Published: July 27 2010 | The Financial Times
Investors in farmland are targeting countries with weak laws, buying arable land on the cheap and failing to deliver on promises of jobs and investments, according to the draft of a report by the World Bank.
“Investor interest is focused on countries with weak land governance,” the draft said. Although deals promised jobs and infrastructure, “investors failed to follow through on their investments plans, in some cases after inflicting serious damage on the local resource base”.
In addition, “the level of formal payments required was low”, making speculation a key motive for purchases. “Payments for land are often waived ... and large investors often pay lower taxes than smallholders ... or none at all.”
The report, The Global Land Rush: Can it yield sustainable and equitable benefits?’ is the broadest study yet of the so-called “farmland grab”, in which countries invest in overseas land to boost their food security, or investors – who are mostly locals – buy arable land. The “farmland grab” trend gained notoriety after an attempt in 2008 by South Korea’s Daewoo Logistics to secure a large chunk of land in Madagascar for a very low price and vague promises of investment. The deal contributed to a coup d’état in the African country.
The draft was leaked to the Financial Times by a person who said they wanted to prevent the World Bank releasing the report in the middle of the summer holiday period.
The Washington-based body said the report was a work in progress and revisions were being made. “When it is released in August, we believe it will contribute much-needed data and other information to this complex subject.”
The World Bank advocated in its draft the launch of a Land Transparency Initiative modelled on the Extractive Industry Transparency Initiative, which commits governments, mainly in developing countries, to disclose revenues from oil and mining groups to improve transparency on the deals. Critics noted that eight years after its launch, only Liberia, Timor-Leste and Azerbaijan, were full members of the EITI. But the draft said: “By establishing a consistent format for reporting on land acquisition and monitoring [the] process over time, it could provide access to information sorely missing.”
The draft highlighted a few successes in land acquisition – mostly in Latin America and also in Tanzania – but the overall picture it gave was one of exploitation, warning that investors either lacked the necessary expertise to cultivate land or were more interested in speculative gains than in using land productively.
It stated that “rarely if ever” were efforts made to link land investments to “countries’ broader development strategy”.
“Consultations with local communities were often weak,” it added. “Conflicts were common, usually over land rights.”
The report said some countries allocated land to investors that was within the boundaries of local communities’ farmland.
Data on farmland deals is sketchy, mostly relying on local media reports. But the World Bank’s draft report said official data for a few countries showed large transfers, including 3.9m hectares in Sudan and 1.2m in Ethiopia between 2004 and 2009. The demand for farmland is unlikely to slow down due to higher commodity demand and prices.