The Backlash of Global Landgrabbing

Via The Independent, a report on the “new breed of colonialism” rampaging across the world, with rich nations buying up the natural resources of developing countries that can ill afford to sell.  As the article notes:

“…Thousand of protesters took to the streets, waving the orange flags of the opposition. Before long, looting began. Buildings were set on fire. But the turning point came when a crowd moved from the main square towards the presidential palace. Amid the confusion, someone panicked and gave the order to the troops guarding the palace to open fire. Scores died. The leaders of the army decided they’d had enough and stormed the palace, causing the president to flee.

A typical African coup d’état? Not quite. Certainly there were allegations of corruption in high places. The president had bought a private jet – from a member of the Disney family – for his own personal use. He was accused of unnecessary extravagance, of mismanaging public funds and confusing the interests of the state with his own. But something else had whipped up the protesters in Antananarivo, the capital of Madagascar, earlier this year, when the government of Marc Ravalomanana was overthrown in the former French colony.

The urban poor were angry at the price of food, which had been high since the massive rise in global prices of wheat and rice the year before. Food-price rises hit the poor worse than the rest of us because they spend up to two-thirds of their income on food. But what whipped them into action was news of a deal the government had recently signed with a giant Korean multinational, Daewoo, leasing 1.3 million hectares of farmland – an area almost half the size of Belgium and about half of all arable land on the island – to the foreign company for 99 years. Daewoo had announced plans to grow maize and palm oil there – and send all the harvests back to South Korea.

Terms of the deal had not originally been made public. But then the news leaked, via the Financial Times in London, that the firm had paid nothing for the lease. Daewoo had promised to improve the island’s infrastructure in support of its investment. “We will provide jobs for them by farming it, which is good for Madagascar,” a Daewoo spokesman said. But the direct cash benefit to Madagascar would be zero – in a country which can barely produce enough food to feed itself: nearly half of the island’s children under the age of five are malnourished.

The government of President Ravalomanana became the first in the world to be toppled because of what the United Nations’ Food and Agriculture Organization recently described as “landgrabbing”. The Daewoo deal is only one of more than 100 land deals which have, over the past 12 months, seen massive tracts of cultivable farmland across the globe bought up by wealthy countries and international corporations. The phenomenon is accelerating at an alarming rate, with an area half the size of Europe’s farmland targeted in just the past six months.

To understand the impotent fury that provokes in impoverished farmers, consider the reaction if something similar happened in Britain. The international development policy consultant Mark Weston has a vivid image to help: “Imagine if China, following a brief negotiation with a British government desperate for foreign cash after the collapse of the economy, bought up the whole of Wales, replaced most of its inhabitants with Chinese workers, turned the entire country into an enormous rice field, and sent all the rice produced there for the next 99 years back to China,” he suggests.

“Imagine that neither the evicted Welsh nor the rest of the British public knew what they were getting in return for this, having to content themselves with vague promises that the new landlords would upgrade a few ports and roads and create jobs for local people.

“Then, imagine that, after a few years – and bearing in mind that recession and the plummeting pound have already made it difficult for Britain to buy food from abroad – an oil-price spike or an environmental disaster in one of the world’s big grain-producing nations drives global food prices sharply upwards, and beyond the reach of many Britons. While the Chinese next door in Wales continue sending rice back to China, the starving British look helplessly on, ruing the day their government sold off half their arable land. Some of them plot the violent recapture of the Welsh valleys.”

Change the place names to Africa and the scenario is much less far-fetched. It is happening already, which is why many, including Jacques Diouf, head of the United Nations Food and Agriculture Organization, has warned that the world may be slipping into a “neo-colonial” system. Even that great champion of the free market, the FT, described the Daewoo deal as “rapacious” and warned it is but the most “brazen example of a wider phenomenon” as rich nations seek to buy up the natural resources of poor countries.

The extent of this new colonialism is vast. The buyers are wealthy countries that are unable to grow their own food. The Gulf states are at the forefront of new investments. Saudi Arabia, Bahrain, Kuwait, Oman, Qatar – which between them control nearly 45 per cent of the world’s oil – are snapping up agricultural land in fertile countries such as Brazil, Russia, Kazakhstan, Ukraine and Egypt. But they are ‘ also targeting the world’s poorest countries, such as Ethiopia, Cameroon, Uganda, Zambia and Cambodia.

The amounts of land involved are staggering. South Korean companies have bought 690,000 hectares in Sudan, where at least six other countries are known to have secured large land-holdings – and where food supplies for the local population are among the least secure anywhere in the world. The Saudis are negotiating 500,000 hectares in Tanzania. Firms from the United Arab Emirates have landed 324,000 hectares in Pakistan.

But they are not the only buyers. Countries with large populations such as China, South Korea and even India are acquiring swathes of African farmland to produce food for export. The Indian government has lent money to 80 companies to buy 350,000 hectares in Africa and recently lowered the tariffs under which Ethiopian agri-products can enter India. One of the biggest holdings of agriculture land in the world is a Bangalore-based company, Karuturi Global, which has recently bought huge areas in Ethiopia and Kenya.

Food is not all the new colonialists are after. About a fifth of the massive new deals are for land on which to grow biofuels. British, US and German companies with names such as Flora Ecopower have bought land in Tanzania and Ethiopia. The country whose name became a byword for famine at the time of the Live Aid concerts has had more than 50 investors sign deals or register an interest in the cultivation of biofuel crops on its soil.

From Ethiopia’s point of view, the economic logic is straightforward: the country is an importer of oil and is therefore vulnerable to price fluctuations on the world market; if it can produce biofuels it will lessen that dependency. But at a cost. To keep the foreign biofuel investors happy, the government doesn’t force any companies to carry out environmental impact assessments. Local activists claim that 75 per cent of the land allocated to foreign biofuel firms are covered in forests that will be cut down.

More worrying is the plan by a Norwegian biofuel company to create “the largest jatropha plantation in the world” by deforesting large tracts of land in northern Ghana. Jatropha, which can be cultivated in poor soil, produces oily seeds that can produce biodiesel. A local activist, Bakari Nyari, of the African Biodiversity Network, has accused the company of “using methods that hark back to the darkest days of colonialism… by deceiving an illiterate chief to sign away 38,000 hectares with his thumbprint”. The company claims the scheme will bring jobs, but the extensive deforestation which would result would deprive local people of their traditional income from gathering forest products such as shea nuts.

The failed Daewoo land deal in Madagascar may have been intended to be the biggest landgrab planned to date, but it is far from the only one.

So what is the cause of this sudden explosion of land acquisition across the globe? It has its roots in the food crisis of 2007/8, when prices of rice, wheat and other cereals skyrocketed across the world, triggering riots from Haiti to Senegal. The price spike also led food-growing countries to slap export tariffs on staple crops to minimise the amounts that left their countries. That tightened the supply still further, meaning food prices were driven up more by a situation of policy-created scarcity than by supply and demand.

This situation also made many rich countries that are reliant on massive food imports question one of the fundamentals of the global economy: the idea that every country should concentrate on its best products and then trade. Suddenly having unimaginable quantities of cash from oil was not enough to guarantee you all the food you needed. The oil sheikhs of the Gulf states found that food imports had doubled in cost over less than five years. In the future it might get even worse. You could no longer rely on regional and global markets, they concluded. The rush to grab land began.

The logic was clear. The highly populous South Korea is the world’s fourth-biggest importer of maize; the Madagascar deal would replace about half of Korea’s maize imports, a Daewoo spokesman boasted. The Gulf states were equally open: control of foreign farmland would not only secure food supplies, it would eliminate the cut taken by middlemen and reduce its food-import bills by more than 20 per cent.

And the benefits could only increase. The fundamental conditions that had led to the global food crisis were unchanged, and might easily worsen. The UN predicts that by 2050, the world population will have grown by 50 per cent. Growing the food to feed nine billion people will place enormous pressure on the Earth, eroding soils, denuding forests and draining rivers. Climate change will make all that worse. Oil prices will continue to rise, and with them the cost of fertiliser and tractor fuel. Demand for biofuels would further cut land available for food crops. The 2007/8 price crunch might just be a foretaste of something worse. The times of plenty are already over. Next, there might not be enough food to go round, even for those with lots of money.

We have not really noticed it here, because the UK, like the US, still instinctively seems to place unlimited faith in the ability of the market to provide. But other countries have begun to devise a long-term strategic response.

The clearest public sign of that came in June when, just before the meeting of world leaders at the G8 in Italy, the Japanese prime minister, Taro Aso, asked: “Is the current food crisis just another market vagary?” He replied to his own question: “Evidence suggests not; we are undergoing a transition to a new equilibrium, reflecting a new economic, climatic, demographic and ecological reality.”

But the market is having its say, too: the cost of land is rising. Prices have jumped 16 per cent in Brazil, 31 per cent in Poland, and 15 per cent in the midwestern United States. Veteran speculators such as George Soros, Jim Rogers and Lord Jacob Rothschild are snapping up farmland right now. Rogers – who between 1970 and 1980 increased the value of his equities portfolio by 4,200 per cent, and who made another fortune predicting the commodities rally in 1999 – last month said: “I’m convinced that farmland is going to be one of the best investments of our time.”

After the disastrous involvement of financial speculators in housing – the global recession had its roots in the development of mortgage-based derivatives – it is hardly reassuring that the same financial whiz-kids are turning to land as a new source of profit. “The food and financial crises combined,” says the Philippines-based food lobby group Grain, “have turned agricultural land into a new strategic asset.”

In one way, that ought to be a good thing for poor countries. Land is what they have in plenty. And the agricultural sector in developing countries is in urgent need of capital. Aid once provided this, but the share of that which goes to farming fell from $20bn a year in the 1980s to just $5bn a year in 2007, according to Oxfam. A mere 5 per cent of aid now goes to rural-development agriculture, even though in the poorest places such as Africa, more than 70 per cent of the population rely on farming for their income. Decades of low investment have meant stagnating production and productivity.

Landgrab deals ought, at least, to rectify that by injecting much-needed investment into agriculture in these countries. That ought to bring new jobs and a steady income to the rural poor. It should bring new technology and know-how to local farmers. It should develop rural infrastructure, such as roads and grain-storage systems, to the good of the entire community. It should build new schools and health posts that will benefit all. It should give African governments much-needed taxes to invest in developing their countries. All of which should lessen dependency of food aid. Landgrabs should produce a win-win situation.

That was the kind of big billing which the government in Kenya gave to the deal it did recently with the state of Qatar. Just one per cent of land in the Arab emirate is cultivable, so Qatar is heavily reliant on food imports. The deal was that Qatar would get 40,000 hectares of land to grow food in return for building a $2.5bn deep-water port at Lamu in Kenya.

Unfortunately, even as the negotiations with Qatar proceeded, the Kenyan government was forced to announce a state of emergency because a third of Kenya’s population of 34 million was facing food shortages. President Mwai Kibaki declared the situation a national disaster and appealed for international food relief. Hungry voters often fail to understand the long-term attractions of the economic advantages which could be brought to Kenya by creating what would be only its second deep-water port and opening up a third of the country – in the arid and neglected north-east – to development. This is a country, after all, where people kill for land, as was shown after the botched elections in 2007.

If the world food crisis tightens, as everyone seems to predict, it will become ever more unpalatable politically for a government such as Kenya’s to countenance the massive export of food at a time of shortage. That is even more true in a continent as politically unstable as Africa.

There is, in any case, already fierce opposition from many to projects like this. The land offered to Qatar is in the Tana River delta. It is fertile with abundant fresh water but it is home to 150,000 farming and pastoralist families who regard the land as communal and graze 60,000 cattle there. They have threatened armed resistance. They are supported by opposition activists, who object less to the land being developed, but want it to grow food for hungry Kenyans. Then there are the environmentalists, who say a pristine ecosystem of mangrove swamps, savannah and forests will be destroyed.

The environment is another major worry in many of the great rash of land deals. Growing food crops in huge plantations is dominated by large-scale intensive monoculture production using large quantities of fertiliser and pesticides. The results are spectacular at first – which might satisfy the yen of the outside investors for short-term profit. But it risks damaging the long-term sustainability of tropical soils unsuited for intensive cultivation and can do serious damage to the local water table. It reduces the diversity of plants, animals and insect life and threatens the long-term fertility of the land through soil erosion, waterlogging or increased salinity. The intensive use of agrochemicals could lead to water-quality problems, and irrigating the land-holdings of foreign investors may take water away from other users.

Water is a key issue. In a sense, these aren’t landgrabs so much as water grabs, suggests the chief executive of Nestlé, Peter Brabeck-Letmathe. With the land comes the right to draw the water beneath it, which could be the most valuable part of the deal. “Water withdrawals for agriculture continue to increase rapidly. In some of the most fertile regions of the world (America, southern Europe, northern India, north-eastern China), over-use of water, mainly for agriculture, is leading to sinking water tables. Groundwater is being withdrawn, no longer as a buffer over the year, but in a structural way, mainly because water is seen as a free good.”

The world needs to begin to think more urgently about water. The average person in the world uses between 3,000 and 6,000 litres a day. Barely a tenth of that is used for hygiene or manufacturing. The rest is used in farming. And the world’s lifestyle, with factors such as increased meat-eating, is exacerbating the problem. Meat requires 10 times more water per calorie than plants. Biofuels are one of the most thirsty products on the planet; it takes up to 9,100 litres of water to grow the soya for one litre of biodiesel, and up to 4,000 litres for the corn to be transformed into bioethanol. “Under present conditions, and with the way water is being managed,” the Nestlé chief says, “we will run out of water long before we run out of fuel”.

Indeed, in many places underground, aquifers are falling; in some regions by several metres a year. Rivers are running dry due to over-use. And the worst problems are in some of the world’s most important agricultural areas. If current trends hold, Frank Rijsberman of the International Water Management Institute has warned, soon “we could be facing annual losses equivalent to the entire grain crops of India and the US combined”. Between them, they produce a third of all the world’s cereals.

Is there a way forward? The Washington-based International Food Policy Research Institute believes so. It has recently produced a report containing recommendations for a binding code of conduct to promote what Japan, the world’s largest food importer, called for at the G8 in Italy – responsible foreign investment in agriculture in the face of the current pandemic of landgrabs.

It wants a code “with teeth” to ensure that smallholders being displaced from their land can negotiate mutually beneficial terms with foreign governments and multinationals. It wants measures to enforce any agreement, if promised jobs, wage levels or local facilities fail to materialise. It wants transparency, and it wants legal action in their home countries against firms that use bribes, rather than relying on prosecutions in the Third World. It wants respect for existing land rights – not just those which are written, but those which exist through custom and practice. It wants compulsory sharing of benefits, so that schools and hospitals get built and those living in areas around landgrabs get properly fed. It suggests shorter-term leases to provide a regular income to farmers whose land is taken away for other uses. Or, better still, it would like to see contract farming that leaves smallholders in control of their land but under contract to provide to the outside investor. It demands proper environmental impact assessments. And it says foreign investors should not have a right to export during an acute national food crisis.

No one is fooled that this will be easy. The local elites in developing countries have a vested interest in the lucrative deals on offer. The government in Cambodia has massively promoted landgrabbing, taking advantage of the fact that many land titles were destroyed under the terror of the Khmer Rouge. Mozambique has signed a $2bn deal that will involve 10,000 Chinese “settlers” on its land in return for $3m in military aid from Beijing. The strategic considerations are clear. “Food can be a weapon in this world,” as Hong Jong-wan, a manager at Daewoo, put it.

But things are ratcheting up on the other side, too. Landgrabs are “a grave violation of the human right to food”, in the words of Constanze von Oppeln of the big German development agency Welthungerhilfe, one of the most prominent campaigners in the field. She speaks for many who have no voice internationally – although they are making their presence felt well enough in their own countries. A huge public outcry erupted in Uganda when its government began talking to Egypt’s ministry of agriculture about leasing nearly a million hectares to Egyptian firms for the production of wheat and maize destined for Cairo. Mozambicans have similarly resisted the settlement of the thousands of Chinese agricultural workers on its leased lands. Earlier this year, angry Filipinos successfully blocked a deal by the Philippines government with China which involved an astounding 1,240,000 hectares. And last month the same activists exposed what they call a “secret agricultural pact” between their government and Bahrain. With 80 per cent of the 90 million population landless, the deal is “unlawful and immoral”, activists there say.

Food touches something very deep in the human psyche. Do not expect either side to give up without a fight.”

This entry was posted on Sunday, August 9th, 2009 at 5:04 pm and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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About This Blog And Its Author
Seeds Of A Revolution is committed to defining the disruptive geopolitics of the global Farms Race.  Due to the convergence of a growing world population, increased water scarcity, and a decrease in arable land & nutrient-rich soil, a spike of international investment interest in agricultural is inevitable and apt to bring a heretofore domestic industry into a truly global realm.  Whether this transition involves global land leases or acquisitions, the fundamental need for food & the protectionist feelings this need can give rise to is highly likely to cause such transactions to move quickly into the geopolitical realm.  It is this disruptive change, and the potential for a global farms race, that Seeds Of A Revolution tracks, analyzes, and forecasts.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land.  Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about freshwater scarcity issues at and frontier investment markets at