Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
60
Investment in agriculture in most countries is not qualitatively different from investment in
other sectors, except for the fact that the sector depends on climate and natural circumstances.
In this respect one might argue that the investment project might not be as ‘footloose’ as, for
example, a textile manufacturing investment. Tax regimes and incentives may vary, and access
to land can be a greater problem for agricultural investment than in other sectors, but these are
differences of degree. Indeed, to judge from the large agricultural investments being undertaken,
countries with poor investment climates appear better able to attract FDI in agriculture than in
other sectors. This is largely a function of the availability of large tracts of land, which many
other countries do not have. In that sense, it is analogous to the ability of countries with large
petroleum or mineral resources to attract investments even though their investment
environment may be very difficult. Investors in search of farmland, minerals, or oil, must go
where those resources are to be found. As experience in the mining industry shows, however,
investors will typically choose to invest in a country with a better investment environment,
other things being equal.
The eagerness of governments in many countries that receive relatively little investment to
attract agricultural FDI may lead them to offer better deals to investors than other countries
may do. Thus, for example, an investor in Sudan is likely to receive more incentives such as free
or subsidized land rentals and various fiscal incentives than a similar investor in Turkey. Sudan
especially, having lost most of its oil reserves with the independence of South Sudan, may be
offering an especially attractive package.
The danger to investors, however, is that a change of government could cause existing contracts
to be reviewed and renegotiated. This occurred with mining concessions in Democratic Republic
of Congo, for example, and with certain oil leases in Nigeria. The corresponding danger to
countries seeking to attract FDI in agriculture is that the worse the investment climate the more
generous the incentives they have to offer investors, potentially to the point where the benefits
from the investment are insufficient to justify the cost of the incentives.
3.5 Chapter Assessment
Based on the quantitative FDI assessment in this part and supported by qualitative research, the
main trends of Agricultural FDI flows in the COMCEC Region are presented below:
 Share of Agricultural FDI to Global FDI is negligible
The total number of agricultural FDI projects (excluding agro-processing) in the COMCEC Region
between 2003 and 2012 is equal to 371, representing a total share of 0.3 percent of the overall
registered FDI projects. However, the number of jobs created (i.e. 115,910) and total amount of
capital investment (i.e. 45.2 billion UD) is substantial.
 FDI projects peaked in 2011
Some 51 FDI projects, or 13.7 percent of projects, were recorded in 2011. This was the year in
which the highest numbers of projects were recorded. During this year a total of 20,708 jobs
were created and USD 9.65 billion capital was invested by these projects, equating to a 17.8
percent and 21.3 percent of total jobs and capital investment respectively.
 Domestic Market Growth Potential key motive for investors