Foreign Land Procurement Policy for Global Food Security

Need for Offshore Land Procurement Policy in Land Surplus Countries for Ensuring Global Food Security

By:

Vijay Sardana

National Food Security Policy and Global Market Place

From the last couple of year, the per capita availability of food is stagnating in the country. In fact, per capita availability of major food items like pulses, oilseeds, etc. is going down in India. This has not only let to price rise but also making socio-economic and political environment in India vulnerable to instability. Gravity of food security will also impact India’s standing in global politics and diplomacy.

Unfortunately rising food prices are not only hurting us but also many countries in the world mainly countries with large population and where population density is high.

The only way to address the issue to price rise and availability of food is by increasing the supply of food. The biggest constraint and challenge in increasing food supply is the availability of land suitable for production.

There are two options to address this issue:

1. Availability of land suitable for production

2. Investment in land to make it suitable for desired level of production.

In the last few five-year-plans we tried both option within India but the expected results are not visible due to various reasons. It is high time we should start exploring the option one outside India. In fact many countries already sensed this challenge and started making serious plans to address this issue for their own food security.

One of the policy impacts of the food and commodity price crisis of recent years on the world food system is the proliferating of activities to secure commodities from all over the world and acquisition of mines, gas fields and farm lands in developing countries by other developed and developing countries seeking to ensure their food and other essential supplies in place of purely dependent on globalised open market trade. 

Increased pressures on depleting natural resources, potable water scarcity, export restrictions due to reduced inventory imposed by major producers when food prices were high, and growing distrust in the functioning of regional and global markets, financial crisis and its impact on currency valuations and trade, other political and economic reason as well, have pushed countries which are short in food, land and water to find alternative means of producing food within and outside the country.

What is the Global Scenario in Land Procurement?

Food-importing countries with land and water constraints but rich in capital, such as the Gulf countries, China, European Countries, etc. are at the forefront of new investments in agriculture land abroad.

In addition, countries with large populations and food security concerns such as China, South Korea, and Japan are looking for secure food supplies overseas. These food security related investments are targeted toward those developing countries where labour and production costs are much lower and also where land and water are abundant.

Other factors that are under consideration are logistics and transportation issues. It means geographical location and proximity and climatic conditions for preferred staple crops in the investors home country. In addition to procuring land for food, many countries are seeking land for the production of bio-fuel crops and mining purposes.

How Agriculture Land is procured in Other Countries?

Depending upon the flexibility and comfort level, many governments, either directly or through their state-owned entities and public-private partnerships, are in negotiations with other governments.

Many big deals are already closed in various forms. These land deals are on arable land leases basis, concessions basis, or direct purchases abroad.  Like any other business transaction, the size and terms of contracts differ widely.

Some agreements do not involve direct land acquisition, but seek to secure food supplies through contract farming and investment in rural infrastructure, agricultural technology, including irrigation systems and roads and other support services to farmers.

In past decades, land acquisition abroad has been driven by the profit-making motives of the private sector in developed countries and has often focused on perennial tropical cash crops rather than basic staples. Coffee, Banana, Palm oil farms, etc are such examples.

Need for Foreign Land Procurement Policy

Land Procurement policy will have the potential to facilitate much needed investment and technology inputs into agriculture and poor rural areas in many low cost developing countries.

If it is done without any proper policy and safeguards, like any other FDI, this will also raise concerns about the impacts on poor local people, who risk losing access to and control over land and other resources on which they depend for their livelihood and income.

The uncontrolled approach towards land procurement may create serious political issue and may impact bilateral relations between India and the partner country. It is crucial to ensure that these land purchase deals and the social and political environment within which they take place, are designed in such a ways that it should reduce the perceived threats and address apprehensions expressed by civil societies. But at the same time, it should facilitate the opportunities, from land procurement deals, for all parties involved.

Natural Resource Valuation and Land Deals

More recent international land deals are partly an effect of the larger role of changing economic valuation of land and water.  Higher agricultural prices generally result in higher land prices, because the expected returns to land increase when profits per unit of land increase.

Given that the food price crisis has increased competition for land and water resources for agriculture, it is not surprising that farmland prices have risen throughout the world in recent years. According to media reports, agriculture land prices jumped by about 20% percent in Brazil, by 30% percent in East Europe, and by 15 percent in the some parts of United States.

Role of Water and Land Procurement

Globally water is becoming a limiting resource for any development activity. Developed water sources like canals and dams are almost fully utilized, but due to growing demand for food agricultural demand for water is expected to increase substantially in the future.

While planning to procure agriculture land abroad, this aspect must be kept in mind.

Land Procurement Policy must be balanced

In principle, additional investments in agriculture in developing countries by the private and the public sector should be welcome.

At the same time, land has an emotion and social value besides as a financial asset for the land owner. That is why, very often land deals land upon into litigation and bloody disputes between land owners and land seekers. 

The scale of procurement, the terms of procurement, and the speed of land acquisition have provoked opposition in some parts of India and also in target countries. Singur in West Bengal, SEZs in various parts of India are classic example.

There are similar examples in various parts of the world. According to some news reports, the Philippines blocked a land contract with China because of serious concerns about its terms and legal validity, as well as about its impact on local food security.

In Mozambic, people resisted the settlement of thousands of Chinese agricultural workers on leased lands—a situation that would limit the involvement of local labour in the new agricultural investments. In Madagascar, negotiations with Korean Daewoo Logistics Corporation to lease 1.3 million hectares for maize and oil palm reportedly played a role in the political conflicts that led to the overthrow of the government in 2009.

News reports also have helped to understand these developments, but details about the status of the deals, the size of land purchased or leased, and the amount invested are often unclear.

It is important to note that there are no well-documented examples about land deals abroad. Many companies prefer to keep it as a trade secret because of various reasons. This lack of transparency limits the involvement of governments and other civil society in negotiating and implementing deals. This also limits the ability of local stakeholders to respond to new challenges and opportunities.

Opportunities from Large-Scale Land Procurement

Given the changing global economic and trading environment, the agricultural sector clearly requires more investment to feed the world. At the same time there is an urgent need for greater development in rural areas to check the spread of violence and extremism.

The financial inability of many under-developed and developing country governments to provide the necessary infusion of capital, large-scale land procurement can be seen as an opportunity for increased investment in agriculture in these poor economies. 

Such investments also bring many possible benefits for the rural poor, including the creation of a potentially significant number of farm and off-farm jobs, development of rural infrastructure, and poverty-reducing improvements such as construction of extension services, basic schools and healthcare facilities and other social infrastructure like markets and recreation places.

Other possible positive spill over include investment for better and newer agricultural production technologies and practices and post harvest management practices. Food price stability and increased production of food crops can also supply local and national consumers in addition to international markets. 

This will also help in controlling the over-exploitation of natural resources in many countries where soil and water is already under stress.

Negative Side of Land Procurement Policy

At the same time critics see these opportunities as undue optimism, emphasizing the threats that the land acquisitions present to people’s livelihoods and ecological sustainability. The arguments used against SEZs in India also get support in many parts of the world. Even though some of the land-lease agreements make provisions for investments in rural development and local employment potential, these deals may not be made on equal terms between the investors, land owners and local communities. 

Very often, the bargaining power in negotiating these agreements is on the side of the buyer, especially when its aspirations are supported by the host state or local elites. Small landholders who are being displaced from their land cannot effectively negotiate terms favourable to them when dealing with such powerful national and international corporate or agencies, nor can they enforce agreements if the foreign investor fails to provide promised jobs or local facilities. Like in case of SEZ land disputes in India, unequal power relations in the land acquisition deals can put the livelihoods of the poor at risk.

This inequality in bargaining power is make situation worse when the small land holders whose land is being acquired for projects have no formal title to the land, but have been using it under customary tenure arrangements since ages. Since the state often formally owns the land, the poor run the risk of being pushed off the plot in favour of the investor, without consultation or compensation.

It is important to note that agriculture land is an inherently political issue across the globe, with land reform and land rights issues often leading to violent conflict.

The addition of another actor competing for this scarce and contested resource, like land, can add to socio-political instability in developing countries. 

In some cases, the land leases are justified on the basis that the land being acquired by the foreign investor is “unproductive” or “underutilized.” In most instances, however, there is some form of land use, often by the poor and land less people for purposes such as grazing animals and gathering fuel wood or medicinal plants. These uses of land are very often undervalued in assessments by various agencies because these products and activities are not marketed, but they can provide valuable livelihood sources to the rural poor and landless.

Large-scale land acquisitions, especially near villages, may further jeopardize the welfare of the poor by depriving them of the natural and almost free safety-net function that this type of land and water use fulfills.

What is the Right Approach?

The best approach is having sensible planning by keep all stakeholders interest in mind. Strong institutions can give small stakeholders enough bargaining power to effectively convey their concerns and negotiate on favourable terms with the other powerful players. Experience in natural resource management and smallholder marketing has shown that by acting collectively the poor can stimulate a shift in power relations, which in the case of land acquisitions can help preserve livelihood options. These efforts can be even more effective when civil society gets involved on the behalf of the poor.

The benefits to local stakeholders also depend on how land procurement and investment projects are designed and managed. In extreme case, conversion of land to large-scale farms or plantations operated by foreign labour causes loss of local land rights and generates little employment for local skilled or unskilled labour. Such projects are likely to face local opposition.

By proper planning, projects do not need to evict existing local farmers.Contract farming schemes that involve existing farmers and land users can enable smallholders to benefit from foreign investment while giving the private sector room to invest. Under such arrangements, small farmers are provided with business development services such as inputs, technical assistance, and credit by the private sector actors, which could be domestic or international. In return, these farmers commit to sell their output to these providers, subtracting the cost of the supplied inputs from their total profits. This is like Amul model or cooperative dairy model or poultry business model in Tamil Nadu.

This approach takes into account the threats posed by large-scale land acquisitions to the livelihoods of the poor and capitalizes on the opportunities for smallholders to benefit, creating a win-win scenario for both local communities and foreign investors.

The demand for land with access to water has increased not only across borders, but also within countries. This increased mobilization of the domestic land market can also have adverse effects on equality in contexts where small farmers lack defined property rights and judicial systems do not have a capacity to protect rights, like in many African countries.

Land issue requires more attention through sound monitoring, statistical assessments, and land rights policies.  The ecological sustainability of land and water resources slated for foreign investment is another important issue when considering large-scale foreign investments.

Introducing intensive agricultural production can threaten biodiversity, carbon stocks, and land and water resources, like paddy and wheat cycle has destroyed Haryana, Punjab and western UP.

Converting forests or grasslands to mono-cropping system like wheat, paddy, maize or sugarcane production system will reduces the diversity in flora, fauna, and agro-biodiversity, as well as above-ground and sub-surface soil health. It will also impact water table as well.

Many tropical soils are unsuited for intensive cultivation. Although fertilizer use and irrigation can overcome some of these limitations, these activities can lead to long-run sustainability problems such as salinity, water-logging, or soil erosion if they are inappropriately designed. Learning from Green Revolution in India should be used. 

These problems will occur if the outside investors focus on short-term profit or lack a sound understanding of the local ecology and its significance to local community. Critics also mention that irrigating the farm landholdings of foreign investors may take water away from other users in the area or from environmental flows, and intensive use of agrochemicals contributes to water-quality problems in groundwater and runoff.

Foreign investors with short-term leases may have a short-term perspective on the sustainability of intensive agriculture and less identity with the area than local residents. Thus, it is important to conduct a careful environmental impact assessment that not only looks at effects on the local area, but also considers off-site impacts on soils, water, greenhouse gas emissions, and biodiversity. 

Precautions should be in-built Lease Agreements

Land-lease contracts should also include safeguards to ensure that sustainable practices are employed.

Negotiations should be toward balanced policies

A balanced approach can help address the threats and tap the opportunities related to foreign direct investment in agricultural land in under-developed countries.

First, the threats need to be controlled through a code of conduct for host governments and also for the companies willing for land procurement.

Second, the opportunities need to be facilitated by appropriate policies in the countries that are the target of these land procurement investments.

Key elements of a code of conduct for foreign land procurement should ensure transparency in deals.

• Ensure Transparency in Negotiations
• Take civil society and media into confidence
• Respect local traditions and concerns
• Ensure compensations, keeping in mind fairness for the land losers, if any;
• Sharing of benefits from the wealth creation
• Ensure Environmental sustainability.
• Adherence to national trade policies
• Companies must act like good corporate citizens.
• Assist in development of social infrastructures like health care and education facilities
• Ensure fair trade practices while dealing with local stakeholders
• Interest of land offering country should be protected so that they feel encouraged to extend the cooperation 
• Focus has to be food security not profiteering from food trade
• Value of commodity supplies from such land banks must be based on cost plus basis to protect food security. 
• The least cost producer should be the reference price for commodity price. This will improve global resource utilization efficiency. 
• Democratic institutions should be promoted to create local participation in decision making and voice to local population against injustice by land use operator. 

Important: Like we have Free Trade Agreements and Double Taxation Avoidance Treaties with many countries, similarly there can be agreement for land utilization for food production on bilateral basis as well.  

In the longer run, a healthy trade relationship could grow out of such investment islands, building trust in trade, at least on a bilateral basis and potentially more broadly, in an increasingly volatile world food system to address domestic food security concerns.

The Way Forward

Foreign investment in land of underdeveloped countries and other developing countries by government of India and Indian companies can provide key resources for agriculture, including development of needed infrastructure and expansion of livelihood options for local people. This issue must be developed in a very transparent and professional manner.

It is therefore in the long-run interest of India, host governments, and the local people involved by ensuring that these arrangements are negotiated in transparent manner, proposed practices are sustainable, and benefits are shared in a fair manner.

It is also advisable to have a good understanding of combination of international law, government policies, and the involvement of civil society, the media, and local communities to minimize the ill effects on bilateral relations and national good will and at the same time it must benefit all stakeholders.

 Points for Consideration:

1. Should India look for land procurement outside to feed growing population and to reduce stress on domestic natural resources because of very high density of population? If not, what are the alternate options before policy makers to ensure sustainable food security?

2. In case private companies wants to buy land outside India, should there be a regulation to government their conduct outside India because their conduct may have serious political and diplomatic implications?

3. What should be the partnership arrangements between Government of India, the host government and the investors from India?

You may be having your views on the subject. Please do write your views and comments on the issues mentioned.

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