The Financial Times reports that according to a UN Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) flows in agriculture jumped to $3bn (€2bn, £1.8bn) annually in the 2005-2007 period, up from $600m during the 1990s. Though at first glance the numerical increase appears quite significant, on the overall scale FDI flows in agriculture are very limited.
UNCTAD’s World Investment Report is the first detailed analysis of FDI flows behind the farmland grab trend, in which participating countries like Saudi Arabia and South Korea invest in overseas plots. The investors plan to export the bulk of the crops back to feed their domestic populations. Investments in agriculture are being spurred by rising food prices and shortages, which has subsequently resulted in export bans.
Supachai Panitchpakdi, Secretary-General of UNCTAD, notes, “This year’s World Investment Report reveals a real and rising interest . . . for investment in developing countries’ agricultural industries,” and indicates that “‘south-south investment’ in agricultural production is on the rise.” The Secretary-General believes this trend will continue in the longer-term future.
However, the agricultural industry is historically amongst the most heavily regulated in many countries. UNCTAD does note attempts to secure similar food supplies have been unsuccessful in the past, citing previous experiences in South Korea in the 1960s and 1970s and the Gulf nations in the 70s. Along with respective agricultural policies set by individual governments; investors’ inappropriate policies, inexperience and lack of understanding of the local culture contributed to these failures.
Posted by Patricia Lee.
