Equitable and Sustainable Development of Foreign Land Acquisitions: Lessons, Policies, and Implications

Introduction

Long-run lease and/or purchase of agricultural land in developing countries by private or public foreign investors has been subject to much research focus during the past decade (UN, 2010; Arezki et al., 2011; Olanya, 2012; Cuervo-Cazurra, 2006; Cotula et al., 2009; Cotula, 2013; Osabuohien, 2014). Countries on target for the most part are those with water and arable resources in Latin America, South & Central Asia and Africa. Australia, Ukraine and Russia are also offering foreign investors large tracts of farmland. These foreign investors include: on the one hand, a private sector in Europe consisting of investment banks and hedge funds; and on the other hand, public and private investors from Asia (UN, 2010). While foreign-owned plantations have existed in many parts of the world since the colonial era, the recent rush (after a sharp decline in the 1980s) is a new investment strategy that is strongly motivated by energy, food and water security.

Many reasons have also been documented for the interest of analyzing large-scale land deals as an important development concern. Consistent with Arezki et al. (2011), one of such concerns is the debate over the structure of agricultural production. According to the narrative, economists have emphasized the relevance of a smallholder poverty reduction structure because majority of the poor are still based in local areas (World Bank, 2007; Lipton, 2009). In essence, the rapid poverty mitigation in Asian countries has been accompanied by an exceptionally substantial poverty elasticity of prosperity in agriculture of small scale (Loayza & Raddatz 2010; De Janvry & Sadoulet, 2010). On the other hand, despite the soaring inflation (Asongu, 2013a, 2014a; Nguena, 2013ab; Nguena & Tsafack, 2014ab) with the limited success by smallholders in sub-Saharan Africa to improve productivity (Collier, 2008) and seemingly export competitiveness of large farms in Eastern Europe and/or Latin America during the 2007/2008 world food crisis, many questions have been raised about whether agriculture of large scale can be the blueprint to poverty alleviation and development (Arezki et al., 2011).

Irrespective of the scenario considered above, it remains an economic fact that the polemics and politics surrounding land grab are raising interesting concerns about whether there is enough transparency and competition in foreign land acquisition (FLA). In other words, there are issues on whether, contrary to having their land taken without their consent; land owners are transferring their land to foreign investors at fair prices. These lines of thought are consistent with development literature suggesting that institutional quality is a necessary condition for resource management (Boyce & Ndikumana, 1998, 2001; Fosu, 2013ab; Asongu, 2012). Essentially, resource booms in developing countries are associated with substantial rent-seeking and corruption (Garoupa & Jellal, 2007; Jellal & Bouzahzah, 2013; Asongu, 2014b) which do not lead to equitable and sustainable management of resources.