A recent study published by the International Institute for Environment and Development (IIED) at the request of UN Food and Agriculture Organization and International Fund for Agricultural Development (IFAD), confirms the fears of many critics that land deals in Africa and Asia may in practice be little more than “neocolonialism”.

The report found that many countries do not have sufficient mechanisms to protect local rights and take account of local interests, livelihoods and welfare. A lack of transparency and of checks and balances in contract negotiations can promote deals that do not maximize the public interest. Insecure local land rights, inaccessible registration procedures, vaguely defined productive use requirements, legislative gaps and other factors too often undermine the position of local people.

Both The Economist and the Financial Times have weighed in on the issue, underlining the social and economic concerns such deals raise for local farmers, but also highlighting the tangible benefits that domestic markets, habitually lacking in capital and technological prowess, stand to gain long-term.

It would be graceless to write off in advance foreign investment in some of the most miserable places on earth. The potential benefits of new seeds, drip-feed irrigation and farm credit are vast. Most other things seem to have failed African agriculture—domestic investment, foreign aid, international loans—so it is worth trying something new. Bear in mind, too, that worldwide economic efficiency will rise if (as is happening) Saudi Arabia abandons mind-bogglingly expensive wheat farms in the desert and buys up land in east Africa.

The muddled conclusions are, in my opinion, a testament to the fact that such deals are theoretically virtuous but all too often inefficient and probably harmful in practice. Per the Economist, for instance:

Most deals are shrouded in mystery—rarely a good sign, especially in countries riddled with corruption. One politician in Cambodia complains that a contract to lease thousands of acres of rice contains fewer details than you would find in a house-rental agreement. Secrecy makes it impossible to know whether farms are really getting more efficient or whether the deals are done mainly to line politicians’ pockets.

Richard Ferguson, formerly of Nomura Holdings in London, succinctly notes that we must examine the motives underlying the deal to fully appreciate what its effects will likely be:

To decide whether the acquisition of farmland in emerging economies can be categorised as “beneficial foreign investment” or a form of “neo-colonialism” we need to distinguish between the underlying motives which drive much of the current investment across the industry. The biggest supply issue in farming is not the availability of land; instead it is the limited supply of competent managements who can manage increasingly complex industrial farms. Long-term investors in the sector understand these complexities and, consequently, make their investments with a view to upgrading infrastructure, enhancing staff skills, introducing capital and so on over an extended period. In this case a long-term approach to investment returns is the norm given the unpredictability and volatility which will always characterise the industry. A less measured approach, which could fall under the “neo-colonialism” banner, is where investment is made in a haphazard manner with little thought to the long-term management of the business. It remains to be seen whether Chinese and Gulf state investment in the sector falls into this category.

Yet regardless, land deals or “grabs” are not going to go away, for the simple reason that their emergence is a natural, inevitable consequence and response to market inefficiencies, notably the world’s food-market turmoil of the 2007-2008, when the index of food prices rose 78% and food stocks slumped. Throw in trade bans and other protectionist policy imposed by grain exporters to keep food prices from rising locally, and it is no wonder that many nations with the means felt obliged to take matters (i.e., the land and means of food production itself) into their own hands). More power to them.

The “solution”, therefore, ought to lie not in the overarching condemnation or the abolishment of the entire concept of food and land outsourcing, but rather in the adoption of greater transparency through stricter standards or even codes of conduct of deal making. Simply put, it is the interests of both the seller/lessee-government (see Madagascar) and the buyer/lessor nations, corporations and sovereign wealth funds (SWF) to negotiate more synergistic deals that unequivocally reflect not only the true costs involved, but also entrench what short and long-term benefits are to be realized, and by whom. Accordingly, enforcement mechanisms must be in place such that aggrieved parties may pursue appropriate remedies.

So, in broad terms, how can such land deals be improved upon?

1. Fairer terms for “smallholders”: This is not simply out of largesse or equity, however–there is a practical incentive for lessors as well–poor terms often lead to local opposition so fierce that some deals cannot be implemented. Economist notes the Saudi Binladin Group had to put on hold a $4.3 billion project to grow rice on 500,000 hectares of Indonesia, while China found itself postponing a 1.2m hectare deal in the Philippines for similar reasons. Such delays impinge on returns and also reflect badly;
2. Benefits should be shared among locals: This involves not only lessors utilizing at least a percentage of local workers, but also lessees creating appreciable social safety nets for displaced farmers or adversely affected communities;
3. Abide by national trade policies: In other words, exports are put on hold or severely limited if the host country is suffering a famine or natural disaster. Such events could be hedged by lessors through insurance or contingent deals with other exporters;
4. Enshrine the technological commitments and know-how that foreign firms must transfer: Too often it is just assumed that the benefits of new seeds and farming techniques will be automatically transferred in such deals. But given human nature, and moreover the business sense and proprietary instinct of the companies involved, there is nothing natural about just giving something away. Thus, checks and balances must be in place such that local farming industries can immediately realize the benefit of foreign expertise, capital and equipment;
5. Mandate organic farming? It has been suggested by some that if proper care is taken, then outsourcing of farmland can improve not just its efficiency but can also provide livelihood and better wages to hundreds of thousands of poor agricultural laborers in these third world countries like Sudan.