Advocates seeking to have barriers on foreign ownership of land removed expect such a move will step up the country’s foreign direct investments (FDIs). However, this demands very careful consideration. As the purchase of land to grow crops for food and biofuels have spiked globally to meet increasing demands, communities have been displaced, women marginalized, and inflationary effects on food prices experienced, all of which affect the poor. Instead of giving incentives to attract FDIs, the government should instead invest in local farmers to promote inclusive growth and reduce poverty in the country. In addition, it is worth noting that Vietnam, Indonesia, and Thailand have attracted higher levels of FDIs despite having similar caps on land ownership, meaning there are other ways to increase FDI levels without removing such restraints.
Introduction
Recent calls for Charter Change (“Cha-Cha”) have included demands to relax the constraints on the ownership of land by foreign individuals and entities, seen as one of the main reasons for the low levels of FDIs in the Philippines. Currently, foreigners may either lease land for 25 years with an option to extend for another 25 years, or hold a minority share of up to 40 percent in a company that owns land.
Lifting the foreign ownership cap will help stimulate job creation and in turn reduce poverty and promote economic growth. However, the impact of removing the said restriction, especially on farmers, needs to be thoroughly assessed.
Current trends
There has been a global rush for land investments, of which an increasing number involve agricultural land.
Triggered by the food security crises of 2007-2008 and higher demand for agro-energy (crops harvested for fuel) sources, governments and private investors have been buying agricultural land around the world to secure stable supplies for food and biofuel. However, not all governments have achieved the development promised by such investments as proven by a report by the international NGO ActionAid titled “The Great Land Heist.”
This trend of foreign businessmen investing in agricultural land can be seen locally as well. According to an online public database called Land Matrix, as of October 2 this year, the Philippines has 17 joint land investment partnerships for agriculture with other governments and private investors, potentially covering an area of about 657,150 hectares. Eleven projects out of the total are focused on the production of biofuel. (Kindly refer to the appendix for more details.)
Potential impacts of foreign land ownership
- Displacement and marginalization
Would such investments bring about the promise of reduced poverty and economic growth? In Sierra Leone, Addax Bioenergy Ltd., a subsidiary of the Malta-based energy corporation Addax and Oryx Group of Companies (AOG), invested in the production of ethanol from sugarcane. The said crops are harvested from an area covering 10,000 hectares, which Addax Bionergy leased from local landowners. The sugarcane-to-ethanol project, backed by several European Development funds (from countries including the United Kingdom, the Netherlands, Sweden, Belgium, and Germany) and the African Development Bank, is seen as a model of how sustainable biofuel projects should be run. However, research by ActionAid, a non-government organization devoted to fighting poverty and injustice worldwide, found that 13,000 people were displaced while hunger levels and loss of income grew because of Addax Bionergy’s project. Nine out of every 10 affected blamed land issues with Addax for the food shortage.
In Cambodia’s Koh Kong province, the government granted 19,100 hectares of land to two sugar companies in 2006, displacing 456 families in the process. In the province of Kampong Speu, 23,000 hectares were leased to two other sugar companies, forcing 1,110 families out of their homes.
Local populations also face greater lack of access to land, water and natural resources.
Coupled with few livelihood opportunities, the only viable and realistic option left to many would be to migrate, mostly to urban areas, in search of work. In developing countries like the Philippines, surplus labor from rural areas becomes an added burden to the already high levels of unemployment and poverty in urban areas. NCR already experiences one of the highest unemployment rates in the country, which stood at 10.3 percent as of July 2014.
Also, the focus on producing cash crops to satisfy biofuel needs globally may likely marginalize women. As pointed out in ActionAid’s report “The Grand Land Heist,” women produce 60 to 80 percent of food such as rice, wheat, and maize in most developing countries. However, men are commonly known to take control of the workload when growing cash crops. For women, control over land can mean the difference between enjoying rights such as access to education and facing subjugation in society as tenure over land is a fundamental component of dignified and sustainable development for those from impoverished communities.
- Food security and rising commodity prices
There has been a global trend of blending biofuel into a vehicle’s fuel supply, especially in the US and the European Union. In the Philippines, through the passage of the Biofuels Act of 2006, all gasoline sold in the country must contain at least 5 percent ethanol. This increase in global investments on biofuel has resulted in rising food prices and increasing concerns over food security as farmers plant less food and more biofuel crops.
In the Philippines, land deals with foreign investors are generally focused on growing biofuels with 11 out of 17 involved plantations devoted to growing such crops, potentially covering a land area of 608,600 hectares, based on data from Land Matrix. With the country importing almost 80 percent of its garlic requirements and being the fourth highest importer of rice in 2012, it may be reasonable to reconsider using land for growing such essential food crops instead. It is worth noting that, unlike today, the Philippines achieved rice self-sufficiency in the 1970s and even exported rice in the early 1980s.
Rising food prices due to decreased supply affect the poor the most. According to the 2012 Family and Income Expenditure Survey, families belonging to the lower 30 percent per capita income group spend almost two-thirds or 62.3 percent of their income on food alone. This percentage will rise with higher prices, forcing such people to devote more of their meager income on food, leaving less for other expenditures like health.
III. Perverted economic incentives
Providing economic incentives to willing investors such as tax breaks is a strategy of governments to attract investments. In the Addax land deal mentioned, the Sierra Leone government provided incentives which would result in a $140.9-million loss for the government during the project’s 10-year operation.
Studies have shown that small-scale farmers are more productive per unit of land and support more livelihoods as compared to large-scale farms. However, due to the lack of adequate government investment in agriculture, by 2013, this sector contributed only 11 percent to GDP, compared to 20-30 percent in the years going back to 1969. Instead of providing economic perks for various multinational corporations to invest in the country, it would be wise to instead invest in our farmers.
Foreign Direct Investment
The main argument for opening up local land to foreign ownership is that it will unlock the country’s FDI potential currently held back by constitutional restrictions. However, Thailand, Indonesia, and Vietnam have been able to attract levels of FDI that were three, five and two times higher than that of the Philippines, respectively, in 2013 despite having similarly restrictive laws on the foreign ownership of land. This means that there exist other avenues which may be explored to boost the country’s FDI levels.
Conclusion
Despite all the promise associated with lifting land ownership limits to foreigners, there is a need to study its possible effects, especially on the agricultural sector. Given the above arguments, there are reasons to hold back calls promoting foreign ownership and instead focus on investing in local farmers who have thus far been neglected by the government. Not only does state support have the potential to more effectively reduce poverty by empowering local farmers, it will also go a long way in helping the Philippines attain its goal of food security through technology transfers to farmers .
Appendix
Source:
[1] “The 2013 Foreign Investor’s Guide to Real Estate Transactions in the Philippines”, Sycip Salazar Hernandez & Gatmaitan, February 2013. [1] As of October 2, 2014, Land Matrix, an independent and global land monitoring initiative, had information on 1,183 land deals, covering and area of 52.41 million hectares globally (excluding failed deals). [1] Heumesser, C., Schmid, E., “Trends in foreign direct investment in the agricultural sector of developing and transition countries: A review”, University of Natural Resources and Applied Life Sciences (Vienna), July 2012 [1] Martin, A., Ayalew, M.M., “Acquiring land abroad for agricultural purposes: ‘land grab’ or agri-FDI?”, Surrey Law Working Papers, August 2011 [1] Land Matrix is a global and independent land monitoring initiative coordinated by the French research center Centre de Coopération Internationale en Recherche Agronomique pour le Développement or (CIRAD), the Centre for Development and Environment (CDE) at the University of Berne, the Hamburg-based German Institute of Global and Area Studies (GIGA), the German government owned Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and the International Land Coalition (a global coalition of civil society groups and inter-governmental organizations), and is implemented through a network of in-country partners and data coordinators. [1] Refer to Land Matrix’s website http://www.landmatrix.org/en/get-the-detail/by-target-country/philippines/ for more information on land deals in the Philippines with governments/private investors from abroad. [1] Oram, Julian, “The Great Land Heist”, ActionAid, May 2014 [1] Ibid [1] Ibid. [1] Ibid [1] Department of Labor and Employment statistics. May be accessed at http://www.bles.dole.gov.ph/PUBLICATIONS/Current%20Labor%20Statistics/STATISTICAL%20TABLES/PDF/Tab4.pdf [1] IFAD, FAO and World Bank. Gender in agriculture sourcebook, 2009, p.522, cited from ActionAid’s report “The Great Land Heist”, May 2014. [1] Paul and Steinbrecher, (2013) op. cit., cited from ActionAid’s report “The Great Land Heist”, May 2014. [1] Crabtree-Condor, I; and Casey, L. Lay of the land: improving land governance to stop land grabs. ActionAid, 2012. http://www. actionaid.org/sites/files/actionaid/lay_of_the_land_-_improving_land_governance_to_stop_land_grabs_low_res.pdf , cited from ActionAid’s report “The Great Land Heist”, May 2014. [1] Rosenthal, Elisabeth, “As biofuel demand grows, so do Guatemala’s hunger pangs”, New York Times, January 2013.’ [1] Data sourced from Land Matrix database and may be accessed at http://www.landmatrix.org/en/get-the-detail/by-target-country/philippines/. [1] Philippine News Agency, “DA clarifies it does not issue garlic’import permits’”, The Manila Times, September 2014 [1] International Rice Research Institute-World Rice Statisitcs [1] Danao, Allison, “PH road to rice self-sufficiency”, Rappler, June 2014 [1] Ericta, Carmelita N., “Filipinos in the poorest income decile earn six thousand pesos monthly, on average in 2012 results (Results from the 2012 Family Income and Expenditure Survey)”, PSA, October 2013 [1] Action for Large-Scale Land Acquisition Transparency in Sierra Leone, Who is benefitting?: the social and economic impact of three large-scale land investments in Sierra Leone, July 2013, cited from ActionAid’s report “The Great Land Heist”, May 2014. [1] IAASTD. Agriculture at the crossroads, 2009. Van der Ploeg. Peasants and the art of farming, 2013. Netting. Smallholders, householders, 1993. van Donge, J. K., Henley, D. and Lewis, P. Tracking development in southeast Asia and sub-Saharan Africa: the primacy of policy. Development Policy Review, 2012, 30: s5–s24, cited from ActionAid’s report “The Great Land Heist”, May 2014.
