Blog post by Kevin May| Manager Oxfam’s China and the Developing World Programme
This article was originally posted at: http://m.english.caixin.com/m/2015-06-04/100816139.html
¨Chinese investors should consider land rights, the involvement of rural communities and transparency issues when setting up agricultural programs abroad.¨
Leaders of the G7 will soon meet in Germany to discuss issues of common interest in economic and foreign policy. This year, as in 2009 and 2012, agriculture and food security will be a significant item on the agenda. This is thus an opportune moment to look back at previous G7-led initiatives in this area and see how China can learn from these lessons.
Investment in foreign farmland is growing. A large amount of this finance still flows between richer, industrialized countries, but investment in land for agriculture in Africa, Asia, Oceania, Latin America, the Caribbean and Southeast Europe is becoming a trend. China is an increasingly important part of this mix. In 2013, its foreign investment in agriculture reached US$ 7.2 billion, about 20 times more than a decade ago. So what can China learn from the G7 when designing its own investment plans?
Unfortunately, the G7 is littered with failed examples of agricultural development programs. The New Alliance for Food Security and Nutrition, launched in 2012, is a case in point. The New Alliance, and other public-private partnerships that use public money to support private sector actors, aims to increase food production in African countries. Through the use of policy incentives and by clustering agri-business in arable areas, New Alliance members hope to improve productivity and create jobs through new plantations and smallholder outgrower schemes.
However, schemes of this type are fraught with risks for local communities. Land transfers to large investors, which are a core part of the New Alliance’s agenda, raise a number of concerns. In target countries such as Mozambique, Tanzania, Malawi and Burkina Faso, governments are offering to lease “idle” or “underutilized” land to large investors. State control over land means that investors’ interests might override those of local communities. Weak tenure rights leave rural communities vulnerable to dispossession, while compensation for removal from land is often inadequate or opaque.
Moreover, the opportunity for small-scale farmers to partake in and benefit from the creation of plantation-style agriculture is likely to bypass the poorest, which will only worsen inequality. In Burkina Faso, some local companies have noted difficulties in gaining funding from the New Alliance due to the relatively small investment plans and amount of capital required.
In addition, farmers often take on large debts to enter outgrower schemes, leading to increased risk and uncertainty. Women, who make up the majority of small-scale producers in Africa, are also unlikely to benefit because they prioritize local food crops – such as fruit and vegetables – rather than the stable commodity crops that are attractive to investors.
The New Alliance has been strongly criticized by civil society groups as being wasteful, not involving the people it purports to support and ineffective in improving food security. So, what does this mean for China and Chinese investors? How can they avoid these pitfalls and create a win-win situation?
First, land rights matter. Chinese investors should clearly understand existing land use rights before undertaking an investment. In addition, land investments should not take place unless investors and the government have gained explicit free, prior and informed consent from local communities. This will remove the potential risks involved for both investors and communities, and build trust between both parties.
Also, the involvement of local communities and small-scale producers in setting the vision and design of the investment remains vital. Experience from the New Alliance shows that any program designed by governments and investors with little participation from those that it claims to support can result in active opposition. Involving small-scale producers and other rural communities during the planning stages is likely to lead to greater benefit for all involved.
Finally, the Chinese government should also proactively support poor countries with which it forms food security partnerships to promote transparency and accountability. This will ensure that the partnerships benefit the poor, especially for those in countries with weak governance and institutional capacities.
While there is growing enthusiasm for investing overseas in China, it is abundantly clear that such investments do not have to end up in win-lose – or ultimately lose-lose – situations. By taking more proactive steps that are inclusive and well-informed, the Chinese government and investors can avoid the mistakes the G7 made, and make their cooperation with other countries truly welcome and mutually beneficial for all involved.