Presentation for the Second Regional Land Forum

1. CHINESE INVESTMENT IN AFRICAN
AGRICULTURE: LESSONS FOR THE
MEKONG REGION?
MRLG/FAO Regional Land Forum #2
Bangkok
29 May, 2018
Darryl Vhugen

2. Background of the FAO Study
 After food crisis, large increase in large-scale land-
based investments in agriculture (LSLBIA) in Africa.
 Most investment came from western countries but
China, India and South Africa represent important
current and future sources of LSLBIA in Africa.
 Using desk research and interviews, study attempted
to assess extent to which selected investors from
those countries and their governments have adopted
the best practices represented by the VGGT in
relation to African LSLBIA.
 This presentation focuses on Chinese investment and
possible lessons for the Mekong region.

3.  Domestic food security.
 China has largest population and third largest land area in the
world, its agricultural resources are limited.
 So, Chinese government encourages overseas investment in
agriculture, including in Africa.
 Also
 Promote the SDGs.
 Enhance international competitiveness in agriculture;
implement “Belt and Road” strategy, etc.
 Increase overseas agricultural cooperation and development.
 Take advantage of lower production costs in Africa.
 Access expanding markets in African markets and other export
markets.
Why Chinese Investment in African Agriculture?

4.  Extent of investment.
 Reliable statistics are hard to come by. Sources differ
significantly.
 China's agricultural investment in Africa from 1950s through
the end of 2014 valued at 684 million USD per 1 source.
 Agricultural investment is small in comparison to other
sectors, such as finance and construction.
 Most Chinese investors in the study are state-owned
enterprises along with a few small privately-owned
firms. May not be true in general.
Chinese Investment in African LSLBIA

5. Breakdown of China's Agricultural
Investment in Africa in 2014
49.10%
36.40%
13.70%
0.80%
Planting
Fishery
Services
Proceessing

6. Land Acquired by Chinese Companies, 1987-2014
0
20
40
60
80
100
120
Benin
Cameroon
CôtedIvoire
DRCongo
Ghana
Guinea
Madagascar
Mali
Mozambique
Nigeria
SierraLeone
Sudan
Tanzania
Togo
Uganda
Zambia
Zimbabwe
Thousandsofhectares
September 2015 Release, v1.

7. Chinese Agricultural Investment Models
 JV with African government. Government contributes
land; Chinese company provides funding and
management expertise.
 Manage land in JV with Private Owner
 Purchase/lease large farms from private owners.
 Lease land directly from local smallholders
 Lease land to establish agricultural parks to develop and
test modern farming techniques and inputs and share
with local farmers
 Build or acquire processing plants and purchase from local
farmers through contract farming.

8. Results of Chinese Investment
Chinese companies face several significant
challenges in their LSLBIA in Africa:
 Lack of skilled labor and modern agricultural
technology
 Difficult investment environment related to poor
infrastructure, natural disasters and political instability
 Chinese companies’ lack of experience investing in
African agriculture
 Government interference in agricultural and currency
markets

9. Results of Chinese Investment (cont.)
Reports indicate that Chinese companies have
generally not fared well in LSLBIA in Africa and
other developing countries.
This appears to have caused Chinese investors
to look elsewhere to invest in agriculture.
Study found that only 2 of 17 Chinese
agricultural investments were in developing
countries (Cambodia and Brazil) in 2015 and
2016.
So Chinese companies prefer to invest in less
risky developed economy environments?

10. Responsible Investment Policies and
Practices of Chinese Investors
Most Chinese investors reported little or no knowledge
of VGGT.
Some aware of potential for conflict when local people
oppose purchase or leasing land.
May be overly reliant on government records and local
lawyers to determine who has legitimate tenure rights
to a parcel of land.
Many believe that they need only abide by local laws
and regulations to respect legitimate tenure rights.
(Customary land rights?)

11. Responsible Investment Policies and
Practices of Chinese Investors
Chinese investors may be ignoring women’s land
rights; not mentioned in any of the case studies.
Some of the projects may be contributing to local food
security, especially those that involve cooperation with
local farmers, as they supply local market.
Some of the business models appear to be at least
somewhat inclusive as they involve cooperative
arrangements with local farmers.
Some investors appear willing to accept relocation of
local people.

12. Chinese Government Policies and Laws
 Chinese governments at central and provincial levels have
issued policies setting standards and guidance for overseas
investment and business operations by state-owned and
private entities to comply with the international norms.
 E.g.:
Convention on Sound Operation and Social Responsibility of
Overseas Agricultural Investment.
Guidelines for Environmental Protection in Foreign Investment
and Cooperation
 Do not directly address land tenure.
 Unknown how well the government enforces these
requirements

13. Chinese Authors’ Recommendations for
Chinese Companies
Engage in improved due diligence through initial
stage evaluations of investment; become better
acquainted with the local politics, economic
conditions, people and traditions
Fulfill social responsibilities
Build greater awareness of responsible investment
principles such as VGGT
But what does this mean?

14. Lessons for Mekong Region
Chinese companies generally need better
understanding of “responsible investment.”
Little mention of:
Respect for legitimate tenure rights;
Engaging in meaningful consultation and participation;
Conducting social and environmental impact
assessments prior to deciding whether and where to
invest;
Utilizing inclusive business models.

15. Lessons for Mekong Region
 Some recognize need to avoid doing harm to food security
 Need to build improved awareness and capacity of
companies
 Use the apparent desire of Chinese government to foster
responsible investments;
Authors suggest government can strengthen its guidance and
promote compliance with VGGT, CFS-RAI, etc.
Need to assess government enforcement/implementation
Integrate into Belt and Road Initiative
 Roles for host and donor governments, non-Chinese
private sector, civil society, etc.

16. THANK YOU
Darryl Vhugen
vhugen@msn.com