Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
34
Table 11: Indian Agricultural FDI projects in the COMCEC Member Countries
Investing Company Parent Company
Destination
Country
Capital
Investment
Estimated
Jobs
Created
Project Type
Biopalm Energy Siva Group Cameroon 1907.24 No 3000 New
KS Oils KS Oils Malaysia 25.6 Yes 176 New
Gokul Refoils & Solvent Gokul Refoils & Solvent Indonesia 150.23 No 770 New
State Trading
Corporation of India
(STC)
State Trading
Corporation of India
(STC)
Suriname 40.9 Yes 270 Expansion
State Trading
Corporation of India
(STC)
State Trading
Corporation of India
(STC)
Indonesia 73.7 Yes 176 New
Source: fDi Intelligence from The Financial Times Ltd
2.6 Advantages and disadvantages and risks of FDI in the agricultural
Sector
As the literature on FDI suggests, inward FDI in any industry is often associated with higher
levels of productivity through product and process innovation through spillover and linkages
and can thus contribute in many COMCEC Member Countries to increased financing, expansion
of land under cultivation, and higher levels of productivity, thus contributing to increased
exports and a reduction in trade imbalances. In such cases FDI can produce additional benefits
through spillover effects in the form of capital expenditure, indirect jobs with suppliers,
innovation, capital transfer etc.
In addition, FDI can stimulate development of forward and backward linkages within an
industry. Backward linkages can be defined as "the growth of an industry leads to the growth of
the industries that supply inputs to it". As in the case of cotton industry, growth of the textile
industry may support the growth of the cotton industry, which will lead to higher incomes for
cotton farmers and will create a greater demand for goods and services in the countryside.
Forward linkages exist when the growth of an industry leads to the growth of other industries
that uses its output as input. The final product of cotton goes to consumers either through
retailers or through manufacturers who open up their own shops to directly sell to consumer,
thereby minimising the role of retailers in the channel process. A company can minimize cost of
production and can maximize revenue when both backward and forward linkages work
together in an effective way.
Attracting FDI through a more conducive business climate for agricultural investments in
combination with preferential, bilateral and regional trade agreements can create a platform for
higher levels of economic growth through the agricultural sector in many COMCEC Member
Countries. Obviously, this process also has challenges that will be dealt with in the next two
chapters of this report.
According to recent research on trends and impacts of foreign direct investment (FDI) in
agriculture, large-scale international investments in developing country agriculture, especially