COMCEC
ANKARA 19 DECEMBER
INVESTMENT CONSULTING ASSOCIATES - ICA
CONTENTS
Introduction Study
Current State of Agriculture
Mechanisms and Drivers of FDI
Agricultural FDI Assessment
Case studies
Recommendations and Q&A
PART I
Presented by Mr. Matthijs Weeink
PART II
INTRODUCTION TO THE STUDY
Agriculture is one of the cooperation areas within COMCEC
and of strategic importance for many COMCEC Member
Countries:
How can agricultural Foreign Direct Investment (FDI) be
encouraged among COMCEC Member Countries to make sure
that host economies benefit from the positive aspects and
mitigate potentially negative risks as much as possible?
REPORT STRUCTURE
This study examines the
current agricultural state
of
the COMCEC Region and looks into the
motives and
drivers why corporate engage in FDI
and more
particular the
agricultural FDI projects in COMCEC
Member Countries
with underlying facts and figures.
Case studies
and further estimates on potentials for
agricultural FDI resulted in a list of
policy measures
UNCTAD FDI DATA – FDI DATA PRESENTED AS
MONETARY FLOWS
Foreign Direct investment (FDI) is investment made to acquire
a
lasting interest
in or
effective control
over an enterprise
operating
outside of the economy
of the investor.
FDI net inflows are the value of inward direct investment
made by non-resident investors in the reporting economy,
including:
–
Reinvested earnings and
–
Intra-company loans,
–
Net of repatriation of capital and
FIRM LEVEL FDI DATA
Firm level data includes only those FDI projects that generate
economic value
(i.e. new jobs, invested capital expenditure in
land, facilities, machinery, etc.)
FDI project data consist of the following types of FDI projects:
–
Greenfield Investment (a new operation)
–
Brownfield Investment (expansions or re-investment in existing foreign
affiliates or sites)
–
New forms of Investment (joint ventures, strategic alliances, licensing
and other partnership agreements), only when they lead to a new
physical (Greenfield or Brownfield) operation
PERCENTAGE OF THE URBAN AND RURAL
POPULATION IN THE COMCEC, DEVELOPING
COUNTRIES, AND THE WORLD (2012, PERCENT)
Source: SESRIC, 2013
53,7
54,2
49,6
46,3
45,8
50,4
0
10
20
30
40
50
60
70
80
90
100
COMCEC Countries
Developing Countries
World
Urban
Rural
SIZE OF THE AGRICULTURAL POPULATION IN
2000 AND 2010
Source: SESRIC, 2013. 42,3 49,0 42,2 36,2 43,9 38,0 30% 35% 40% 45% 50%COMCEC Member Countries Developing countries World
2000 2010
- 14%
AGRICULTURAL LAND USE IN 2012
Countries
Total Land
Area Agricultural area Arable Land Permanent Crops Permanent Pasture Million
Hectare HectareMillion
% of Land Area Million hectare % of agricultural area Million hectare % of agricultural area Million hectare % of agricultural area COMCEC 3,129 1,392 44.5 293 20.7 55.2 3.8 1,043 75.7 Developing 9,767 4,160 38.6 942 27.1 118 3.4 3,091 69.6 World 13,003 4,911 37.6 1396 28.3 153 3.1 3,358 68.7
Source: Author’s own calculations using FAOSTAT 2013
- Comparative advantage in Permanent Pasture
- Relatively low amount of arable land
AVAILABLE WATER RESOURCES
Region Agricultural land
Average Precipitation
in depth (mm/yr)
IRWR
(km3/yr) (km3/yr)ERWR (km3/yr)TRWR
TRWR / Capita (m3/yr) Dependency Ratio (%) COMCEC 1,415 48,471 5,378 2,487 7,865 4,759 32% World 4,889 207,574 42,370 12,004 54,374 7,974 22% COMCEC as % of World 28.9 23.4 12.7 20.7 14.5
- Acute shortage of Internal Renewable Water Resources, low Total Renewable Water
Resources and relatively high Dependency Ration (i.e. high reliability on External
TOP 10 COUNTRIES WITH LOWEST TRWR
COMCEC Member Country
TRWR (m
3/capita/year)
Kuwait
7.09
United Arab Emirates
19.0
Qatar
31.0
Yemen
84.7
Saudi Arabia
85.5
Bahrain
87.6
Maldives
93.85
Libya
109.0
Palestine
201.6
Algeria
324.3
IRRIGATION TECHNIQUES
61,570
(93%)
2,989 (5%) 1,568 (2%)
surface irrigation
(1000 ha)
sprinkler irrigation
(1000 ha)
localized irrigation
(1000 ha)
Surface irrigation
Localized irrigation
Sprinkler irrigation
FERTILIZER USE PER HECTARE OF ARABLE LAND
(2000 - 2011)
0 20 40 60 80 100 120 140 160 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 K Gs / H e ctar eCOMCEC Member Countries
Developing Countries
World
- Gap between COMCEC Member Countries and the Developing Countries as well as the rest
of the world is widening
PRODUCTIVITY PER HECTARE (2000 – 2012)
1,5
2
2,5
3
3,5
4
2000
2002
2004
2006
2008
2010
2012
Pr
o
d
u
ctio
n
p
er
h
ea
ct
ar
e (
to
n
s)
AGRICULTURAL GDP BY COMCEC SUB-REGIONS
(1990 - 2011)
0 10 20 30 40 50 60 70 0 100 200 300 400 500 600 700 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 % B ill io n US Do llar sAsian Group (left) Arab Group (left) African Group (left) Asian Group (right) African Group (right) Arab Group (right)
COMCEC MEMBER COUNTRIES AMONG THE
WORLD TOP 20 PRODUCERS PER COMMODITY
(2010)
Commodities Cocoa Coffee Cotton Maize
Natural Rubber
Palm
Oil Rice Soybean
Sugar
Beet Tea Wheat
Afghanistan 20 Bangladesh 4 11 Burkina Faso 14 Cameroon 6 14 13 Cote d'Ivoire 1 11 8 8 Egypt 12 13 12 15 Gabon 20 Guinea 17 19 Indonesia 2 4 8 2 1 3 10 7 Iran 18 14 10 14 Kazakhstan 18 10 Malaysia 13 3 2 Mozambique 20 18 Nigeria 4 13 10 9 3 18 11 Pakistan 4 18 12 6 Sierra Leona 16 Syria 8 Tajikistan 17 Turkey 7 12 6 5 8 Uganda 19 12 13 Uzbekistan 6 18 Source: SESRIC.
AGRICULTURAL TRADE BALANCE IN THE
COMCEC SUB-REGIONS (2012)
11,5
17,7
82,9
112,1
13,5
82,4
63,9
159,9
-2
-64,7
19,0
-47,8
-100
-50
0
50
100
150
200
African Group
Arab Group
Asian Group
OIC
Export (in bn USD)
Import (in bn USD)
PERCENTAGE POPULATION UNDERNOURISHED
WORLD MAP
INVESTMENTS ARE NEEDED TO INCREASE PRODUCTIVITY LEVELS AND REDUCE
THE PERCENTAGE OF UNDERNOURISHED POPULATION
INTERNAL CRITERIA SHAPING FDI DECISIONS
Internationalization is strategic
We have to internationalize or die
All bets are off tomorrow Our competitors are
already doing it Only a few players
will survive
Bigger is better
We have to take positions now
There are only a few interesting
targets left Our home market is
too small Our home market is
saturated Eat or be eaten
Foreign competitors are entering our
home market
We need to be where the market is It is key to have global
access to clients We need to be
international
from the start depend on the home It is too risky to market alone
We are just following our clients – they are
international
Exploiting different factor
endowments
Supply chain optimization
Market seeking Resource seeking Efficiency seeking Strategic-asset seeking
Enhancing synergies
(i.e. technology,
marketing channels and
management expertise
Raw materials,
Energy sources
following customers,
suppliers or competitors
abroad
STRUCTURING FDI DRIVERS
Companies take risk but evaluate alternative investment
locations to optimize their return on investment
LIST WITH INTERNATIONALIZATION MODES –
WHERE TRADE MEETS FDI
Export
Licensing/Franchising
Foreign Direct
Investment
Joint
venture/Alliances
Cross border M&A
Greenfield FDI
D ep th o f in vo lv em en t in fo reign mar ke ts Investment volume Licensing / franchising ExportCross border M&A JV / Alliance Greenfield FDI High Low Low High
ADVANTAGES AND DISADVANTAGES OF
DIFFERENT MODES OF FDI
Mode (including definition)
Advantages
Disadvantages
Cross-border M&A
To establish a wholly owned
affiliate by acquiring (or
merging with) an existing firm
in a foreign market
•
Quick access to the market
•
Benefit from existing clients
and sales channels
•
Difficult to find the right
target
•
Possible governmental
intervention / politics
•
Management challenge –
high risk of conflicts
Mode (including definition) Advantages Disadvantages
Greenfield FDI:
To establish from scratch an
operation entirely, in a foreign
country
•
Full ownership and control
•
Strong signal to customers and
other stakeholders
•
Incentive potential
•
Circumvent duties and
customers
•
Significant investment costs
•
Requires time, resources
and knowledge about local
market
•
Management control
foreign operations
Cross-Border Merger & Acquisition as FDI Mode
UNDERSTANDING THE CORPORATE INVESTMENT
PROCESS
Implementation Con su lt an t Clien tPrepare site visits
Prepare discussions
with relevant governments and service providers
Incentive negotiations
Real estate transaction and
acquisition support
Input cost model
Real estate support
Phase 2
Phase 1 Phase 3 Phase 4 Phase 5
Site visits
Resources for
site visits
Define real estate
objectives and accommodation needs
Define project and
goals Business requirements
Project
definition &
understanding
of strategy
Comparison of costs
Analysis and
comparison
of locations
Project assumptionsSet up cost model
Cost differentials between locations Determine geographic scope Selection of location factors Weighting location criteria Data gathering
Build model for location
analysis Present rankings of locations Sensitivity analysis Exploration of incentives Strategic Assessment Location Screening, modeling & benchmarking Cost comparison Community Evaluations
TOP LOCATION DETERMINANTS: PERCENTAGE
OF PROJECTS CITING INVESTMENT MOTIVE
Source: fDi Intelligence from The Financial Times Ltd, Sample: 58 projects. 44,4 25,9 20,4 18,5 13 11,1 7,4 5,5 3,7 3,7 3,7
Dom
esti
c Mar
ket
Gr
owth
Pot
enti
al
Re
gu
lat
io
ns or
busi
ness
cli
m
ate
Nat
ural
Re
sour
ce
s
Pro
xi
m
it
y to m
arket
s
or
cus
to
me
rs
Infra
st
ructu
re and
logisti
cs
Low
er C
osts
Sk
ill
ed wo
rk
forc
e
ava
ilabi
lity
P
re
senc
e of
Su
pp
lier
s or
J
V
…
IP
A
or
Govt sup
po
rt
Fi
na
nce
Inc
ent
ive
s or
Ta
xes o
r Fu
n
ding
Ot
her
Mot
ive
LOCATION FACTORS USED TO EVALUATE
DIFFERENT INVESTMENT ALTERNATIVES
FDI determinant Site selection consideration Cost factors Quality factors
Economic conditions Labour Labour Potential to recruit local staff
Flexibility of labour environment
Infrastructure Electricity Power supply
Water Water supply
Telecommunications and broadband Telecommunications and Internet
Internet Availability and reliability of shipping transportation Natural gas
Freight shipment
Real estate Real estate Availability of land, office space, building and sites
Construction Office space
Living conditions None Schools, safety, healthcare, etc.
Access to markets None Size of local market
Proximity to raw materials, components and equipment
Host country policies Macro policies None Access to foreign exchange
Legal and regulatory framework
Private sector Cost of finance Clear, stable and predictable policies
Efficient financial markets
Trade and industry Import duties Openness of economy to trade
Export duties Regional integration and access to markets
FDI policies None Ease of entry
Restrictions on land ownership Investment protection and incentives Transparent and stable policies
BREAKDOWN OF COST (LEFT) AND QUALITY
(RIGHT) MOTIVATIONS FOR FOOD & BEVERAGE FDI
Prioritized Cost factors
Prioritized Quality factors
ROLE OF INCENTIVES IN ATTRACTING FDI
Orthodox: Incentives have little or no effect on investment
decisions and their location;
Traditional: It’s all about the incentives. They are the key
driver behind investments; and
Mixed: Incentives do matter, but it very much depends on
situation, type and structure.
WHY ARE THEY PROVIDED?
To overcome a competitive weakness such as high costs or
weak business climate (so-called site equalization outlays);
To promote investment in deprived areas by offering
incentives in poorer areas;
To attract particular industries by offering them incentives to
invest;
To correct for market failures in the provision of capital and
risk-taking of companies; and
IMPORTANCE OF SOFT FACTORS
How Many Stops in a One-Stop Shop?
In seeking to establish a one-stop shop, first instincts are
often to bring together representatives of different
government agencies into one place. This is often described
as the
“one door”
or
“one roof
” approach.
If, on going through the “one door,” the customer finds not
several counters, but just one (or several, of which he can go
to any one), this is a different type of organization: a
“one
window”
or
“one table”
approach.
POTENTIAL FOR AGRICULTURAL FDI
SUITABILITY – BASED IN INPUT FACTORS
Total Renewable Water
Resources (km3/year, 2012)
Arable Land (2012, percent)
ABILITY - COMCEC MEMBER STATE RANKINGS IN
2013 WORLD BANK DOING BUSINESS INDICATORS
Lowest Tier (rank) Middle Tier (rank) Upper Tier (rank)
Indonesia 128 Azerbaijan 67 Malaysia 12
Nigeria 131 Kyrgyzstan 70 Saudi Arabia 22
Bangladesh 132 Turkey 71 UAE 26
Palestine 135 Brunei 79 Qatar 40
Sierra Leone 140 Kuwait 82 Bahrain 42
Tajikistan 141 Albania 85 Kazakhstan 49
Sudan 143 Maldives 95 Oman 50
Syria 144 Morocco 97 Tunisia 50
Iran 145 Jordan 106
Mozambique 146 Pakistan 107
Gambia 147 Egypt 109 *Somalia: not ranked
Mali 151 Guyana 113 * Libya: not ranked
Algeria 152 Lebanon 115 * Turkmenistan: not ranked
Burkina Faso 153 Yemen 118
Uzbekistan 154 Uganda 120
Togo 156
Comoros 158
Cameroon 162 Djibouti 171 Guinea-Bissau 179
Suriname 165 Iraq 171 Chad 184
Senegal 166 Benin 175
Mauritania 167 Niger 176
Afghanistan 168 Côte d’Ivoire 177
DIFFERENT NEED FOR DIFFERENT TYPES OF FDI
AMONG COMCEC MEMBER COUNTRIES
Stage I – Low Income
Dependent position
Stage II – Medium Income
Self sufficient
Stage III – High Income
Independent position
Domestic production
&
Necessary Imports
Domestic production
&
Import substitution
production
Domestic production
&
Sufficient Import and/or Global
Export Production
Foreign Direct Investment (FDI)
Process Driven FDI
Increase Primary Productivity
Capital Driven FDI
Increase Value addition
R&D Driven FDI
Knowledge addition
SCOPE AND SAMPLE OF OUR AGRICULTURAL FDI
ASSESSMENT
Agricultural Main Sectors and related Sub-Sectors
Animal production (main sector) Crop production (main sector)
Animal slaughtering & processing (sub-sector) Animal husbandry (sub-sector) Dairy products (sub-sector) Plant production (sub-sector) Other agricultural sub-sectors included in this analysis
Lime & gypsum products Medicinal & botanical
Grains & oilseed Other (Beverages)
Coffee & tea Other rubber products
Leather & hide tanning and finishing Pesticide
Grains & oilseed Fertilizers & other agricultural chemicals Food services Fruits & vegetables & specialist foods
Food (all other) Sugar & confectionary products
Seafood products Tobacco
EXAMPLE OF AN AGRICULTURAL FDI PROJECT
Example of a landmark FDI deal in Cameroon
Biopalm Energy subsidiary of Siva Group into Cameroon
In line with the objective of diversifying into high-growth sectors, SIVA Group’s foray into large-scale agriculture viz.,
oil palm plantations through its associate Biopalm Energy, has seen substantial progress within the first two years of
inception.
In August 2011 Biopalm Energy (India) invested
$1,907.24 million
in Cameroon in the food & tobacco sector in a
manufacturing project. The company is planning to establish a 200,000 hectare palm oil plantation in the south of
Cameroon, as part of a joint venture with the National Investment Corporation of Cameroon. The 1.9bn investment is
expected to yield 80,000 tonnes of palm oil within its first five years of production.
- Sub sector: Crop production
- FDI Project type: New / Greenfield from India into Cameroon
Biopalm Energy has been focusing on developing green-field oil palm projects and acquiring existing palm plantations
in Africa [mainly Liberia, Sierra Leone, Côte d'Ivoire, Democratic Republic of the Congo, Cameroon and Mozambique],
Asia [Indonesia and Papua New Guinea] and South America. Further information on their Website: www.svl.co.in
WHAT ARE THE ECONOMIC DEVELOPMENT
GAINS BY AGRICULTURAL FDI?
Headline
Number of FDI projects
371
Total jobs created
115,910
Average project size (jobs)
312
Total capital investment
USD 45.2 billion
Average project size
USD 121 million
NUMBER OF AGRICULTURAL FDI PROJECTS BY
YEAR AND DESTINATION WORLD REGION
10
11
10
13
14
20
20
13
20
14
11
3
5
7
9
14
14
14
13
22
4
3
2
5
2
4
2
6
7
1
7
1
3
2
2
5
5
2
2
1
1
2
1
1
3
4
2
3
4
6
4
3
1
1
2
1
1
6
2
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Western Europe
Asia-Pacific
North America
Middle East
Africa
Other source world regions
WHERE ARE ALL AGRICULTURAL FDI INVESTMENTS
IN COMCEC MEMBER COUNTRIES COMING FROM?
Source world
region projectsNo of
Jobs Created Capital investment Total Average (USD) m)Total (USD) m)Average
Western Europe 145 29,647 204 9,101.40 62.80 Asia-Pacific 112 51,240 457 21,235.90 189.60 North America 36 11,448 318 2,687.70 74.70 Middle East 30 11,430 381 6,457.10 215.20 Africa 21 8,925 425 3,631.40 172.90 Rest of Europe 21 2,237 106 1,458.00 69.40
Latin America &
Caribbean 6 983 163 631.40 105.20
Total 371 115,910 312 45,202.90 121.80
Source country projectsNo of
Switzerland 34 United States 33 India 31 France 30 UK 23 Saudi Arabia 20 Singapore 18 Malaysia 15 Spain 14 Japan 12
Other source countries 141
TRENDS IN AGRICULTURAL FDI IN THE COMCEC
REGION
Year
Number of
projects
Capital investment
Jobs created
Total(USD m)
Average(USD m)
Total
Average
2012
44
3,887.40
88.40
17,530
398
2011
51
9,654.70
189.30
20,708
406
2010
38
3,761.30
99.00
12,979
341
2009
46
5,863.40
127.50
12,471
271
2008
48
7,548.30
157.30
20,225
421
2007
29
2,891.00
99.70
6,040
208
2006
29
4,938.60
170.30
11,075
381
2005
25
1,978.90
79.20
4,917
196
2004
22
2,472.10
112.40
4,796
218
2003
39
2,207.10
56.60
5,169
132
Total
371
45,202.90
121.80
115,910
312
AGRICULTURAL FDI TRENDS BY DESTINATION
WORLD REGION
Destination World Region
projects
No of
Jobs Created
Capital Investment
Total
Average
(USD m)
Total
(USD m)
Average
Asia-Pacific
152
38,756
254
12,408.70
81.60
Africa
129
57,101
442
19,534.70
151.40
Middle East
56
12,740
227
9,127.40
163.00
Rest of Europe
33
7,043
213
4,091.20
124.00
Latin America & Caribbean
1
270
270
40.90
40.90
Total
371
115,910
312
45,202.90
121.80
AGRICULTURAL FDI PROJECTS BY DESTINATION
COUNTRY
Destination country projectsNo of companiesNo of
Jobs Created Capital investment Total Average Total (USD m) (USD m)Average
Indonesia
68
55
20,277
298
6,776.70
99.70
Malaysia
50
41
9,561
191
2,304.70
46.10
Turkey
30
27
6,805
226
4,033.20
134.40
Nigeria
22
18
9,183
417
3,227.20
146.70
UAE
21
16
7,600
361
3,282.20
156.30
Egypt
21
20
4,314
205
1,921.70
91.50
Morocco
15
14
3,869
257
1,348.30
89.90
Mozambique
13
13
6,984
537
2,781.10
213.90
Uganda
10
7
2,664
266
594.40
59.40
Côte d'Ivoire (Ivory Coast)
10
10
1,870
187
351.70
35.20
Other destination countries
111
102
42,783
385
18,581.70
167.40
Total
371
279
115,910
312
45,202.90
121.80
GCC COUNTRIES: INVESTING IN FOOD SECURITY
GCC COUNTRIES: INVESTING IN FOOD SECURITY
GCC COUNTRIES: INVESTING IN FOOD SECURITY
GCC COUNTRIES: INVESTING IN FOOD SECURITY
Why do GCC Countries Risk Investing Instead of Relying on Trade?
•
Scant risk of not being able to meet need on international markets
•
Political and commercial risks of FDI in volatile countries
•
Target countries vulnerable to climate change
The 2008 Food Crisis Heightened Sense of Vulnerability
•
Wheat prices doubled from Jan.-Mar. 2008; Rice prices nearly tripled
•
Several exporting countries imposed export bans
•
Demand for bio-fuels increased demand for agricultural land worldwide
So GCC Countries Will Continue Outward Agricultural FDI
•
Mitigating risks by selling a substantial portion of crops locally
•
Reducing risks by diversifying pool of target countries
TURKEY: AN IMPORTANT FDI DESTINATION
Turkey is one of the most suitable countries to receive agricultural FDI: limited land
availability but excellent investment environment
TURKEY: AN IMPORTANT FDI DESTINATION
A New Generation in Strategy Consulting
•
Food and beverage processing, agricultural R&D, and alternative energy
identified as industries with the potential to become “centers of excellence”
within the next 30 years
•
Government in February 2011 approved the country’s first
agriculture
technopark
in Mersin
•
Monsanto has set up several R&D centers in Turkey
•
$23.7 bn Güneydoğu Anadolu Projesi (GAP) in SE Anatolia
•
FDI in the agriculture sector in Turkey has grown from about $14m in 2002
to more than $2.1bn in 2012
•
With more than 54,000 ha. in greenhouse production, Turkey is world’s 4
th
largest fresh vegetable exporter
•
Government goal of doubling agricultural production to $150bn and
increasing exports to $40bn in next 10 years, making
Turkey 1 of world’s top
5 agricultural producers
TURKEY: AN IMPORTANT FDI DESTINATION
ETHIOPIA: RISKY AND CHALLENGING
ETHIOPIA: RISKY AND CHALLENGING
•
Agricultural Development Led Industrialization” (ADLI) is a
linchpin of the government’s overall development strategy,
which aims for Ethiopia to achieve middle-income status by
2020
•
To accomplish this, the Government has budgeted some
USD16.6 billion over the 2010-2020 period 60% expected to
come from Government and 40% from donors.
•
FDI also expected to contribute substantially, especially in
raising domestic value added through agro-processing,
increased production yields, and better post-harvest handling,
storage, and logistics
ETHIOPIA: RISKY AND CHALLENGING
ETHIOPIA: RISKY AND CHALLENGING
ETHIOPIA: RISKY AND CHALLENGING
Many sources of FDI – Netherlands, India, Denmark, GCC
countries, But Saud Arabia is by far the largest.
•
Saudi Star: $2.5 bn, 290,000 ha. rice project in Gambella
•
Karuturi (India): leased 312,000 ha., also in Gambella, and
announced plans to invest up to $4 billion to produce palm
oil, sugar and rice
ETHIOPIA: RISKY AND CHALLENGING
The positive:
•
Sharp increase in agriculture value added, from US$5.28 billion in 2005 to
US$13.6 billion in 2009
•
Transmission mechanisms necessary to generate economic growth caused
by FDI inflows are in place
The negative:
•
Weak regulatory framework and recent emphasis on maximizing FDI inflows,
leading to heightened tensions over land and water resources
•
Some highly publicized disputes between investors and government and
revocation of some leases by government
•
Alleged abuses with respect to seizure of land, inadequate compensation,
and botched relocations of local populations
ETHIOPIA: RISKY AND CHALLENGING
Conclusions:
•
Ambitious investment objectives must not be allowed to outrun
a government’s capacity to oversee and regulate such
investments, especially in the agriculture sector, where
environmental and social vulnerability is especially acute
•
Ethiopia may lose some FDI as a result of new policies limiting
the pace of development and the size of land
concessions/leases
OVERALL CONCLUSIONS FROM CASE STUDIES
•
Need for good land use planning, aligning interests of communities
and investors in a way consistent with sustainable resource use
•
Both formal and customary land use and occupancy rights must be
respected by investors and host country governments
•
Local communities must share in benefits from public infrastructure
investment, community investments, and equitable employment,
and/or outgrower schemes.
•
Preference for outgrower and smallholder cultivation over large-scale
mechanized agriculture
•
Rigorous economic analysis of land-related investments is essential
•
Allow direct negotiation between communities and investors
MAIN CONCLUSIONS
Agricultural productivity levels are relatively low in the
COMCEC Region – room for improvement in terms of using
fertilizers as well as machinery;
Increased levels of FDI are possibly a solution, but not
necessarily – all depends on the regulatory framework;
There is certainly potential (suitability and ability) among
COMCEC Member Countries – but focus must be on improving
business and investment climate;
Countries such as Saudi Arabia, Qatar, as well as other GCC
States, but also Switzerland, US and India are important
sources for FDI in other COMCEC Member Countries.
POLICY MEASURES
There are several policy measures that can reduce and mitigate the
risks of agricultural FDI, both for the investor and for the host country:
Proper land use planning and respect for property rights;
Preference for outgrower and smallholder cultivation through stimulation
programs by public bodies and international aid programs;
FDI attraction programs should be focusing on large scale agricultural
investors;
Host-country governments should assess the economic viability and
sustainability of proposed investment projects, and should allow direct
negotiation between communities and potential investors;
Taxation of idle land and establishment of an appropriate level of lease
payments, to make it financially unfeasible for investors to maintain fallow
land for extended periods.
FINAL RECOMMENDATIONS (1/2)
Based on the findings and conclusions we propose 5 distinct fields of
policy intervention and cooperation at COMCEC level:
1.
Improve the investment climate of COMCEC Member Countries by
identifying and promoting specific agricultural investment
opportunities
in each COMCEC Member Country
;
2.
Based on the agricultural FDI assessment, prepare an investment
promotion strategy and
targeting plan
, including a lead generation
plan;
3.
As a final step, prepare appealing
Value Propositions
in
coordination with the national IPA’s, to illustrate the potential and
profitability of investing in the agricultural sector;
FINAL RECOMMENDATIONS (2/2)
4.
Start working on a
Media and Communications Strategy
to
disseminate the value propositions to the right audience;
5.
Identify and list relevant
public stakeholders
as well as
private investors
in the COMCEC Region and use the
COMCEC platform to stimulate debate and information
sharing;
CONTACT DETAILS
Investment Consulting Associates - ICA
A New Generation in Strategy Consulting
