Please find below a contribution which is a summary of a report discussing the rai process to be launched on March 14 2014.
Sincerely
Kjell Havnevik
Summary of discussion paper by Kjell Havnevik, ”How to make the ’responsible agricultural investment’ (rai) principles and guidelines effective – Agriculture, investments, scale and food security in developing countries”. Presented to the Swedish FAO Committee, Stockholm.
This discussion paper attempts to contribute to how to make future investment in agriculture responsible and efficient. Investment in agriculture is critical for global food provision, but in future it will have to compete with investment in land for raw materials and energy, such as various feedstocks for biofuel and biodiesel production. The competition for water will also increase in connection with large-scale investment in agriculture. In the context of a scarcity of water, the emerging competition between investment in land for food and for energy is linked to attainment of “peak oil” and the growing global concern with climate change. These developments are also reflected in the rise of food security and energy security to become primary global political priorities. This policy shift over the last decade is also mirrored by a rapid increase in large-scale land and agricultural investment, with sub-Saharan Africa at the centre. On the African continent , smallholder farmers (most of them women) contribute the major share of food production. In parallel, this process described above has triggered global consultations, initiated in 2008/9, which aim to formulate both voluntary principles and guidelines for improving agricultural investment.
The urge to develop principles and guidelines for agricultural investment also reflects the concern of global, national and local stakeholders with managing land responsibly since this had emerged as a contentious issue globally over the last decade. In the most recent global attempt to formulate voluntary, responsible agricultural investment principles (rai), the aims are to promote agricultural investments which simultaneously enhance food security, nutrition and sustainable development – hence the reference to responsibility Sustainability implies that agricultural investments must address economic, social and environmental/climatic concerns, which will have to be integrated in the discussions and consultations surrounding rai. In order to address the potential for employing the rai principles as a basis for strategy and policy, this discussion paper argues that a need exists for for transforming the rai principles into more concrete guidelines for responsible investment in agriculture so that they can provide the basis for policies and strategies that can prepare for concerted actions and activities.
The rai process relates to all types of agricultural investments globally, and it will include all major stakeholders. A global approach to responsible agricultural investments, however, will need to be based on the insights and understanding of the particular constraints and opportunities existing and anticipated in different groups of countries/regions, e.g. developed countries, emerging economies and developing countries and the relations between them. This is the broad mandate of the World Commission for Food Security (CFS) and which is the basis for the current global negotiations. The Zero Draft of the rai, published on August 1 2013, although indicating consensus about the broad rai principles, also showed clear disagreement among different stakeholders relating to the concretisation of rai. The CFS, through its Zero Draft, also requested inputs into the further rai process. To this effect a number of studies have been carried out by the High Level Panel of Experts (HLPE) connected to and set up to support the CFS and the rai process.
The Swedish FAO Committee, managing a limited budget, wished to contribute to this process by commissioning a desk study focusing on some of the most critical and discussed aspects of current agricultural investments, i.e. land related investments in developing countries. A particular objective of the study was also to inform about and mobilise discussion around these issues in Sweden. This study is thus structured as a discussion paper and focuses primarily on rai in the context of land related investments in developing countries, primarily Africa. Since challenges to promote agricultural investments which also enhance food security, nutrition and sustainability are of particular concern to Africa and developing countries, such a study would also contribute to the broader analysis of the rai process. The discussion paper also aims at informing about and mobilizing interest for the rai process among the Swedish concerned public. Three cases relating to large scale land investments were thus selected for inclusion in which the investors or the co-investor are of Swedish origin. The choice of a case of large scale investments in agriculture in Brazil also makes possible for the discussion paper to reflect on differences of conditions for the rai process in emerging economies (Brazil) and developing countries in Africa (Sierra Leone and Mozambique).
The discussion paper consists of several parts. The introduction addresses voluntary principles and guidelines in relation to legal pathways, in order to create a framework for responsible agricultural investment. The concept of responsibility is also discussed. Subsequently, the paper presents the background and evolution of global land investment, as well as an analysis of the role of foreign direct investment in relation to economic growth and spill-over effects. Empirical studies cited show that it is difficult to discern any direct connection between foreign direct investment, economic growth and the various spill-over effects, in particular as regards agriculture. This part of the discussion paper thus puts major emphasis on the relations between developed and developing countries, with particular focus on investments and reflections about the constraints and opportunities of investments versus trade.
Since Africa is a major focus for global agricultural land investment, the discussion paper also sets out an understanding of land, land investment and rural organisation on the continent. In addition, there is a description and analysis of smallholder agricultural production regimes and farming systems. This provides an assessment of the potential for smallholder or small-scale agriculture through their investments, and with support from their governments, to contribute to food security, nutrition and sustainable development.
The next sections of the paper present descriptions and different views, featuring the three case studies of large-scale investment in agriculture and forestry: biofuel investment in Sierra Leone by Addax Bioenergy, tree plantations in Niassa, Mozambique led by Swedish and Norwegian church organisations, and large-scale agricultural investments in Brazil by the Second Swedish National Pension Fund, AP2.
The implicit model in the evaluation of the case studies is to focus on pre-conditions, processes and planned and unintended outcomes, and the relationships between these elements. The character of the outcomes may be explained by a weak/strong understanding of the pre-conditions of the investment and/or a weak/strong process in relation to its implementation in terms of consultations, mobilisation, training etc. Such a model makes it possible to distinguish between the impacts of pre-conditions and processes for the outcomes, e.g. a project with a good analysis of the pre-conditions may still have negative and unintended outcomes, if the implementation process is flawed. For all assessments of investments, however, there has to be a strong reliance as well on contextual aspects.
This investigation, as explained above, is a desk study and thus does not include any visits to the sites of the investments analysed. The World Bank (World Bank 2008 and Deininger et al. 2011) and the FAO (2013b), are among the few institutions with resources and outreach to conduct field studies with broad coverage. This discussion paper relies on secondary sources of various characters and some interviews with knowledgeable persons about the investments and contextual factors (see acknowledgements). All these sources of knowledge have been helpful for the implementation of the study. The numerous comments on the first draft of the study, have as well been important for its final phase.
The author had, however, to a large extent to rely on his experiences as a researcher and consultant in identifying and analyzing relevant empirical material relating to the broad topic of the study, including various evaluations and monitoring activities of the large scale agricultural investments chosen for inclusion in the study. As emerges from the study and its reference list knowledge and insights of a number of researchers and institutions have been very helpful for the analysis.
The large-scale investments evaluated relate to different countries and continents (Africa and Latin America), different crops/commodities and different types of investors – a large corporation, church organisations and a pension fund. Hence there are large variations in contextual factors to take into account. The analysis of these large-scale investments attempts to present empirical material, representing different perspectives that can capture economic, organisational, social and environmental/climatic aspects. The paper attempts to identify views and perspectives on the investments, based on research but as well on available studies and evaluations organised by the investor(s) and NGOs that often pursue an alternative understanding.
The empirical material analysed show that different notions exist regarding large-scale agricultural investment. Investors emphasise the potential for win-win outcomes, while NGOs to a larger extent are biased towards win-lose or lose-lose outcomes. In fact, the discussion paper shows that all investors claim the potential for win-win outcomes, i.e. that investors, host states and rural communities, producers and workers will all gain from the investment.
It is hard to substantiate these claims, since one of the investments – that of Addax Bioenergy in Sierra Leone – has not yet initiated production of sugar cane/ethanol. The Addax case shows, however, that it is highly relevant to discuss the pre-condition, process, impacts and outcomes of a large-scale agricultural investment even before production gets under way. This is because the identification of and access to land and the consultation processes surrounding the investments often generate uncertainties and insecurity among part of the local population and as well offer some understanding about the host government’s and investor’s perceptions of pre-conditions for and the implementation process connected with the investment. Such insecurity is documented among the local population in both the African based investments, and in particular among people living inside or adjacent to the investment sites.
Such a scenario can emerge in spite that lots of efforts are expended by the investor in the planning and early phase of implementation, as was done by Addax Bioenergy. When investments not only cross spatial, but as well cultural boundaries, the potential for misunderstanding is also great. In most projects of such character it leads to problems of ‘managing expectations’ on the ground, as this report will show. For the case of Addax Bioenergy’s investment in Sierra Leone, NGOs that evaluated it, say that the investment is one of the best (probably the best) that they have investigated, but problems still occur. This discussion paper attempts to present different perspectives on these problems and how to address them.
In some cases problems related to the initial phases of the investment can lead to conflict in later stages. This happened with the large-scale forest plantation in Niassa in northern Mozambique. Here the empirical studies show that the investment by GSFF and the Chikweti company did not pay sufficient attention to potential problems relating to land access and the consultation processes associated with the investment. This discussion paper primarily analyses the failed developments of this investment until 2011, when the diocese of Västerås, the lead investor, was forced to write down the value of its investment by 25 per cent and to start afresh with new leadership at both board and management level. Information about the post-2011 process of the investment shows that it has taken a more constructive path and that relationships with people in the adjacent communities have improved. The win-win notion of the investor, however, remains.
The large-scale agricultural investment in Brazil by the Second Swedish National Pension Fund, AP2, has been difficult to assess, since, for commercial reasons, AP2 refuses to disclose the locations of the investment made through the international investment company TCGA and with assistance from the Brazilian company Radar. The analysis contained here thus has to take a more general and contextual pathway, and try to gain an understanding of the conditions, processes and potentials/problems of the sector in which AP2 is investing, in particular the biofuel/energy sector. The argument here is that AP2 and most stakeholders would probably gain from AP2 being more transparent about its investments – after all, it is the management of Swedish pension funds we are talking about.
The three case studies of large-scale investment addressed here reflect similar discussions and findings to those from recent case study research by the FAO in Africa, Asia and Latin America on the trends and impacts of foreign investment. The FAO suggests that, for investments involving large-scale acquisitions in countries where land rights are unclear and insecure, the disadvantages often outweigh the few benefits to the local community, especially in the short run. It is further stated that this outcome is even more likely when the land acquired was already being utilised by local people, either on a formal or an informal basis. Consequently, the acquisition of already utilised land to establish new large farms or investments should be avoided, and other forms of investment should be considered (FAO 2013b). The FAO study also concludes that, even from the investor’s perspective, business models that do not involve the transfer of land control are likely to be more profitable (FAO 2013b).
The next section of the paper brings out the recent history of guidelines for agricultural investment. This history goes back to 2008/9, when rapidly increasing food prices, triggered by the global financial crisis, coincided with a rise in the global interest in land-based food and energy investments and a growing concern for the climate. An overview of the stakeholders involved and of the various voluntary guidelines that were developed offers a better understanding of why there was a need for new consultations and negotiations connected to the current rai process. The final sections of the discussion paper present the objectives and principles, including the different parts of the rai principles. This is done with reference to the rai Zero Draft, which was published in August 2013. The rai Zero Draft outlines four major parts and a total of eight principles within these parts. The parts include: (i) food security, nutrition and sustainable development and the progressive realisation of the right to adequate food in the context of national food security, (ii) policy coherence and sector development, (iii) governance, grievance mechanisms and accountability and (iv) review and accountability.
There is no sequencing of the parts and principles in terms of their importance for achieving the overall objectives of rai. The discussion paper goes on to suggest that relevant experience and knowledge should be used more consciously in order to arrive at rai principles that could become more efficient. A set of critical questions and answers to the rai process is developed, which leads to a suggestion about how rai principles could be made more responsible and efficient. In so doing, the discussion paper adds more substance and offers a better option for sequencing the principles, so that they may achieve their overriding objectives. It is hoped that the stakeholders at all levels who are involved in the current discussions and consultations about rai will read and analyse these suggestions with an open mind as to how the ideas presented could inform the rai process.
Likewise, the discussion paper, with reference to the discussion and suggestions for modification of the rai principles presented in the Zero Draft, takes a step in the direction of suggesting more concrete guidelines for the implementation of rai principles. The rai and the associated guidelines could thus inform strategies and policies relating to the promotion of land based agricultural investments that could assist in the rural transformation in developing countries that also enhances food security and nutrition in a sustainable way. The discussion paper concludes that concrete guidelines to this effect will provide important inputs into the broader rai process so that its outcome makes a difference for people “on the ground” and not just add weight to the book shelves in the offices of the various stakeholders involved.
Kjell Havnevik