Increasing Agricultural Productivity:
Encouraging Foreign Direct Investments in the COMCEC Region
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 Respect for property rights: The absence of ownership title to a given tract of land does
not mean that it is vacant or unused. Various forms of traditional and customary rights
may govern use of a piece of land, and these rights must be respected by any investor, as
well as the host country government. To the extent that existing occupants or users
must be displaced, appropriate compensation and resettlement plans must be adopted
and fairly and effectively implemented.
 Preference for outgrower and smallholder cultivation over large-scale mechanized
agriculture. A substantial body of evidence indicates that benefits to local populations
are much greater, and productivity higher, when public investors develop effective
outgrower programs and work in cooperation with smallholders.
 Global economies of scale in agricultural production and supported by our agricultural
FDI assessment indicates that foreign private investment must be attracted by engaging
with large scale companies.
 Assess economic viability of projects: “Rigorous economic analysis of land-related
investments is important for two reasons. First, many of the investments reported in the
media appear to be motivated by non-economic factors, such as the security of food
supplies. Many are located in places that may not be suitable for producing the
commodity involved. Second, investors and some government bureaucrats may have an
incentive to underestimate the cost of the land or other factors of production such as
labour. If investments will not be economically profitable, this reality needs to be
factored into the design of the contract so that both sides acknowledge it explicitly and
form their expectations accordingly from the beginning.”
 Allow direct negotiation between communities and potential investors. Most countries
now provide legal recognition of local land rights, which implies that direct negotiation
between the parties can help produce better outcomes and greater overall benefits. But
many countries still require that government first expropriate land to be used for
investment. This tends to encourage political interference and corruption, and often
produces outcomes contrary to those that were expected. Transfer of responsibility and
accountability to the local level – accompanied by necessary training and capacity
building – is almost always preferable.
 Tax idle land and impose appropriate lease payments. Many countries tax land-related
investments but not the land itself. But taxing unimproved land above a certain size or
value can be an effective way to prevent speculative hoarding. Smallholders can and
should be exempted. Taxing land is superior to most alternatives, such as making
investors’ land rights conditional on investment being undertaken. Though this may
seem attractive in theory, in practice it is costly and difficult to enforce and can lend
itself to discretionary application.