Foreign Direct Investment (FDI) and development

It is incredible how often the international intellectual community gets trapped in debates that are generated by outsiders. For example I remember the issue of Land Markets 20 years ago, which suddenly became the "good" alternative to agrarian reform. Markets were predicted to be the perfect allocator of resources, namely land, as part of genuine market driven economic growth. The idea was that it would be possible to promote the transfer of land from big land owners to the landless through a market mechanism, thus replacing States and their (weakened) institutions. This was an example of how people with very little, if any, field experience could invent theories that had never proved to be viable. Over many years the issue of land markets, and its grandchild the "market driven - market oriented land reform" occupied hundreds of experts’ papers, resulting in a lot of discussion and little action. It was only as recently as 2006, when we organized the international conference on agrarian reform and rural development (ICARRD) that the issue of land markets was finally removed from the core international agenda on land. 

But, instead of starting a discussion on the real issues, like the reconcentration of land and the increasing scarcity of land and water resources, another "myth" appeared: Foreign Direct Investments (FDI).

I still remember when some colleagues and international experts insisted on presenting FDI as a win-win solution for local populations (“the global acquisition of land has the potential to be an unparalleled development opportunity for lessor states” Beth Robertson, Per Pinstrup-Andersen http://link.springer.com/article/10.1007%2Fs12571-010-0068-1) and resisted the idea of simply calling FDI what it is: a grabbing of natural resources by (mainly) private interests from societal ones.

The (strange) hypothesis was that there would be an important and positive role for FDI in the development of local economies, particularly in African countries.

For those of us who have been working in the field, it is very evident that these interventions are not at all "investments" but simple speculations over cheap and easy accessible resources. This strategy is always the same: limit the risk (the "investment") and maximize present (and future) benefits for the firm. Concerns over local economies and local stakeholders do not exist in this strategy. And in fact, why should they exist? This is a way of doing business, not charity. As George Soros said in June 2009: “I'm convinced that farmland is going to be one of the best investments of our time."

So, if land becomes a (relatively) rare asset, access to large areas of land will be good for business and the present, as well as future, generations of businessmen. And this is likely to be the case even if the land is not currently utilized in any way.

A confirmation that current land grabbing is mostly speculatory comes from the World Bank, who published a study in 2011 on land acquisitions that found that 80% of land investments were not being used by the investors. (http://www.profor.info/knowledge/large-scale-acquisition-land-rights-agricultural-or-natural-resource-based-use).

In 1884, at the Berlin Conference, European politicians, leaded by Otto von Bismarck, Chancellor of Germany, enacted a General Act that can be considered the formalization of the Partition of Africa and the launching of the official grabbing of the continent resources. During the period following independence, this grabbing was continued by national elites, but this was not a priority for the international community. Now it is, because land is becoming a scarce resource. Therefore new arguments are emerging, the most predatory one being related to the benefits of land grabbing for local communities’ food security. Food security has never been the concern of businessmen, and will never be.

The only common ground between all of the historical cases and the current situation is the private interests of businessmen (and conversely the societal cost for the recipients) and the lack of respect for existing rights over those resources.

This is to say that the debate about the role of FDI in local development is misleading, simply because this has never been at stake. What is relevant is the cost for society, and local stakeholders in particular, from these business interests. Viewed from the societal and local stakeholder perspective, the outcome historically has always been negative. Thus debate on the modalities of these business phenomena (land acquisiton or renting..) is nonsense, because they are simply different forms of a common trend of big actors maximizing their benefits.

So what intellectuals have to ask themselves is: why are we continuously driven from the real issue, and why do we fall into these traps?

The very limited utility of FDI has been recently highlighted by the report "Trends and impacts of foreign investment in developing country agriculture. Evidence from case studies", prepared by FAO (http://www.fao.org/fileadmin/user_upload/newsroom/docs/Trends%20publication%2012%20November%202012.pdf). However, in spite of all the evidence, FDI (and the overarching RAI - responsible investments in agriculture) is still occupying the discussion on land.

In parallel, the lack of respect for local stakeholders’ rights continues everywhere, and the grabbing of natural resources is now becoming a major threat. One would expect that the large majority of land (or natural resources) related discussions (publications, workshops, conferences) would be focused on the real debate, which is how to build a real alliance in favour of a democratization of natural resource access and distribution, so that peasant organisations are not left standing alone on this issue. But this is not the case.

As we are witnessing, the grabbing phenomenum is exacerbated by not only private firms but also Governments’ trust funds. Since government involvement in this issue cannot be done without tacit consent by political officials, this proves that the spoliation of natural resources from the hands of historic rightholders has scaled up to a level that makes it even more difficult to tackle than 50 years ago. This alliance between private firms, corporate interests and governments elites has a unique possible outcome: an acceleration of the concentration of resources into a few private hands. This means that whatever will be produced (food) or found (energy) will become more expensive for all others. This is because the capacities of weak actors to resist this hurricane is very limited and is becoming weaker everyday. Who is going to stand in favour of these poor people? Northern countries like, say, Italy, UK, Norway or Germany? In the first case it's enough to read the report "Gli arraffa terre" (http://www.recommon.org/gli-arraffa-terre/) to get an idea about how the grabbing is promoted by italian firms and public banks.

For the others, it should be recalled that the bigger impetus pushing for land grabbing is biofuel production, particularly palm oil, soy and corn, as a direct result of mandatory biofuel targets set by European and North American countries for their domestic energy supplies. The UK is the biggest investor in biofuel production in sub-Saharan Africa, followed by the US, India, Norway and Germany.

So what can one expect from the present world governance to address these issues? To be frank: almost nothing. The most recent proof was the Rio+20 Earth Summit where a lot of participants (peasant movements, international research foundations, etc.) were insisting for the Summit to “endorse community land rights,” noting that “when land rights of rural communities are recognized, far more sustainable land uses evolve.” Sadly the summit agenda and the summit results have been very different, as was the case in Rio 20 years ago. 

We need to invest in peasant farmers and on family agriculture, not dispossess them. Here is where we need the intellectual community to focus: strengthening local actors’ capacity to analyze and organize themselves. Only with better prepared peasant organisations, supported by international and national intellectuals, field oriented organisations, and specialized UN agencies, will it be possible to move into this agenda. The order of the intervention is also clear: first addressing asymmetries of power and acting for a more democratic agrarian structure and then, with a little bit more equal footing promoting a negotiated approach involving private sector and businessmen. Promoting the “investments” by the latter without having operated, first, for a democratization of the agrarian structure is simply useless if not counterproductive. In order to do this, we should start by engaging field operations wherever it is possible. This is a fundamental step in order to build credibility vis-a-vis peasant organisations and weaker actors in general. Those of us with years of field work know that this is a time consuming process, and that we still have a long way in front of us; but we have no choice then to start walking.