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Copy of FDI in land_Dev.Econ_Group 5.1

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Tatjana Mauthofer

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Transcript of Copy of FDI in land_Dev.Econ_Group 5.1

Why FDI in land ?
FDI in Land: Cure or Doom ?

Development Economics (Prof. Dr. Kirk)
Philipps-Universität Marburg
Summerterm 2013
Presentation by:
Filipa Blagojevic, Luisa Dietrich, Sophia Eder, Tatjana Mauthofer, Patrick Wittenberg, Gulsah Yurdakul



- Investors from oil rich countries: Short of fertile
land, sufficient financial means (food security)

- Investors from industrialized and emerging
countries: (renewable) resources

- Investors from developed countries: agro-fuel projects




North-South divide
DCs and especially LD African and Southeast Asian countries

Missing transparency ”The Landmatrix”

http://www.landmatrix.org/




- lasting interest in taking control over land use rights.

- the transaction includes either rights of land-use or land-ownership.

- land use rights can be extended if not valid over certain period of time

(GTZ, Foreign Direct Investment (FDI) in Land in developing countries, 2010)

Land Grabbing vs FDI
What is land grabbing?
- Large scale & land acquisition
- Agricultural production by investors
- Taking control of land
- Use of resources

Does FDI have an opportunity or cost for Ethiopia
?
Benefits: Technology Transfer
Impacts on Food Security
Socioeconomic and Cultural Impacts
Dispossession
&
Displacement
Environmental Influences
Infrastructural Improvement
Macroeconomic Growth
Wage Employment
Commercial Land investment is one more stressor, making those who are marginally food insecure even more susceptible to hunger
Wage employment and influx of laborers

Increase in conflict

Loss of cultural identity

Villagization and forced resettlement

Compensation

Deforestation and land investment
Impacts of monoculture
Loss of degradation of wetlands
Decrease quality and quantity of wildlife population
Decrease in water quantity and quality
Loss of biodiversity

Drivers & Trends
Increasing crop and livestock products
Change of consumption pattern: more quality food
urbanization
Growth
Increase in
Demand &
Prices

Demand for substituting fossil fuels with bio fuels to reduce green house gas emissions

Implementation of bio fuel policies

Energy vs food

Biofuels
Increasing interest of speculators on commodity market
Alternative to financial products
Experiences features of financial markets:
information asymmetries,
few players,
price volatility

Financial Crisis,
Food Crisis

„"Clean Development Mechanism“ to compile with Kyoto Protocol
--> Forestation projects
--> land acquisitions
Droughts, floods etc.
decreasing productivity
increasing probability of unexpected harvest loss

Climate Change &
Obligations

Risks
Social risks
Enviromental risks
- threatening of biodiversity, carbon stocks, land and water resources
- lack of understanding of local ecology

salinity, waterlogging, soil erosion
Opportunities
Investor countries:
Target countries:
- creation of jobs
- potentially better working standards
- tax revenues
- investment in rural infrastructure
- possible spillover effects (knowledge, technology, education etc.)
- better integration of smallholder family/farmers who may integrate in associations
- increase in civil safety and political stability



Ethiopia has been known as a country of
Famine
Food Shortages
Endemic hunger
Dependency of foreign aid


Ethiopia, like other African nations, is negotiating the long-term leases of its most productive agricultural lands to foreign investors.
Case Study: Ethiopia
- difference to portfolio investment

- lasting interest and control over enterprise

- can include buying shares of an enterprise in another country, reinvesting earnings of a foreign owned enterprise in the country where it is located, or parent firms extending loans to their foreign affiliates.

- considered to be FDI if it accounts for at least 10 % of the foreign firm’s voting stock of shares
(World Bank Glossary).
What is Foreign Direct Investment
What is FDI in land?
Demanders
Suppliers
- Development assistance for agricultural sector decreased since the 1970s - 2007 (15%-7%)

- According to FAO agricultural sector needs investment – due to otherwise stagnating productivity

- In order to meet the goal of eliminating hunger by 2025 – investment of around 30 billion US Dollar is needed
– private sector needed to contribute too (so far 5 times higher than public investors)

- Since developing countries suffer from low domestic investments – foreign investments play a crucial role

- Recently increasing growth in FDI in land, especially in Africa, South America and Asia




Thank you for your attention!
State-backed
Private
- reducing import costs of food
- future energy security
- future food security
- Reducing dependence on price development
- market integration - higher productivity levels
- growing demand for agro fuels
- complying with international agreements
- reducing dependency
- access to resources
- cheap labor
- expected returns of food and agro-fuel market
- speculation on growing land prices
- alternative investment options
- loss of access to land
- higher prices of agriculture products/land
- unequal land deals/ low bargaining power
- often undervaluation of land use
- production doesn't correspond to local consumption

socio-political instability




Source: IEA, 2000
Source: IMF Commodity Statistics and BIS Quarterly Review June 2010
"Our goal is not to alleviate hunger.I am a business man . What I am doing is positive , cheaper food, making employment. Can't fathom how can be negative."
-Foreign investor in Gambella


Main Investors in Ethiopia: EU, India, Saudi Arabia, USA, Israel
Total FDI in Ethiopia: 678.78 ( million USD)
Total Land Amount transferred to investors: 3 619 509 (ha)
Source: Ethiopia Investment Breau, 2009)

- Cotula Lorenzo, Sonja Vermeulen (2009): Deal or no deal: The outlook for agricultural land investment in Africa.
International Affairs 85. London/Rome: IIED/IFAD /FAO.
- United Nations World Food Programme(2010): Food insecurity and Climate Change.
- Brüntrup, Michael (2011): Detrimental Land Grabbing or Growth Poles? Determinants and Potential Development Effects of Foreign Direct Land Investments. German Development Institute, Bonn.
- GTZ (2009): Foreign Direct Investment (FDI) in Land in developing countries. Eschborn.
- Institute for Agriculture and Trade Policy (2011): Excessive Speculation in Agriculture Commodities. Selected Writings from 2008–2011.
- Von Braun, Joachim/Meinzen-Dick, Ruth ( 2009): "Land Grabbing" by Foreign Investors in Developing Countries: Risks and Opportunities. In: IFPRI Policy Brief 2009, No. 13, pp.1-9.
- The Oakland Institute (2011): Understanding Land Investment Deals in Africa. Country Report: Ethiopia. Oakland.



Sources:
Source: Population Division, UN: World Population Prospects: The 2004 Revision and World Urbanization Prospects
Food Security Risk Index, 2011 published by Maplecroft, based on food security set out by FAO
What is Foreign Direct Investment in land
Full transcript