Table 5.
Effect of FDI in agriculture on food security
, by region
Prev
alence of undernourishment
Dietar
y energ
y consumption
East Asia and the
Pacific
Latin America and
the Caribbean
Sub-Saharan Africa
East Asia and the
Pacific
Latin America and
the Caribbean
Sub-Saharan Africa
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
FDI in ag
ricultur
e (lag_1)
-0.0790***
-0.0670**
-0.00038
-0.00667
0.0276
0.0261
3.156***
2.738***
-0.87
-0.616
2.283**
1.934*
(-3.03)
(-2.46)
(-0.02)
(-0.25)
(0.78)
(0.72)
(4.10)
(3.39)
(-1.36)
(-0.81)
(2.16)
(1.81)
GDP per capita (ln)
-6.132***
-5.392***
-8.781***
-14.66***
-6.515***
-5.889**
405.8***
466.1***
510.1***
613.4***
236.7***
334.7***
(-4.65)
(-3.25)
(-3.37)
(-3.82)
(-3.07)
(-2.02)
(10.43)
(9.49)
(6.80)
(5.65)
(4.31)
(4.09)
Crop production
-0.0429***
-0.0622***
0.0231
0.0242
-0.110***
-0.117***
2.514***
1.854***
0.279
0.635
2.654***
1.927***
(-2.78)
(-2.82)
(1.22)
(1.05)
(-7.61)
(-6.34)
(5.52)
(2.84)
(0.51)
(0.97)
(7.04)
(3.88)
Food e
xports
0.0174
0.0276
0.0145
0.00772
-0.048
-0.0462
1.626
0.85
-0.361
-0.168
-1.017
-0.773
(0.29)
(0.42)
(0.75)
(0.36)
(-1.65)
(-1.50)
(0.92)
(0.44)
(-0.65)
(-0.28)
(-1.44)
(-1.07)
Age dependenc
y
0.317***
0.288***
-0.00726
-0.144
-0.367***
-0.329***
-1.116
-2.081
3.075
5.189
-3.264
-3.689
(3.95)
(3.02)
(-0.07)
(-1.02)
(-3.56)
(-2.82)
(-0.47)
(-0.74)
(0.99)
(1.29)
(-1.23)
(-1.30)
Population density
0.0448
0.0423
-0.0699
-0.154
0.0350*
0.0281
-0.410
-1.535
4.811**
6.761**
-0.697
-1.065*
(1.60)
(1.19)
(-0.89)
(-1.40)
(1.86)
(1.13)
(-0.50)
(-1.46)
(2.12)
(2.17)
(-1.61)
(-1.84)
Political stability
-2.128***
-2.074**
-2.841***
-2.681**
-2.268***
-1.992***
-6.507
12.47
49.65**
42.24
-5.576
-20.73
(-2.83)
(-2.47)
(-3.78)
(-2.54)
(-3.45)
(-2.82)
(-0.29)
(0.50)
(2.30)
(1.42)
(-0.23)
(-0.83)
Land go
ver
nance
..
-0.897
..
-0.758
..
0.30
..
2.468
..
-15.07
..
-49.61*
(-1.62)
(-1.00)
(0.28)
(-0.15)
(-0.70)
(-1.85)
Constant
39.18***
39.91***
87.78***
155.1***
100.5***
94.46***
-693.7**
-862.7**
-2 177.8
-3 279.8***
975.2*
615.9
(3.62)
(3.21)
(3.36)
(3.81)
(5.51)
(4.53)
(-2.17)
(-2.34)
(-2.90)
(-2.86)
(1.98)
(1.07)
Obser
vations
Obser
vations
120
120
103103
193193
154154
9595
8585
120120
103103
193193
154154
8080
7171
Source
: Author’
s
estimations.
No
te
: t
-s
ta
tis
tic
s i
n p
ar
en
th
es
es
. * p < 0
.1
0, *
* p < 0
.0
5, *
** p < 0
.0
1.
67
Does FDI in agriculture promote food security in developing countries? The role of land governance
East Asia and the Pacific, but not in other regions.
Empirical results should be interpreted carefully. While the two indicators used
to capture two different dimensions of food security (in its official definition), and
supply- and demand-related issues, these indicators react reasonably fast to
external changes. Availability of food for per capita consumption in a country is
directly linked to its ability to produce, export, and import food in a given year.
Prevalence of undernourishment is calculated as a crude number of people
whose consumption remains below this level in the same year. Other dimensions
of food security may reflect longer term factors that affect food security. Health-
related indicators, such as stunting among children and anemia among women,
capture longer term consequences of food insecurity. One may or may not be
undernourished today but may suffer growth retardations and other related
problems due to past experiences of undernourishment. Production-related
indicators, such as export dependency of essential food groups, variability of food
supply, share of arable land equipped for irrigation, reflect a country’s productive
capacity and the stability of the food security status of the country over the long
term. Therefore, empirical analysis concludes that FDI in agriculture improves food
security in the short-run but that the results cannot be generalized for long-term
food security.
5. Conclusion and policy implications
As population growth, rising incomes and urbanization increase the demand for
food, investment in agriculture and food systems is not only essential but also
critical to enhance food security and food safety for all. Foreign direct investment in
developing country agriculture can play an important role in closing the investment
gap. However, the recent wave of agricultural investments in developing countries
pose significant challenges. This is a matter of concern because of the potential
direct impacts on local populations, which are mainly due to legal gaps in the
governance of land tenure systems. In most developing countries, tenure systems,
which define how people and communities access natural resources (e.g. land,
water, fisheries and forests), are based on unwritten customs and practices rather
than written policies and laws.
This study argues that FDI in agriculture does not always enhance food security in
the host country. Because the recent wave of farmland investments is characterized
by resource-seeking, and their main motivation is to promote food security in the
investor country. Even when intended for crop production, foreign investors do
not always produce for the domestic market. The ultimate effect depends on
other factors, such as the type of investment, structure of agriculture sector in the
host country, and the institutions involved. Existing land governance systems are
particularly important as they determine the direct impact of investment projects on
local populations and have an indirect impact on domestic food security.
68
TRANSNATIONAL CORPORATIONS
Volume 29, 2022, Number 2
To this end, the effect of FDI in agriculture on food security in the host country is
examined empirically. Using data from 56 developing countries, empirical analysis
shows that FDI in agriculture has a significant and negative effect on food security
in the host country. The land governance index used to explore the role of land
governance, is only significant when it interacts with FDI, which indicates that FDI
has a more favourable effect where land governance is better.
The critical thing about customary land and resource tenure systems is that they
make no distinction between legal property rights and de facto use rights. Most
recent farmland investments in developing countries exploit this gap in the legal
system. Foreign investors target predominantly “unutilized” or “underutilized” land,
which is nonetheless used by local communities. These common lands are critical
sources of livelihoods for indigenous people and rural populations for agriculture
or raising livestock. The resilience of small communities and related agro-systems
is deeply connected to this land. It is also a central factor in economic growth.
Therefore, no statutory recognition of the customary land tenure in some developing
countries make rural populations vulnerable to poverty and food insecurity.
Transferring the property rights of these lands to foreign investors, temporarily or
permanently, endangers the survival of rural communities by depriving them of land
and other critical resources for food security, resulting from the production of food
for direct consumption and providing income-generating activities.
Growing interest in farmland investment requires vigilance. Measures need to be
taken to promote responsible and sustainable investment in developing country
agriculture. When considering an investment in agriculture, one of the main
principles to observe is not to jeopardize food security and the overall livelihoods
of local populations directly affected by these investments. It is therefore important
that investors are aware of local conditions and respect existing local rights to
land and resources use. Tenure reforms by formalization of customary rights
are essential to enhance tenure security for a more equitable and transparent
access to land. Governments need to support sound systems for monitoring and
assessing the impact of agricultural investments and processes associated with
them. In order to address concerns about the consequences on local livelihoods,
governments should formulate integrated policy frameworks to ensure transparency
in international investments, to prevent marginalization of rural populations, and to
enhance environmental sustainability.
69
Does FDI in agriculture promote food security in developing countries? The role of land governance
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