Study on How Commercial Investments in Natural Resources be Designed as to Better Benefit Poor People?

Lack of investment in developing country agriculture is a root cause to poverty and food insecurity levels. Massive increases in agriculture investments in developing countries are needed to improve the lives of the world’s poor. Investments made by domestic private enterprises, mainly farmers’ investments in their own fixed assets, constitute the bulk of investment in agriculture. In developing countries, public investments in rural infrastructure, research and development and provision of extension services to smallholder producers are needed as complements. The financial resources of many developing country governments and national private investors are constrained and flows of official development assistance and remittances are insufficient. Foreign Direct Investments are therefore seen as necessary to fill the investment gap. Developing country governments and other actors have therefore welcomed a recent trend of transnational large-scale land acquisitions for agriculture as a viable source of FDI. In theory, investments involving large-scale transfers of land may facilitate benefits such as increased agricultural output, employment generation, introduction of knowledge and technology, rural infrastructure development, market access and export opportunities.
Very few, of these potential benefits have materialized. Instead poorly managed and secretively negotiated large-scale land acquisitions have resulted in significant negative impacts. In extreme cases large-scale land acquisitions have led to displacement of smallholders and loss of income and resources for local inhabitants as well as irreversible environmental degradation. Such impacts generate grievances and mistrust that may ultimately result in civil conflict.

Investors with a long-term perspective realize that pro-poor impacts can contribute to economic viability of investments and reduce business risks such as reputational loss and expensive and time consuming conflicts with local communities. With this view, various actors including governments and development cooperation partners are considering options to work with commercial investors in order to increase benefits and minimize risks of land acquisitions and other business models.

The aim of the assignment was to provide concrete examples of what various actors have done in order to increase the benefits and avoid the risks of commercial agriculture investments for poor people.