Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
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ventures include 50,000 acres of farmland in Sharq Al Owainat, in Southern Egypt, around 30
kilometres from the Sudan border. The project started by growing fodder and then moved to
growing wheat, potatoes, dill and maize. Around 50 percent of the produce in Egypt is being sold
in the domestic market, while the remainder is sold in the Gulf region including the UAE. In
Sudan, the firm was given 100,000 acres in the north by the Sudanese government to develop, at
a nominal cost.91
Risks, Challenges, and Opportunities
Heavy investment in agricultural production overseas, especially in poor countries in Africa,
could actually decrease food security for several reasons. Many of the target countries are
politically volatile. There is substantial criticism, both in these countries and globally, of large-
scale agricultural investments as “land grabs” that impoverish and reduce food security for
vulnerable local populations. Governments could potentially repudiate agreements they have
made with foreign investors or, alternatively, the governments that entered into these
agreements could be replaced by new governments that seek to reverse course. Expropriations,
especially when land ownership is involved, are feared among international investors.
Many of the countries in which these investments are taking place are among the most
vulnerable to climate change. In countries such as Egypt and Sudan, but also in Southern Africa,
global warming is expected to increase the frequency and severity of drought, which could
render some of these investments unviable. An even greater risk is that drought, or other
conditions that lead to food shortages or sharp price rises, will cause the governments of these
countries to ban exports and/or impose price controls. Many countries did both during the
2007-2008 food price crisis.
Between January and May 2008, the price of rice increased from US$389 per ton to over $1,037.
Between January and March, wheat export prices increased from $196 to $440 per ton. 92
Countries’ attempts to isolate themselves from these trends through measures such as export
restrictions only worsened volatility. The price increases threatened food security and welfare
among the poorest, particularly in countries that depend on food imports. In countries where
the poorest population could no longer afford their normal levels of food consumption, and
where state budgets could not absorb the costs of increased subsidies, price increases led to
growing concerns. Food importers were compelled to explore alternative means of securing
adequate food supplies, such as acquiring land or investing in agriculture in countries with
abundant agricultural land. Food prices however were not the only force at play in increasing
the demand for land. High fuel prices were simultaneously leading to greater demand for
plantations on which to grow bio-fuel crops such as oil palm at the expense of traditional food
crops.
Private companies such as Jenaan have adopted strategies that may help mitigate some of these
risks. By selling 50 percent of its production in the domestic market, it reduces its exposure to
the risk of an export ban, while also reducing vulnerability to criticism that it is engaged in
exploiting domestic agricultural resources for the exclusive benefit of foreigners. Also, by
91 Reuters (2010) “UAE firm focuses on developing farmland abroad,” November 24, 2010.
92 Songwe and Deininger (2009)