Inclusive investment

Article, 01 October 2013

Known as ‘land grabs’ in the media, large-scale land-based investments have generated much international debate. Some commentators have welcomed the new livelihood opportunities investment may bring to lower-income countries. Others have raised concerns about negative social impacts, including loss of local rights to land, water and other natural resources; threats to local food security; and the risk that large-scale investments marginalise family farmers.

Small-scale farmer in Tanzania. Photo: Alun McDonald/Oxfam

Why is inclusive investment necessary?

The idea that these land acquisitions are happening on ‘idle’ or ‘empty’ land is largely false. The truth is that in many parts of the world most arable land is already farmed or provides important ecosystem services to communities, such as clean water or wood fuel. And rather than improving degraded land, agricultural investments, which often focus on intensive farming and monocropping, often add pressure to soil and resources.

Insecure rights and weak land governance are major challenges to ensuring that local landholders benefit from agricultural investments. Many deals violate local land rights and do not consider local development needs or priorities. And the idea of the land being ‘idle’ is also misleading because it often refers to land that is under customary tenure and use.

It is true that land acquisitions and commercial agriculture can bring rural jobs, but in many cases, employment is often limited and insecure. The consequence of land acquisitions is an increase in displacement and landlessness across the developing world. Indigenous people are particularly vulnerable to dispossession.

For example, poor consultation, disregard for customary tenure and little evidence of free, prior and informed consent is well documented in Southeast Asia where it is not uncommon for the military to be brought in to defend investor access to lands. In Sarawak, Malaysia, alleged appropriation of ancestral lands has led to more than 200 legal cases being brought against the regional government.

What models exist for inclusive investment?

Although the reputational risk of corruption and poor land governance does not deter some investors, many are beginning to look for ways to avoid local land disputes. Some businesses are seeking more inclusive investment models that make good business, social and environmental sense. ‘Inclusive investment’ models include local communities in value chains as producers, suppliers, shareholders, employees or consumers in ways that are both equitable and sustainable and that respond to local and national aspirations.

Business models that are genuinely inclusive put local groups at the centre of their business activity rather than considering corporate social responsibility programmes as secondary. There is growing experience with such models, and a diverse range of collaborative arrangements between investors and local communities now exist, including contract farming schemes, joint ventures, management contracts, community leases and new supply chain relationships.

No model is perfect – there is plenty of bad experience with contract farming, for example. Farmers can get into debt, be squeezed by low prices, and have little voice in the process.

But it’s important to consider the full range of options and learn lessons from experience gained with the different business models before rushing into large land deals. There is a growing demand by governments, development agencies, civil society and farmer groups for information and support on how to structure agricultural investments in ways that respond to local aspirations, benefit local communities and do not involve large land acquisitions.

We are engaging with investors (companies, lenders and investment funds) and government agencies in selected countries to open up policy options, challenge assumptions and promote more inclusive models of investment.

Legal tools

Together with relevant national and international laws, investment projects – and their related risks, costs and benefits – are defined through contracts. These contracts can have major and lasting impacts on farming and food security in host countries. As part of our Legal tools initiative, we are Scrutinising the law and contracts and Helping communities push back by making better use of the law.