the Trust Fund for Environmentally and Socially Sustainable Development (TF-ESSD), the Hewlett Foundation, the Bank Netherlands Partnership Program (BNPP) and the French Ministry of Foreign and European Affairs.

Large-scale Acquisition of Land Rights for Agricultural or Natural Resource-based Use

CHALLENGE

Large-scale land acquisition and investments in agriculture attracted considerable interest in the wake of the 2007-08 commodity boom and the subsequent financial crisis. Some countries were concerned about their inability to provide food security from domestic resources. Other investors sought land as a hedge against inflation or for speculative gain. Agro-industrial investors had an incentive to increase the scale of their operations.

This global 'land rush' is unlikely to slow given volatile global commodity prices, demand for biofuels, rising incomes, urbanization and population increases. However, opinions about the social and environmental implications of this phenomenon are divided in the absence of solid empirical data. Some have saluted the rediscovery of agriculture by different investors as an opportunity for yield increases and rural development. Others focused on highly publicized cases where land acquisition by outsiders for speculative purposes at very low prices were detrimental to local welfare, trampled basic rights and resulted in irreversible environmental damage including water pollution and deforestation. 

APPROACH
 
To provide guidance to countries trying to deal with this issue and contribute to a more informed debate, the World Bank conducted an in-depth study on patterns of large-scale land acquisition around the world. PROFOR provided catalytic funding for the inventory and legal analysis components of this research. 

Released in draft form in September 2010 and in hard copy in January 2011, the study Rising Global Interest in Farmland --Can it yield sustainable and equitable benefits? compiles country inventories of large land transfers during 2004-09 in 14 countries, identifies global drivers of land supply and demand and highlights how country policies affect land use, household welfare and distributional outcomes at the local level. It establishes a typology, classifying countries by the size of suitable available land and yield gaps and proposes paths for responsible agricultural investments that would contribute to positive social, economic and environmental outcomes.

MAIN FINDINGS

What emerged is a mixed picture.

  • The projected increase in the demand for agricultural commodities over the next decade could be met by increasing productivity without expanding into forested areas. In particular, crop yields in the Sub-Saharan African countries which are of most interest to investors seldom exceed 30 percent of potential yields on currently cultivated areas.
  • Some countries work with smallholders and use competitive bidding to foster investment deals that benefit locals. But many countries are ill-equipped to deal with large-scale land acquisition. For example, in many countries, lack of information and transparency make it difficult to exercise due diligence and responsibly manage a valuable asset. This information gap makes it easy to neglect local people’s rights and environmental impacts, opens the door to bad governance and corruption and jeopardizes investors’ tenure security. Furthermore, land transfers appeared mainly ad hoc based on investor demands rather than country development strategies.
  • There is a large discrepancy between investments deals reported in the media and those actually finalized, and between deals signed and actual land area under cultivation. While some countries have transferred large areas to investors, the extent to which such land is actually used productively remains limited. For example, in South East Asia, in response to policies that aimed to foster development of the palm oil industry by giving away land (and the trees on it) for free, large areas with high biodiversity value have been deforested without ever having been planted to oil palm. In Mozambique, 2004-2009, 2.7 million has of land were acquired by investors, but a 2009 land audit found that some 50 percent of this land was unused or not fully used. Many projects in the biofuel sector experienced problems or were cancelled due to lower oil prices. Beyond economic and technical challenges, tensions with local communities have often stymied implementation.
  • Case studies based on field visits show that investments can bring significant benefits under certain conditions but that the benefits are often outweighed by negative impacts borne disproportionately by vulnerable groups. Even projects that are not fully implemented can seriously undermine local livelihoods. Project proposals that were not implemented have often affected patterns of resource access and shifted the local balance of power. Expressions or expectations of outside interest in agricultural land can set in motion “land grabbing” by local elites that can have undesirable social impacts or deprive vulnerable people of their livelihoods.

 RESULTS

  • Building upon this study’s initial results and consultations with governments and private sector investors, the Bank drafted seven principles for ensuring responsible agro-investments: Respecting land and resource rights; Ensuring food security; Ensuring transparency, good governance, and a proper enabling environment; Consultation and participation; Responsible agro-investing, Social sustainability; Environmental sustainability.
  • A number of developing countries have approached the World Bank for technical assistance to improve the capacity of their legal and institutional environments to screen, monitor and enforce responsible agro-investments.

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Author : The report was prepared by a team led by Klaus Deininger, World Bank. Support was provided by PROFOR , the Swiss Agency for Cooperation and Development (SDC), the Trust Fund for Environmentally and Socially Sustainable Development (TF-ESSD), the Hewlett Foundation, the Bank Netherlands Partnership Program (BNPP) and the French Ministry of Foreign and European Affairs.
Last Updated : 02-24-2017

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