As rising food and fuel prices create incentives for large-scale land acquisitions around the world, it is more important than ever for governments and the international community to protect local land rights, according to a new World Bank study released this week.
Strong and clear land rights make it more likely for existing owners to directly negotiate with investors, obtain higher payments for land transfers and make sure investments benefit the public and the local economy, says the study.
For investors, respecting existing land rights is key to legitimate and economically viable projects. In addition, investors in countries such as Mexico and Argentina have found it productive to work with smallholders, especially since there is less “unused” land with growth potential than official figures suggest, the report finds.
“A consistent finding across regions is that better-defined land rights helped in many instances to improve efficiency and equity,” says Klaus Deininger, who conducted the study with firsthand data from 14 countries, where the most amount of land is available and where investors have shown most interest. The report also covers large land purchases in other countries. “Having rights protected is a necessary condition for making the best use of productive assets,” the report says.
The research came after some countries asked the Bank to help deal with large-scale land acquisitions, around which a lack of data has sparked confusion and speculation. Bank officials say if such acquisitions go ahead, as is happening already, governments should protect the interests of locals, especially smallholders and secondary landholders who depend on the land for a living. That’s because measures such as improving smallholder productivity – combined with technology investment, infrastructure and new markets – will prove critical to food security and rural poverty reduction, especially in Africa.
For 18 months, Deininger, a lead economist at the Development Research Group, has been collecting data from people handling various aspects of land deals and databases in Africa, Latin America, Europe and Asia. He also investigated deals reported in the press.
What emerged is a mixed picture. Some countries worked with smallholders and used competitive bidding to foster investment deals that benefit locals. Along the Pacific coast of Peru, the government auctioned off public land with relatively low yields through a transparent process, which required investors to pay a hefty deposit and spell out how many jobs they would create and how to protect the interests of existing landholders.
In Mexico, registration of land rights helped communities bargain with investors and improve governance and accountability in rural areas. In Argentina and Brazil, some big producers often lease land through competition, pay landowners for the lease, but earn enough to make a profit by improving yields.
By contrast, in some countries, deals with outside investors have lacked transparency. In fact, Deininger says in many African countries and other places where landownership isn’t recorded or respected, details on investments are treated as confidential, and information on land rights either isn’t kept at all or is stored in incompatible databases. Vulnerable groups and secondary landholders are often excluded from land deals.
That makes it difficult for existing landowners to negotiate good terms or ensure investors keep their promises. It also tends to turn off responsible investors. In fact, some investors in Africa seem more interested in speculating on rising land prices than growing crops, and they aren’t fully cultivating the land they have acquired. For example, in Sudan, where many local farmers complained about losing land rights, not much of the land transferred has been cultivated.
Some African countries are now trying to reverse previous land acquisitions. Mozambique, for example, is trying to take back some of the land sold to investors because the government is concerned that half of that land is sitting idle, not growing sugar cane or other crops, as promised by those investors.
The report gives specific recommendations on how to boost land administration. For example, in countries with large shares of land but low yields, governments and farmers can benefit from attracting private investment that boosts productivity among existing smallholders. The report offers country-level data on available land and yields, which can be used to simulate the impact of different investments, such as new technology and infrastructure. How land is cultivated will not only affect poverty and productivity in the short term, but how a country’s land ownership structure evolves in the long run.
Another recommendation is that governments map available land and identify what type of investment – such as sugar cane, bio-fuel or specialty crops – will boost exports or fit into their national economic development strategy. They should then build roads and other infrastructure to support the strategy, and seek bids from responsible investors who can bring agricultural technologies and more economic benefits to locals.
“Figure out a country’s niche and competitive advantage, then investors can help you achieve your goal,” Deininger says. “They know technology and other things, but you can often get a much better bargain – and investments will be sustainable only if everybody benefits”.
The report builds on the World Bank Group’s commitment to support efforts by client countries to improve agricultural output, fight hunger, boost incomes of the poor, and foster economic and environmental services. The Bank has worked with Food and Agriculture Organization (FAO), International Fund for Agricultural Development (IFAD) and United Nations Conference on Trade and Development (UNCTAD) and other stakeholders, and used early findings from the research to develop seven voluntary principles for responsible agro investment that respects rights, livelihoods and resources. The Bank is working with countries and other stakeholders to translate these principles into practice.