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Land Grabs and Development

Geoff Riley

18th January 2013

Land Grabs have become an important and controversial issue in development economics in recent years.

Throughout the world, it is estimated that 445 million hectares of land are uncultivated and available for farming, compared with about 1.5 billion hectares already under cultivation. About 201 million hectares are in sub-Saharan Africa.

  • The vast majority of land deals are for agricultural projects. Forestry is the next largest sector
  • Of the agricultural deals, fewer than 30% are for food crops alone. Almost 20% are for non-food crops such as bio-fuels and livestock feed.

Arguments in favour of land purchases

The buying of land by transnational investors / companies is viewed favorably by some economists. They see it as an opportunity to reverse under-investment in developing countries' agricultural sectors, to create new jobs, and to bring improved technology to local farming industries that will boost productivity and thereby raise farm incomes and reduce the risk of extreme poverty.

Criticisms of land grabs

Opponents of “land grabs," argue that transnational land buyers neglect local rights and do not pay a fair price for the land. They seek to extract short-term profits at the cost of long-term environmental sustainability. They claim that land grabs are closely connected to corruption on a large scale. Another argument is that selling thousands of hectares to large-scale investors hurts small-scale farmers. Mechanized farming reduces employment in labour-intensive farming and can accelerate forced migration into urban areas.

A report published by Oxfam in 2011 claimed that much of the farm land bought by western investors in recent years has been left idle or given over to bio-fuel production for motorists in rich nations instead of being used to grow food and reduce malnutrition among the poorest communities

"In the past decade an area of land eight times the size of the UK has been sold off globally as land sales rapidly accelerate. This land could feed a billion people, equivalent to the number of people who go to bed hungry each night. In poor countries, foreign investors have been buying an area of land the size of London every six days. With food prices spiking for the third time in four years, interest in land could accelerate again as rich countries try to secure their food supplies and investors see land as a good long-term bet." (Source: Oxfam) - Click here for their report

According to development economist Professor Paul Collier there are two main types of land grab:

  1. Pioneer commercial investment: buying unused land at low prices to see if it is viable for production; risky but high-gain. Increases factor productivity; if successful, draws others – as such, it should be encouraged because there is a net benefit
  2. Speculative acquisition of large areas of useless land: may not stay useless – it has an option value. The investor hopes that the land will become useful in the long run (e.g. because of climate issues), causing the market value to rise.

Collier believes that the 1st type beneficial to developing countries but the 2nd is not.

Some countries are introducing legislation to constrain overseas buyers of land. From January 2013, Tanzania will start restricting the size of land that single large-scale foreign and local investors can "lease" for agricultural use. The vast majority of Tanzanian small-scale farmers do not have legal protection for their property. Tanzania has an estimated population of 42 million people and 12,000 villages, but only 0.02% of its citizens have traditional land ownership titles.

Source: BBC Radio 4 Analysis - click here for article

Reading:

Guardian: Land-grabbing firms beware: cost of ignoring people's rights is rising

Guardian: Food and drink firms urged to crack down on sugar 'land grabs'

Oxfam

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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