Investment Policy Support

Foreign investment: key observations

Traditionally not significant

Evidence indicates that domestic and international corporate investment in agricultural production is marginal and contributes little to farm-level capital formation. From 1970-2008, of the total foreign direct investment directed to Thailand, less than half of one percent went to agriculture. In China during the 1990s, agriculture received only 1.3 percent of total foreign direct investment. In Brazil, foreign direct investment in agriculture in 2008 accounted for only US$420 million out of US$ 288 billion.

A large part of foreign investment is on post-harvest and high-value crops

Extensive consultations and surveys of the domestic and international corporate investors carried out by FAO revealed that investors tend to avoid investing in primary production because of:

  • the high level of risk in production;
  • the almost universal government interference with production, price and trade of primary food crops;
  • inadequate clarity about property rights and lack of laws to uphold these rights; and
  • the difficulties encountered in recovering investment in fixed capital when disputes arise.

For these reasons, investors are mainly directing their investments to post-harvest activities and high-value crops.

It may have significant impact at the local level

The purchase of land by more affluent countries in land-abundant developing countries, a practice commonly referred as 'land grabbing', is emerging as new form of foreign direct investment. The practice has the potential to affect global food security. Currently, data is lacking on the extent and nature of actual transactions, but scenarios suggest that 'land grabbing' would affect, at most, no more than one percent of the arable land in the countries involved; a small amount in the global context. Nevertheless, the practice may have significant impact at the local level.