Seed Magazine | April 27, 2009by Maywa Montenegro
Growing food in foreign lands has a long history. But the 21st century version of outsourced agriculture presages something fundamentally new.
In response to the global food crisis, wealthy countries ?—?mostly in the Middle East and North Africa, but also China, India, and South Korea, among others ?—?are buying or attempting to buy farmland in the developing world. In the eastern and financial presses, these sorts of stories have been coming at a steady drip for more than a year. But somehow, with the exception of a few brief reports ?—?most casting it as a “win-win” scenario ?—?the phenomenon has fallen beneath the radar of mainstream western press. That is now likely to change as the trend gathers momentum and the international community begins to respond. On April 6, at a specially convened Manhattan forum, UN food security expert Olivier de Schutter called for a “code of conduct” to regulate the purchase of international farmland. “States, all too often, are led to make such deals because they are attracted to immediate rewards, but they should also look at the long-term consequences,” he said. On Wednesday of this week, Joachim von Braun, Director General of the International Food Policy Research Institute, will deliver a press conference in Washington, DC, on the controversial issues surrounding this development.
Anxious to secure long-term food supplies in the wake of last year’s devastating price inflation, government leaders from Libya to Japan are deciding that importing crops and food will no longer suffice; it is safer, cheaper, better to own the land. Throughout 2008, with the world’s attention fixed on elections and Olympics and economic implosion, high-level officials quietly crossed the globe in a diplomatic hunt for arable country. And many brokered successfully: Prime ministers from both Kuwait and Qatar established relations with Cambodia that have now developed into robust land-for-oil negotiations. Libya secured 250,000 hectares of Ukrainian farmland, and Laos signed away 15 percent of its arable countryside. The United Arab Emirates opened talks on a $3 billion, 800,000-hectare-deal with Pakistan, and surveyed arable tracts in Sudan, Egypt, and Yemen. Saudi representatives looked at land in Kazakhstan, Turkey, South Africa, and the Philippines and began discussions that this March resulted in a $4.3 billion, 2 million-hectare-lease of Indonesian rice paddies. Embattled Sudanese President Omar al-Bashir spent much of the year stumping to attract investors for almost 900,000 hectares of land, and Meles Zenawi, prime minister of Ethiopia said his government was “very eager” to provide hundreds of thousands of hectares of land for investment. China, rumored to have projects slated on nearly every continent, officially announced a $5 billion earmark for food production in Africa.
Private InvestmentBy August of last year, the size, number, and speed of these exchanges had grown so great that Jacques Diouf, the director general of the UN Food and Agriculture Association, warned that the situation risked creating a “neo-colonial” system ?—?a reference to the grim sort of imperialism that began with the Dutch East India Company in 1602 and continued until the demise of the so-called Banana Republics in the late 20th century, when the benefits of the global market turned colonialists into capitalists, toward reliance on imports and exports of grains and produce rather than on ownership of the property itself.
In September 2008, New York–based BlackRock Inc, one of the world’s largest money managers with nearly $1.5 trillion on its books, set up a $200 million agricultural hedge fund, $30 million of which will be used to acquire farmland around the world. That same month, Germany’s Palmer Capital and Bidwells of the UK launched a joint fund?—?at $425 million, the largest of its kind?—?to acquire farmland across Europe. Renaissance Capital, a Russian investment house, acquired 300,000 hectares in Ukraine, and Morgan Stanley recently bought 40,000 hectares in the same country. Phillipe Heilberg, a US investor previously at AIG and now chairman and CEO of New York–based Jarch Capital, leased 400,000 hectares in South Sudan, telling Reuters in January, “There’s always an issue of instability…It’s also extremely fertile land.” The Swedish investment groups, Black Earth Farming and Alpcot-Agro, along with the British investment group Landkom collectively acquired nearly 600,000 hectares in Russia and Ukraine, while Al Qudra, an Abu Dhabi–based investment company, bought large tracts of farmland in Morocco and Algeria, and is reportedly closing in on purchases in Pakistan, Syria, Vietnam, Thailand, Sudan and India.
The current land run, however, presages something fundamentally new. In part, it’s the number and diversity of parties involved. At least 12 nations are now seeking land for food in more than 30 different countries, often in alliance with private agribusiness to manage the farm once the governments have negotiated a deal. But in addition to this group, which is motivated by food security, another category of actors is jumping in for purely economic reasons (see box 1). Investment houses, private equity funds, hedge funds, and commodity traders see that food prices are hovering well above their pre-spike 2006 levels ?—?and are predicted to go only higher with the expansion of the Chinese and Indian middle class. Meanwhile land, at least in the developing world, is relatively cheap, so there is ample profit to be made by getting control of good soils as quickly as possible. According to agronomist Henk Hobbelink, whose Barcelona-based organization Grain compiles media reports of these deals, the twin tracks of food crisis and economic crisis have together spawned a global “land grab” that, in terms of speed and scope, is “unprecedented in history.”
But there is a deeper, more unsettling phenomenon that distinguishes the 21st century version of farming abroad. Globally, farmland ?—?and just as critically, water on that land ?—?is disappearing at an alarming rate. Approximately 50 million acres vanish each year to urbanization, population growth, and economic and industrial development. The aquifer watering Saudi agriculture is nearly dry. In Iraq, the Mesopotamian breadbasket is expected to shrink by 30 percent due to upriver damming in Turkey, and in China, farmland has dwindled by over a million hectares per year in the past decade.
The recent scramble for land brings to the fore broader issues of the role of natural resources in a changing world. As economist Mahfuzur Rahman wrote in a recent editorial for the Dhaka Daily Sun, “Not long ago, economic development was dominated by the role of physical capital. This was followed by increased emphasis on labor skill and technology. The thinking appears to have come full circle ?—?the role of ‘land,’ in the broadest sense of natural resources and the environment, is again the focus of an increasingly resource-scarce, environmentally conscious world.”
It may at first seem absurd that African and Asian governments ?—?several still reeling from the food crisis ?—?have been so willing to let go of arable land. After all, just last year at the FAO-hosted emergency global summit in Rome, a number of African leaders, including former UN Secretary General Kofi Annan, made renewed calls for a “green revolution” in Africa and stressed the importance of local, small-scale farming. But the funding so far allotted for this homegrown green revolution pales in comparison to the money attached to these new land contracts. And since several include funding for much-needed infrastructure and agricultural R&D, for many leaders of cash-strapped nations, the decision to let land has been an easy one.
For others, however, the trend raises a number of red flags: What will become of displaced subsistence farmers? Will the host countries be able to grow enough food for their own needs? Does it really make sense for nations like Laos and Cambodia, which currently receive aid from the World Food Program, to be signing away leases to fertile land? Hobbelink’s group is particularly concerned about the potential for corruption?—?benefits accruing only to the leasing nations, and perhaps to the host nations’ governing elite, while the local people lose out. And then there are environmental concerns. “In many instances,” says Devlin Kuyek, a political economist at Grain, “a way of farming based on traditional knowledge and local biodiversity will be replaced by large irrigated monoculture schemes.”
Yet for nearly every critique of “outsourcing ag,” there is an equally compelling argument in favor. Experts point out that most land contracts will result in the employment of indigenous labor: Even as China flies in thousands of its own farmers and scientists to begin production on its African farms, those workers are training locals to grow rice “the Chinese way.” Many of the Arab states, upholding Islamic traditions of helping the poor, have promised a share of the food crop to local markets. And countries like Pakistan and Sudan currently lack the resources to make their own farms productive; by improving infrastructure, foreign investment could boost the overall economy of the host nation. Josh Ruxin?—?director of the Millennium Villages Program in Rwanda, co-founder of Rwanda Works, a new organization that invests in Rwandan agribusiness ventures, and an assistant professor of public health at Columbia University?—?acknowledges the potential for colonial-like exploitation, but believes that renewed international interest in African land could also be a powerful springboard for smart development. “Show us how you’re going to do it in a way that’s environmentally sustainable and that provides opportunities for local talent,” he says. Land-hungry nations could be leveraged for investments in African health and education, to ensure, he says, that “ultimately the cycle of poverty is broken.”
Recent events in Madagascar illustrate Ruxin’s point. Until earlier this year, the island was slated for the largest outsourcing project to date, with the South Korean firm Daewoo having signed a 99-year lease on a million hectares of land ?—?roughly one-third of the country. In early March, largely due to public resentment over this deal, President Marc Ravalomanana was ousted in a military coup d’état, and his successor, even before being sworn into office, announced that Daewoo’s plan was “cancelled.” But even President Andre Rajoelina isn’t tossing out the idea altogether: As reported in Le Monde on March 21, the Indian company Varun plans to rent nearly 500 hectares of Madagscaran land. More importantly, the lease must first receive approval from peasant owners, and if they agree, they will receive 30 percent of the harvest. Because Indian technologies are expected to boost output from 3 to 12 tons of rice per hectare, local farmers will get the same if not a larger amount of food, with no effort at all.
Assessing the long-term implications of farming abroad isn’t easy: Arrangements vary from country to country and are highly complex ?—?Libya’s recent 100,000-hectare deal in Niger, for instance, also includes a contract with China’s oil corporation SINOPEC for infrastructure development and with another unnamed Chinese corporation to supply the hybrid rice seeds. Perhaps the biggest problem, however, is the lack of transparency. “The countries involved don’t like to have the details published,” says Lester Brown, director of the Earth Policy Institute in Washington, D.C. “Exporting nations are nervous that their farmers will resent investors coming in and driving up land costs, while importing nations aren’t eager to advertise their dependence. There are extreme sensitivities on all sides.”
In Kenya, for example, reports have surfaced of a deal with Qatar, giving the Gulf state access to land in the Tana River Delta. Conservation groups are now urging the government to be more forthcoming about its plans in the delta, and some, like Nature Kenya, have recently enlisted economists to analyze the costs of putting pristine ecosystem under the hoe ?—?assessments they hope will eventually hold sway at the national level.
More holistic appraisals of land development have in fact been incubating for over a decade. At places like Vermont’s Gund Institute, Stanford’s Natural Capital Project, and the Stockholm Resilience Center, researchers are developing and testing models that ask ?—?from pollination, carbon capture, and water filtration services to value as both genetic reservoir and tourist trap ?—?how much is a chunk of the Earth really worth? In all likelihood, what’s currently being paid for leased farmland is a paltry sum compared to its full systemic worth.
Of course, the value of a piece of land can’t be reduced to its natural resources, its biodiversity, or even its ecosystem services. Layered atop those are the emotional, incalculable, often ineffable attachments to place. Land is home, land is country, land is community. It is why, in the end, the idea of giving up a piece of one’s backyard is such a charged issue. More critically, any kind of farming abroad ?—?even if skirting the world’s ecologically pristine sites ?—?will offer only temporary relief from soil erosion, drought, salinization, and human encroachment. The long-term solutions to the future of food won’t lie in geopolitical land grabs. They will instead lie in the hands of scientists seeking to reinvent agriculture from the inside out, with biofuels that double as feedstock, plants engineered to yield vital nutrients, and ways to grow crops that reimagine “land” in the traditional sense. Mark Twain famously quipped, “Buy land, they’re not making it anymore.” True, but neither have we learned to make the most of it yet.
