Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
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This caused the company to slow down its investment program. Six months later, according to
CLC, the government served them a termination notice.121
Without attempting to judge the competing claims by the Government and aggrieved investors,
it seems clear that Ethiopia’s ambitious plan to transform its agricultural sector by attracting
large-scale FDI has suffered from a lack of appropriate planning, project evaluation, and
governance, problems that no program of investment incentives, no matter how generous, can
overcome.
The Karuturi investment is a case in point. Karuturi’s farm is a rectangular strip of land along the
floodplain of the Baro river near the South Sudan border. In 2011, a flash flood destroyed
Karuturi’s first crop and caused about $100,000 of damage and $200,000 in lost revenue,
according to the company’s financial reports. The company responded by building dykes that
are alleged to have diverted floodwaters into nearby villages, flooding the villages as well as
much of Karuturi’s 100,000 ha. farm when the river breached the dykes. Karuturi claims that 80
percent of its concession lay in the Baro River flood plain, but that the Government had failed to
provide the company with data on past flooding and rainfall. As a result of the flooding, Karuturi
was unable to achieve its goal of clearing and developing the entire 100,000-hectare plot in two
years, as stipulated by the contract signed with the government.122
Ethiopia’s investment program has also been tarnished by claims of abuses with respect to
seizure of land, inadequate compensation, and botched relocations of local populations. In order
to accommodate international investors, the Agriculture Ministry in November 2010 announced
plans to relocate 45,000 households, or about three-quarters of the population of Gambella, by
mid-2013. Almost half of the region’s population is made up of the semi-nomadic Lou Nuer
people. Critics have argued that domestic farmers are being dispossessed and the country
shouldn’t rent land cheaply to foreign investors to grow cash crops when about 13 percent of its
approximately 80 million people still rely on food aid. Saudi Star claims that the land it has been
allocated is unoccupied. It argues, moreover, that there is plenty of land in Ethiopia, especially in
the lowland areas, and that its investment will help increase Ethiopia’s food security and reduce
its dependence on food aid. 123
Added to concerns about “land grabs” and relocations are even more sensitive concerns over
water. Despite the flooding on Karuturi’s concession, water shortages are a far more pressing
concern, not only in Ethiopia but throughout much of Africa and in other regions of the world.
FDI in Ethiopia and other African countries, especially by investors from Saudi Arabia and other
arid countries, can be seen as motivated more by a search for water than by a search for land. As
climate change progresses and populations in countries like Ethiopia continue to grow rapidly,
these investments are likely to lead to further conflicts.
Case Assessment
121 The Hindu (2013), “Karuturi debacle prompts Ethiopia to review land policy,” June 1, 2013.
122 The Hindu (2013a), “When the levee breaks,” May 19, 2013.
123 Bloomberg, 2011