Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
35
acquisitions of agricultural land, continue to raise international concern. The ongoing debate
raises questions on complex and controversial issues relating to economic, political,
institutional, legal and ethical matters in relation to food security, poverty reduction, rural
development, technology and access to land and water resources.
There seems to be little to no consensus among different parts of the world whether FDI is a
significant contributor to poverty reduction and sustainable agricultural development. Some
countries forbid FDI in agricultural sectors and reserve investment opportunities strictly for
domestic investors, while other developing countries are making significant efforts to attract
foreign investors into their agricultural sectors. Clearly these countries foresee the important
role for such investments in filling the gap left by dwindling official development assistance and
the limitations of their own domestic budgetary resources, creating employment and incomes
and promoting technology transfer.
It is claimed that FDI creates knowledge and skill transfer, yet local farmers complain that
superior technologies of foreign investors put them out of business. In other words, can foreign
direct investment be compatible with the needs of local stakeholders as well as those of the
international investor? And can these investments on a societal level yield more economic
benefits?
Analyzing the impacts of foreign direct investment in developing country agriculture and even
understanding its extent and nature has been hampered by the weakness of the available
information and the lack of comprehensive statistical data. Much discussion of the phenomenon
has been based on anecdotal evidence but one should be careful with biased information
sources. With this limitation in mind, different literature has been evaluated and several case
studies have been provided in Chapter 3.
2.7 Chapter Assessment
In this chapter, the most important impacts of FDI have been identified. One of these effects is to
contribute to economic development. Employment creation is perceived as one of the most
direct positive outcomes of FDI in agriculture as it directly deals with unemployment and
poverty issues.55 Such additional earnings can be re-invested into their own farms and improve
local productivity. 56 Evidence from Tanzania indicates that agricultural FDI had a positive
impact on smallholder farmers, especially farmers linked in integrated producer schemes.57 In
both within the Tanzanian tea and sugar industries, schemes integrating smallholder farmers
through growers associations that have direct links with FDI have significantly increased
production volume, productivity and efficiency. Research in Tanzania and elsewhere indicates
that such schemes have a much greater effect on employment and livelihoods than large-scale
mechanized agriculture.
FDI in infrastructure and logistics helps to improve the fundamentals of every national
investment climate. Without a sophisticated level of infrastructure it will become very hard to
55 Deshmukh, 2012; Djokoto, 2011; FAO, 2011; FAO, 2012a; Gerlach and Liu, 2010
56 FAO, 2012a.
57 Msuya, (2007)