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Who invests in agriculture and how much? An empirical review of the relative size of various investments in agriculture in low- and middle- income countries

ESA Working Paper 12-09








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    Book (stand-alone)
    International Investments in Agriculture in the Near East
    Evidence from Egypt, Morocco and Sudan
    2011
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    The food crisis of 2007- 2008 sparked an increase in investment flows to agriculture in the Near East, particularly to countries rich in water and land resources, such as Sudan. These investments have continued to increase during 2009 - 2010, as food prices continue to remain high. This publication was motivated by this surge in international investments in agriculture. and the-. need to answer some key policy questions, through and a brief review of international investments in the region, and an exploratory analysis of the issues and challenges in the policy arena. Three case studies in Egypt, Morocco and Sudan were commissioned by the FAO Regional Office for the Near East. The purpose was to (i) identify past and current investment trends in terms of the actors involved, modalities, size and impact (to the extent that information is available), (ii) assess these investments in the context of the region and its food security challenges, and (iii) identify areas to be addressed by pol icy makers to ensure food security in the long run and provide a starting point to evaluate investments for timely and targeted policy measures. While information on international investments in agriculture is not readily available, the case studies provide an overall picture of agriculture investments, specifically focusing on foreign direct investments. The share of international investments to agriculture has traditionally been very low in the region. With a an average share of 1- 2% of total FDI, this investment is mostly concentrated in sectors other than primary agriculture. In the past few years, investments in agriculture have grown remarkably; however, information on their allocation and impact is incomplete and fast changing. Impacts of agricultural investments in the past have been mixed and concentrated in capital and resource intensive activities which are largely supported by the public sector. Sudan has attracted resource seeking investments, whereas Morocco and Egypt co ntinue to be investment destinations for market seeking investments, in the food processing and fruit and vegetable production sectors. The involvement of the private sector in investment in agriculture is growing but there is still a strong government presence in supporting these investments, often through direct and indirect subsidies in most countries. The historical experience of the region is instructive in terms of improving the efficiency of future investments in agriculture as well as en suring sustainable outcomes. Some of the salient features of international investments in agriculture can be summarized as follows: • Intra-regional investment in agriculture constitutes the bulk of the international investment in agriculture in the Near East. • Countries such as Egypt and Sudan are the largest recipients of recent international investments in food and agriculture, mostly from the Gulf States but also from other countries such as China and South Korea. Other countries in the reg ion are also heavily investing in agriculture and food sectors overseas, and beyond the Near East, including in Asia and Latin America. • Whether investor or host country, the common driving factor for international investments in agriculture in the region is food security concerns. The investment policies of most countries in the region are geared toward attracting investments. They are therefore relatively open and do not differentiate between the different sectors or the different types of ac tivities within agriculture. Agriculture, as an investment category, has been growing rapidly in the last three years, and most countries (especially the poorest) have not yet had the time to align their investment strategies with their national food security objectives. Given the rapid growth in agricultural investment, caution needs to be exercised by investor and host country governments, as well as private investors, to develop sustainable solutions and incorporate a long term perspective to support healthy and profitable investments. Given the diverse national and household food security concerns and resource availabilities, a regional focus on food security may be needed to better formulate and harmonize policies as well as tap into opportunities. The potential capacity for staple food production has its limits, but income generating opportunities are ample. A mix of investments geared at food processing, food service, and other sectors linked to agriculture, could also provide a lternative income opportunities for rural people, as well as increased employment opportunities in urban areas. Within this context, regional initiatives could be very promising in promoting food security in the longer term.
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    Book (stand-alone)
    Current research on the impacts of investment and the Principles for Responsible Agricultural Investment on developing country agriculture
    A Side Event organized by the Inter-Agency Working Group (IAWG) during the 39th Session of the Committee on World Food Security (CFS) 18 October 2012, FAO Headquarters
    2012
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    The Inter-Agency Working Group on the Principles of Responsible Agricultural Investment that Respects Rights, Livelihoods and Resources (PRAI), composed of FAO, IFAD, UNCTAD and the World Bank, held a Side Event entitled on Thursday, 18 October, during the 39th Session of the Committee on World Food Security (CFS) at FAO Headquarters in Rome. The objectives of the Side Event were: To present empirical evidence from several streams of ongoing research on responsible agricultural investment in d eveloping countries; to discuss the implications for policy formulation and possible recommendations for foreign and domestic investors, governments, donors and international agencies; to provide inputs into the inclusive CFS consultation process to ensure broad ownership of principles for responsible agricultural investment that enhance food security and nutrition.
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    Document
    Financial resource flows to agriculture
    A review of data on government expenditures, official development assistance and foreign direct investment
    2011
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    This paper reviews four international datasets and one regional dataset which allow us to consider the magnitude of and trends in government spending on, official development assistance (ODA) to and foreign direct investment (FDI) in agriculture, forestry and fishing and, in some cases, other relevant sectors. These datasets represent the most current and comprehensive data available on resource flows to agriculture. Two of the datasets have not yet been made freely available to the public. Alth ough the existing data do not permit consideration of several important issues, they do allow us to better understand trends in resource flows to agriculture and we are able to draw some conclusions including the following. Spending on agriculture is mainly financed through domestic sources of finance (levels of government spending are larger than ODA and FDI). For developing countries as a whole, the three types of spending on agriculture (total levels and levels per population working in agriculture) have increased. Although increases have been recorded for FDI, we find some evidence that FDI may have increased less than previously claimed. Trends in indicators of government spending on, ODA to and FDI in agriculture are discouraging for Sub-Saharan Africa. The paper concludes with suggestions of areas for future research.

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