UNCTAD chief promotes responsible foreign investment in agriculture

Foreign direct investment (FDI) in agriculture — a long-neglected sector— tripled between the start of the decade and the onset of the global recession, climbing from US $2 billion in 2000 to $6 billion in 2006-2008. If well-managed, this investment promises to help developing countries create jobs and improve farm productivity in future, UNCTAD´s Secretary-General told a ministerial conference of Asia-Pacific countries recently.

But Secretary-General Supachai Panitchpakdi told the meeting that when agricultural FDI resumes its growth - having fallen slightly during the financial crisis — steps should be taken by governments to ensure that it is "mutually beneficial for investors and the development objectives of host countries.

"Questions therefore need to be asked as to what extent FDI in agriculture contributes to food security or jeopardises it; and how far does it support other country priorities, such as employment generation, market access, and the transfer of technology and know-how," he said.

He spoke before an Asia-Pacific Economic Cooperation (APEC) ministerial meeting titled "Food Security: Trends in Foreign Direct Investment in the Agricultural Sector and the Trade Situation in the APEC Region."

While global FDI dropped by almost 40% during the 2009 financial crisis, total APEC exports to the rest of the world only declined by 14%, and "agricultural exports only fell by half as much -- 7%." The figures point "to the greater robustness of the agriculture sector in APEC countries".

His address came a day after the conclusion of a meeting in Rome of the Committee on Food Security, a joint effort of the Food and Agriculture Organisation (FAO) and the International Fund for Agricultural Development (IFAD), and the World Food Programme (WFP). One of the topics there was a proposed set of principles for responsible agricultural investment (RAI). The draft principles were developed jointly by the World Bank, IFAD, and the FAO, with inputs from UNCTAD and other international organisations.

In a packed plenary room, the Roundtable on Land Tenure and international Investment in Agriculture, which discussed the RAI, heard the views of governments, international organisations and NGOs. Consensus was reached during the session and the RAI process is to be included in the Report and future work of the CFS.

UNCTAD, noticing the uptick in FDI in 2008 as the food crisis struck, dedicated its World Investment Report 2009 to the issue of FDI in agricultural production. Its findings led it to intensify its involvement in the drafting of the RAI principles, Supachai said.

UNCTAD research has demonstrated the positive "spillover effects" of FDI, such as job creation. "Data from the United States suggests that globally the ratio of employees per $1 million of foreign affiliate assets is 12.7 for the agricultural sector, compared to 2.4 in manufacturing, 0.3 in mining, and 0.9 overall," he said.