In my last post, I wrote about the risks and benefits of large-scale land acquisitions in developing countries. Judging by the growing number of related articles and commentaries, the issue is increasingly finding its way on to the radar screens of policy-makers and thought leaders. As I read these materials I am struck by four common—and important—misconceptions concerning this phenomenon:
There is Abundant “Empty” Land Available in Africa and Elsewhere. Investors and host governments often argue that land made available for acquisition is empty, idle or “wasteland.” Rarely, however, is productive land actually empty. Local farmers may leave land fallow in order to improve productivity. Seemingly empty land may actually be used during certain times of the year by pastoralists or those engaged in hunting and gathering. Fertile land is likely to be claimed by somebody. Claims by host governments, investors and others that vast quantities of unused land are available in many cases are simply untrue.
All Large-scale Land Investments Are Actually “Land Grabs” that Violate Host Country Laws. Another common misconception: these investments always or usually violate local land laws. This is sometimes true. In most cases, however, land is acquired for these projects in ways that are consistent with local law. Most large-scale land leases are of state land, which is administered by the government according to statute, including the right to lease it to tenants. Harm to the rights of local occupiers of land can result from a dearth of legislation that protects their rights and recognizes their customary rules and practices. Alternatively, adequate laws may exist on the books but may not be implemented effectively. In either case, land can be acquired legally while still displacing communities and disrupting smallholder farming.
In Developing Countries Large Farms Are More Efficient than Smallholder Farms. Advocates of large acquisitions of agricultural land often argue that such projects are beneficial because large farms are more productive than small farms. Perhaps surprisingly, however, small family farms are almost always more productive than large farms in more labor-intensive developing country settings. Economies of scale are more likely to be achieved elsewhere in the production chain. Thus, larger operations or cooperative arrangements among smallholders may be more efficient in accessing inputs and finance or in processing, storing and marketing their agricultural production.
All or Most of the Investors Are Foreigners. In reality, in many countries the majority of land investors are domestic companies or individuals. Focusing only on deals involving foreigners inevitably results in missing many investments by politically powerful national and local elites that can often cause great harm to local communities.
Investments in farmland typically benefit local communities. A World Bank study of 19 recent cases revealed that local communities often do not receive the promised benefits and are left even worse off by the investment.
Investors can avoid risks by relying on governments to acquire land. Where land rights are inadequate, unclear, and poorly governed, land takings by governments typically result in aggrieved local communities and substantial risks for investors.
With rising food and energy prices there is no reason to think that this rush to acquire agricultural land in the developing world will end anytime soon.
Policy-makers and investors need to be smart and strategic in managing these investments so as to increase production while not harming local communities. Understanding the facts—by avoiding these and other misconceptions—will help them do so.
Originally Published May 2011.