Farmers forgotten in oil-for-food deals

| 31/07/2009 | Reply

By Brian McCartan

BANGKOK – Southeast Asian countries took big steps towards formalizing
food-for-oil deals with Gulf states at a June meeting between the Association
of Southeast Asian Nations (ASEAN) and the Gulf Cooperation Council (GCC).

Proponents of the deals cite the benefits of more foreign investment for the
region’s often backward agricultural industries, but the lack of transparency
surrounding the investments is raising concerns about their ultimate economic

A meeting in Bahrain on June 30 was notably the first between ASEAN and GCC
foreign ministers, signaling growing trade ties between the regions. ASEAN
secretary general and former Thai foreign minister Surin Pitsuwan summed up the
commercial outlook of those attending at a press conference following the

gathering. “You have what we don’t have, and we have plenty of what you don’t
have, so we need each other.”

ASEAN is composed of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam. Growing population and economic
pressures on land and water contributed to the 2007-2008 global food crisis,
which saw prices spiral and already impoverished global populations go hungry.
That prompted several food-producing nations to restrict exports of certain
staples and caused governments everywhere to rethink their food security

The food price scare, which has for now receded with falling commodity prices
dragged down by the global economic crisis, has pushed many oil-rich and
food-poor Gulf states to seek long-term lease rights to overseas farmlands.

Gulf states, which last year imported 80% of their staple foods at a cost of
US$20 billion, have shown an increasing interest in Southeast Asian farmland.
China, which in recent years has leased large tracts of regional land to grow
rubber and crops for biofuels, is also seeking land to feed its rapidly
urbanizing population. South Korea, with one of the world’s highest population
densities, and India, the second-most populous country, are both challenged by
shrinking agricultural areas and are also in the hunt.

The deals brokered so far have been substantial. According to an October 2008
briefing paper by GRAIN, a Spain-based grassroots organization that promotes
sustainable agriculture, Cambodia had at that time as much as US$3 billion in
agriculture-related foreign investment under negotiation, apparently involving
millions of hectares of land.

Agreements signed or under consideration included a $546 million loan from
Kuwait for agricultural projects, a $200 million venture with Qatar, the lease
of 1.6 million hectares to Saudi Arabia, a similar lease arrangement for 1.2
million hectares to China and another for 20,000 hectares to South Korea.

In the Philippines, Saudi Arabia announced it would allocate $238.6 million to
establish fruit plantations and support aquaculture and halal food processing
projects. Philippine President Gloria Macapagal-Arroyo opened talks with Qatar
in December to lease around 100,000 hectares of agricultural land.

Bahrain agreed in March to set up a $500 million joint agri-business venture
and around 10,000 hectares have already been allocated to grow rice, corn,
sugarcane, pineapple and various vegetables. The United Arab Emirates (UAE) has
been granted 3,000 hectares for agriculture projects. A South Korean company
was granted a 25-year lease in April for 94,000 hectares of farmland on Mindoro
Island for growing feed corn.

An additional 1.5 million hectares is to be made available to foreign and
domestic investors for agricultural projects, the Philippine Department of
Agriculture announced on May 7.

In Indonesia, China has paid for the rights to 1.24 million hectares of land.
That lags only Saudi Arabia’s agricultural investments, which encompass 1.6
million hectares across the country. A planned $4.3 billion investment in rice
production on 500,000 hectares by the Bin Laden Group of Saudi Arabia was
recently put on hold for undisclosed reasons.

Even political pariah and agricultural laggard Myanmar is in on the Gulf
action. Chinese companies are investing in contract farming of rice for export
in the country’s northern regions. In September 2008, Myanmar’s ruling generals
signed a deal with New Delhi to produce pulses exclusively for export to India.
Kuwaiti officials visited Myanmar in September last year to finalize an
agreement to produce rice and palm oil on a contract farming basis.

Estimates of land leased to foreigners in Laos now runs as high as 15% of total
viable agricultural land – although some non-governmental workers dispute that
figure as excessively high. GRAIN’s figures in 2009 indicate that China has
leased some 70,000 hectares in Laos for food, rubber and biofuel crops. Kuwaiti
firms were reported by the Vientiane Times earlier this year to be interested
in investing in rice and agarwood production.

Thailand and Vietnam, the world’s two leading rice exporters, have also cut
Gulf state deals. A big Thai exporter signed a memorandum of understanding in
2008 with Bahrain to secure rice supplies for the next two years. Earlier this
month, Thai ambassador Suphat Chitranukroh told the Bahrain-based Gulf Daily
News that Bahrain had been selected as a hub for the distribution of Thai food
across the Gulf, with plans to build a Thai food distribution center in the

Meanwhile, Vietnam agreed in September 2008 to establish a $1 billion
investment fund in cooperation with Qatar, funds from which will be earmarked
for investment in food production for export. Talks held with Saudi Arabia in
June were aimed at exchanging food for energy supplies.

Capital-starved lands

Proponents of the deals say they could help capital-starved Southeast Asian
countries faster develop their often backward agriculture industries and in the
process bridge the yawning wealth gap between urban and rural areas. They say
rural-focused investments will result in more jobs, better infrastructure and
improvements in agricultural techniques and technology. Foreign funds could
also provide much-needed capital for small farmers, particularly as they face
funding difficulties amid the current global credit crunch.

Cambodia has said it hopes foreign investment will improve its average rice
yields from 2.5 tonnes per hectare to levels comparable to neighboring
Thailand’s 3.5 tonnes. The government is also eager to increase rice exports,
which lag due to quality control problems caused by a shortage of storage and
milling facilities. The Philippines says it expects an agreement with Bahrain
will create 20,000 new jobs on the impoverished and insurgency-prone southern
island of Mindanao.

At the same time, activists and food-security experts express concerns about
the lack of transparency surrounding deals cut between Southeast Asian
governments and their Gulf area suitors. Details of land areas, locations,
lengths of leases and amounts invested have been scant in government
statements, and news reports on the deals often present contradictory
information. That, they venture, could open the way for abuse and corruption.

Jacques Diouf, the head of the United Nation’s Food and Agriculture
Organization (FAO), warned in August that a new kind of “neo-colonialism” could
emerge from land deals where poor Southeast Asian countries produce food for
export to rich Gulf states at the expense of their own underfed people.

Figures for deals brokered between Cambodia, Kuwait and Qatar, which media
reports indicate could involve hundreds of millions of dollars, have not been
publicly disclosed. Despite a string of prime ministerial visits and the
official announcement last year of a $546 million loan for an agricultural
land-related deal between Cambodia and Kuwait, official statements have been
devoid of exact financial details.

In Laos, there is widespread suspicion that government officials are lining
their own pockets from foreign-invested land deals. Many rural Lao are known to
be upset by the ease with which foreign firms have been able to buy rights to
farmland long worked by their families. There has been no public debate about
Lao land deals in the state-dominated media. At least one Lao businessman who
protested against China-invested rubber plantations mysteriously disappeared in

Loose laws

Land rights throughout the region are largely customary rather than secured
through legal title deeds. Land entitlement and reform has been slow in coming
in most Southeast Asian nations. In many villages across the region, land
ownership is recognized by agrarians and village headmen, but formal legal
titles provided by the central government are seldom granted. In Vietnam and
Myanmar, land is formally owned by the state with farmers holding only land-use

Land ownership laws that do exist are often inadequate, with vague language and
numerous loopholes that are frequently exploited by businessmen and corrupt
politicians to justify land seizures. In other countries laws are simply
ignored by local elites and corrupt government officials with links to
influential agriculture corporations.

Numerous reports have detailed heavy-handed expropriation in Cambodia and the
Thai press regularly carries stories of land scandals involving politicians,
businessmen and high-ranking army and police officers. Land-grabbing in
Cambodian rural areas is rampant, human-rights groups allege, despite a land
law that limits economic concessions to less than 10,000 hectares. LICADHO, a
Cambodia-based rights group, estimated in a May report that over 250,000 people
in 13 provinces had been adversely affected by land-grabbing and forced
evictions since 2003.

British-based rights group Amnesty International said last year that on top of
those already evicted another 150,000 Cambodians across the country were at
risk of forced relocation. The Cambodian government’s recently brokered and
opaque deal with Kuwait for farmland in Kampong Thom province has farmers
concerned that their eviction may be part and parcel of the deal, according to
rights activists.

In the Philippines, which has a history of farmer demands for land
redistribution and agrarian reforms, an agreement with China to lease 1.4
million hectares of agricultural land worth an estimated $4 billion was
suspended in 2007 after protests by local farmers’ groups, politicians and the
Roman Catholic Church. Fishing and agricultural groups last month came out in
opposition to the government’s recent deal with Bahrain, calling it “unlawful
and immoral” at a time when millions of Filipinos are landless.

In Myanmar, the government often uses the legal justification that the state
owns all lands to forcibly remove peasants from their land for development
projects. Human rights groups have for years documented forced relocations of
whole villages and the seizure of farmland for commercial agriculture projects
linked to the ruling military junta. Refugees arriving in Thailand have claimed
that they were forcibly removed from their land to make way for rubber
plantations, including deals cut with Chinese companies.

In export-geared Thailand, agribusiness giant Charoen Pokphand Foods (CP)
signed a deal on June 22 with the Bahrain-based Islamic Bank, al-Salam, to
jointly invest in agricultural businesses. According to CP Group vice chairman
Eam Ngamdamronk, “Investment in any project will be supplied by Bahrain, while
the CP Group will provide knowledge and expertise to support them.” The group
is apparently looking at investment opportunities not only in Thailand but
throughout the region.

What troubles activists is that land seized and committed to growing food for
export may drive up prices in domestic markets and crowd out small farmers.
Several regional countries, including Myanmar and Laos, receive food aid from
the World Food Program (WFP) due to chronic agricultural production shortfalls.

Last year, Cambodia requested $35 million in food aid from the WFP at the same
time as it was negotiating deals to lease large tracts of farmland to Kuwait
and Qatar. The Cambodian Center for Study and Development in Agriculture said
last October that as many as 100,000 Cambodian families suffered from
insufficient food.

Food security experts, including the UN’s special rapporteur on the Right to
Food, Olivier de Schutter, have called for a “code of conduct” over land-lease
deals to better protect host countries and local farmers. At an April 6 forum
in New York, de Schutter said, “States all too often are led to make such deals
because they are attracted to immediate rewards. But they should look at the
long-term consequences.”

The US-based International Food Policy Research Institute has similarly called
for the creation of a code of conduct to govern commercial relations between
foreign investors, whether corporate or governmental, and host countries which
also protects the interests of small farmers and the environment.

In an April 2009 policy brief, the institute said that such a code of conduct
should include transparency in negotiations, respect for existing land rights,
shared benefits, environmental sustainability, adherence to national trade
policies and strong enforcement mechanisms. Brian McCartan is a
Bangkok-based freelance journalist. He may be reached at

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