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Large farmland sales pose major social risks, says World Bank

Sept. 10, 2010 at 11:20 AM   |   Comments

WASHINGTON, Sept. 10 (UPI) -- Large-scale disposal of farmland by governments carries potential risks for their communities and the environment and will build economic and social pressures as new corporate or foreign state owners move in, a World Bank report warned.

Drawing on firsthand data from 14 countries, the report followed persistent reports of large-scale farmland acquisitions by foreign investors, including governments.

China was reported to be in the forefront of foreign investors snapping up large tracts of farmland in Africa and Latin America in outright purchases or long-term lease. Corporate giants from North America were also seen behind the moves.

Several key U.S. and European pension funds were seen pouring billions of dollars into farmland investment as a hedge against riskier investments elsewhere.

The current focus was on Latin American farmland, especially in food and commodity exporting countries, market reports said.

Critics condemned the sales as a new form of colonialism. The Telegraph newspaper said the Chinese government "is anxious about food security, though it may not be willing to risk the accusation of colonialism that such a move would attract."

While China sent out specially formed investor companies as part of its food security strategy, new investment in massive farmland acquisitions also sprang out of recent hikes in global food prices, analysts said.

Saudi investors lobbied Tanzania for leases for up to 500,000 hectares of farmland to be used for the cultivation of rice and wheat for the kingdom's growing population, the Middle East and Africa Monitor reported.

Volatility in food prices was a key factor behind a rising tide of large-scale farmland purchases in the developing world, which can pose social and environmental risks if not well managed, the World Bank report said.

The report, "Rising Global Interest in Farmland," called on developing countries to recognize and respect resource rights of their people. Countries with poor records of formally recognized land tenure are attracting strong investor interest, "which raises real concerns about the ability to protect vulnerable people from losing their land," said the report.

It pinpointed needs for more transparency and due diligence over the land deals. "An air of secrecy has created an environment conducive to weak governance," the report said.

"These large land acquisitions can come at a high cost," said World Bank Managing Director Ngozi Okonjo-Iweala. "The veil of secrecy that often surrounds these land deals must be lifted so poor people don't ultimately pay the heavy price of losing their land," he said.

"With food prices still highly volatile, large-scale land deals are a growing reality in the developing world, highlighting the need for concerted action for the benefit of all parties."

Spurred on by the 2008 food, fuel and financial crisis and continuing food volatility, the number of reported large-scale farmland deals rose to 45 million hectares in 2009 from 4 million hectares a year in the decade leading up to 2008.

On the positive side, the Word Bank said in many countries, both those with and without land available for expansion, there is scope to dramatically increase productivity on currently cultivated land that could lead to poverty reduction and greater food security.

"Currently none of the African countries of interest to investors achieves even a quarter of its potential productivity," said Klaus Deininger, lead economist in the bank's development research department and author of the report.

"Rather than just focus only on an expansion of uncultivated land, it is important that investors and governments support improvements in technology, infrastructure, and institutions that can improve productivity on existing farmland," he said.

Recent land deals in Africa, Latin America, Europe and Asia presented "a mixed picture." While some benefited smallholder farmers, created jobs and provided access to markets and technology, others were not so positive.

"Far too many other governments have been caught unprepared by the increase in demand and made deals with outside investors without first clearly recognizing existing rights," said the report.

In some cases where people's rights have been ignored there has been conflict over land, undermining investment incentives. "Many people have few options for recourse when they are hurt by specific ventures or investors fail to live up to their promises," said the report.

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