Daewoo’s planned Madagascar farm in doubt

The Financial Times | March 18 2009

Javier Blas in London and Jung-a Song in Seoul

Daewoo Logistics, the South Korean company, said on Wednesday that it was confident that Madagascar’s new government would support a plan to lease a huge tract of farmland on the island to grow food crops to send back to Seoul.

Daewoo’s plan to lease for 99 years about 1m hectares of farmland, about half the size of Belgium, from Madagascar, was a source of popular resentment that contributed to the fall of Marc Ravalomanana.

Mr Ravalomanana stepped down on Tuesday in the face of mass opposition protests and an armed rebellion. Andry Rajoelina was declared president by the military and constitutional court following the demonstrations and will be formally sworn in on Saturday.

Mr Rajoelina, who was sacked as mayor of the capital after he led demonstrations against the former president, had accused the president of treating the country like his own private company.

The appointment of Mr Rajoelina will make it difficult for Daewoo to revive its deal, analysts said, noting that the new president has denounced the agreement.

Daewoo officials acknowledged that political uncertainties and falling agricultural commodities prices had decreased the attractiveness of the project, but said they would press ahead with it regardless of the political situation in Madagascar.

“We are surprised by the growing political risks in Madagascar. But we want to continue to pursue the project as planned, whether the government changes or not,” said Richard Shin, an official at Daewoo involved in the project. “We are closely watching the situation and waiting for the political problems to be resolved,” he added.

Philippe de Pontet, a sub-Saharan Africa analyst at Eurosia, the consultancy, said that while major mining and oil investors were likely ride out the crisis without losses, “the mega-Daewoo land project, on the other hand, is off the table”.

Mr de Pontet said that the opposition capitalised on high-profile scandals, including the proposed deal with Daewoo, to secure replacement of Mr Ravalomanana.

The Daewoo project would have leased out almost half of the country’s arable land-at a time of soaring food prices and famine, according to Mr de Pontet.

Rio Tinto, the mining group which is Madagascar’s largest foreign investor and mines titanium on the island, said it would press ahead with plans to spend $1.2bn on new facilities.

Daewoo’s plan became the most high-profile of several similar foreign farm investments. The race to outsource agricultural production is a sign of how countries are seeking food security following last year’s food crisis, which saw record prices for staples such as wheat and rice, and the imposition of export restrictions.

The Korean company plans to invest $6bn in the Madagascar over the next 25 years if it is allowed to farm there. The company said it is in talks with some foreign plantation companies in Europe and the US about possible joint investments.

Under current Madagascar law, Daewoo will have to pay up to $3m in leasing fees but until Tuesday’s change of government, Daewoo was trying to minimise the leasing cost through negotiations.
  • Sign the petition to stop Industria Chiquibul's violence against communities in Guatemala!
  • Who's involved?

    Whos Involved?


  • 13 May 2024 - Washington DC
    World Bank Land Conference 2024
  • Languages



    Special content



    Archives


    Latest posts