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SOARING GLOBAL INTEREST IN FARMLAND
HOW CAN MOZAMBIQUE BENEFIT?
Klaus Deininger, World Bank
Maputo, Feb. 10, 2011
The global picture
Daewoo to cultivate Madagascar land for free
Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-100
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Rice price (US $/t)
Commodity price rise triggers land demand
Investor demand in Africa unprecedented
Region Area cult. (M ha) Δ/yr Demand in
20091961 2007 Mn. ha
SSA 134.6 218.5 1.79 39.7
EAP 183.9 262.8 1.68 8.0
LAC 103 168 1.39 3.2
ECA 291.5 241.7 -1.06 4.6
MENA 77.9 89.0 0.24 1.4
SAS 197.9 213.5 0.33 0.7
ROW 368.7 355.5 -0.28 0.2
Total 1,357 1,549 4.09 57.8
Historically, money can’t ensure success
1970/71
1971/72
1972/73
1973/74
1974/75
1975/76
1976/77
1977/78
1978/79
1979/80
1980/81
1981/82
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1988/89
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1997/98
1998/99
1999/2000
2000/2001
0
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Sudan: Sorghum & sesame yields (t/ha) 1970-2005 (vs. > 4t/ha in Australia)
Sorghum
Land transfers very large (5.5 Mn ha official; up to 11 Mn ha encroached)1970s oil price shock as a major determinant; inflow from Middle EastProductivity & welfare impacts very limited due to conflict & soil mining
Sesame
A large danger of neglecting rights
Dependent variable Interest Implementation
Suitable land non-forest 0.2987** 0.3916***
Suitable land forest 0.0396 0.0770
Yield gap -0.2774 -1.7457**
Land rights recognition -0.691*** -0.3416*
Investment protection +0.0058* 0.0033
Pseudo R2 0.339 0.268
Determinants of a country attracting investor interest/actual implementation
Actual land transfers lower but still large
Country All projects Share domestic (%)
1000 ha # Median (ha) Projects Area
Ethiopia 1,190 406 700 94.3 48.9Liberia 1,602 17 59,374 11.8 7.3Mozambique
2,670 405 2,22567.7 52.5
Sudan 3,965 132 7,980 68.2 77.8
Total area transferred, no of projects and share of domestic investors, 2004-2009
Investment is often not predominantly foreign.Many ventures did not start production – thus positive impacts limited.
Why has success been so limited?
Gaps in legal & policy framework Requires expropriation/extinction of existing rights (e.g. ZMB) Unclear/duplicative institutional responsibility (e.g. ETH) Low land payments/participation; non-collection (e.g. LBR) Requirements for liquidating non-profitable investments rarely considered
Weak institutional capacity & implementation Lack of information & consultation -> Neglect of property rights Neglect of economic/technical viability (e.g. GHA) Limited capacity to do or monitor ESIAs (e.g. SDN) Weak land administration -> Boundary conflicts, overlap Agreements are not written/monitored
Communities with little voice, capacity, and ability to resist Negative effects shifted to locals who receive damage but no benefits Non-viable projects encroach on local rights to make ends meet Vulnerable & women left out –poor people subsidize (foreign) speculators Historical examples of this leading to conflict or revolution
Boundary misaligned with roadAllocation over existing smallholdersNo visible large-scale cultivation despite transfer 5 yrs ago
An example from Zambia
Boundary of
allocated land
1 km
Countries that fared better did 3 things
Assessing potential and integrating it into their development strategy Rather than having ad-hoc decisions by investors determine the country’s future Identify suitable & off-limits areas as well as suitable crops (demand, endowment) Strategically provide infrastructure (roads, research) Link with local factor endowments, development strategy, and aspirations
Securing existing property rights & allowing their voluntary transfer Development is for local people & unlikely to be promoted by expropriation Often at group/community level: Need internal rules & outside representation (TZN) Well-defined mechanisms to transfer all or part of local land (PER) Clear demarcation of land & scope for transfer of unsuccessful ventures (MEX)
Implementing transparent processes & effective ways of monitoring/redress Avoiding traps of rent seeking, corruption, and another resource curse Auction of public land: Technical review, down-payments & investor vetting (PER) Publication of contracts (LBR) can allow learning and independent monitoring Build on initiatives to set technical standards & independent monitoring (RSPO; EP) Incentives to avoid merely speculative land acquisition
Assessing potential: Methodology & use
Identify potential per crop & grid cell (5’ or 1 km resolution) Data on soil, slope, elev., rainfall, temp. to simulate crop growth Output prices for ‘local’ output value; transport cost for global price -> ‘best’ crop Input prices to compute net profit & implicit land rental value
Cultivated land -> yield gap (actual/potential output) Productivity increase often only option; may be cheaper & socially more appropriate Area expansion risky & costly (soil tests, investment, compensation) Yield gap can be attributed to technology, infrastructure & institutions Leave options for expansion of existing farms (e.g. via mechanization)
‘Uncultivated’ land -> possibly available/of interest to investors Identify areas of highest potential/threat, opportunity cost & need for scrutiny Priority areas for tenure regularization Land rental surface can form a basis for negotiation Investors benefit from that knowledge – and in Brazil make lots of money from it
The scenario used below Rainfed Maize, soy, wheat, sugar, cassava, groundnut, oilpalm; high input intensity Exclude forested & protected areas; levels of population density (5, 10, 25/km2)
Source: IIASA
Mozambique has considerable potential
Land ‘availability’ by countryHigh potential, non-cult., -forested, -
protected land < 25/km2
1000 haRelati
ve 1000 haRelativ
e
Sudan 46,025 2.82 Tanzania 8,659 0.94
Brazil 45,472 0.73 Bolivia 8,317 2.92
Russian Fed. 38,434 0.32 Cent. Afr. Rep. 7,940 4.23
Argentina 29,500 1.05 Paraguay 7,269 1.34
Australia 26,167 0.57 Colombia 4,971 0.68
D.R. Congo 22,498 1.53 Ethiopia 4,726 0.34
Mozambique 16,256 2.85 Cameroon 4,655 0.68
Madagascar 16,244 4.63 Kenya 4,615 0.99
Chad 14,816 1.92 Mexico 4,360 0.17
Zambia 13,020 2.83 Mali 3,908 0.47
Indonesia 10,486 0.32 Papua N.G. 3,771 5.93
Angola 9,684 3.31 Burkina Faso 3,713 0.77
Uruguay 9,269 4.56 Belarus 3,691 0.61
Venezuela 8,966 2.29 South Africa 3,555 0.23
United States 8,756 0.05 Congo 3,476 6.79
Canada 8,684 0.17 Ukraine 3,442 0.10
World total 445 Mn ha (< 25/km2)306 Mn ha (< 10/km2)198 Mn ha (< 5/km2)
Key characteristicsHighly concentrated• > 90% in 32 countries • Half of these in Africa
Large rel. to current area• > double in 11 countries• > triple in 6 countries
Sheer size is instructive• Multiple constraints likely• Need sophisticated investors• Potential social dislocation
Illustrative expansion potential by crop
Current production ‘Available’ landArea (1000
ha) Yield (t/ha) Total < 6 h
USA 31,826 9.66 1,647 1,538Argentina 3,412 6.45 9,469 7,704Australia 68 5.69 18,870 2,890Uruguay 81 4.15 2,735 2,225Brazil 14,445 4.09 11,388 10,406Russian Fed. 1,732 3.86 2,458 2,170Venezuela 740 3.47 4,640 3,919Zambia 664 2.18 5,716 2,383Sudan 31 2.02 31,889 14,390Madagascar 250 1.48 6,753 4,654Chad 235 0.96 9,131 3,736Mozambique 1,400 0.92 7,592 4,206World total 161,017 156,828 83,310
Top countries with maize expansion potential (<25/km2)Latin America’s advantages• Technology & land for expansion
Human capital• Infrastructure & market access• Institutions:
Property rights secureThriving land marketsTransparencyContract enforcementFinancial markets
Africa’s opportunity• Borrow technology• Focus on regional markets• Expand from existing production • Rel. low opportunity cost of land *
Challenges to be overcome• Institutions• Mix of large & small• Public and private sector roles
Available options differ by country
Africa Latin America & Caribbean
Sudan
D.R. Congo
Tanzania
Ethiopia
Ghana
Malawi
Rwanda
0 0.2 0.4 0.6 0.8 1 1.2
Ratio of cultivated to total suitable area1 - Yield Gap
0.14
0.22
0.52
0.21
0.29
0.35
0.70
0.56
0.40
0.26
Area (ha/rural inhabitant)
Uruguay
Argentina
Brazil
Colombia
Honduras
Peru
Haiti
El Salvador
0 0.2 0.4 0.6 0.8 1 1.2
Ratio of cultivated to total suitable area1 - Yield Gap
7.91
8.82
2.25
0.64
0.46
0.46
0.20
0.35
Area (ha/rural inhabitant)
CHN
MYS
PHL
VNM
EGY
JOR
INDPAKHUN
KAZ
LTUPOL
ROM RUS
SVN
TKMUKR
ARGBRA
CHL COL
SLV
GUY
MEX
PER
URY
AGOBEN
BDI
COGZAR
GHAMWI
MOZ
NGA
RWA
SDN
TZAZMB
Type 1 Type 2
Type 3 Type 4
.2.4
.6.8
1
Yie
ld G
ap
-10 -5 0 5Suitable relative to cultivated area (in logarithms)
A typology of agrarian structure
Type 1 (Korea, China, Vietnam, India) Significant gains from technology & institutional change by smallholders in the past Intensification & (private sector) value addition as only sources of on-farm growth Off-farm employment a main engine for increases in farm sizes via (rental) markets
Type 2 (Brazil, Argentina, Peru) Technological barriers to large farm expansion low - big recent investment inflows Land markets function relatively well, currently danger of bubbles Regulation needed to avoid distributional, environmental & social externalities
Type 3 (Malawi, Rwanda, El Salvador) High yield gap often a consequence of past underinvestment Land is a key safety net; danger of people being pushed out with no alternative Private investment to complement public initiative; contract farming
Type 4 (Sudan, Tanzania, Zambia, Mozambique) Mechanization & larger farm size can be sustainable; incentive for private sector Institutions (property rights & land markets) a key challenge Factor market imperfections, if unchecked, can cause dualism & conflict
Implications for Mozambique
Policy focuses on the right issues
Agricultural zoning (1:1 Mn; ongoing at 1:250,000) to assess potential Based on identification of agro-ecological suitability Excluding productive forest, parks, cult. area, protected areas, concessions -> Identify blocks of land possibly ‘available’ for investors
Property rights rightly recognized as a key pillar Recognition of community occupancy rights; option of delimitation Process for negotiation with investors Land policy forum to explore key legislative & regulatory issues Investors’ DUATs conditional on compliance with investment plan
Implement transparent processes & effective monitoring/redress Establishment & gradual decentralization of CEPAGRI Format for investment processing (res 70/2008) & process to vet proposals Efforts to better regulate consultation process Increasingly vigilant monitoring of investor compliance Cleaning and consistency of data from provincial offices
But challenges remain
Zoning may be too narrowly focused on land availability only Local strategy/understanding how to close yield gap needed required Access to markets & technology has a key role; concessions underutilized The exercise could yield vastly more insights
Land rights ‘recognition’ de facto often irrelevant Lack of demarcation makes rights invisible Land system serves a small minority & excludes women Land transfers costly & uncertain even where they are allowed
Processes often costly & ineffective Process for individualization/mutation ill-defined Consultations deficient (few people, actas incomplete) ‘Plan compliance’ costly to ascertain & easy to abuse
Structures often duplicative & centralized Registry & cadastre operate in parallel spheres Low/non-collected fees ($0.8/a) foster land speculation Whatever revenues exist do not accrue to local gov’t
Yield gap for maize
Limited delimitation
Background 1997 law recognizes
community rights – good legal basis
Huge potential: 34 mn. ha arable land; only 3.7 mn. ha cropped
Want to attract investors New applications for 13 mn.
ha in 18 months Land audit: > 50% of existing
awards of land use rights (DUATs) un- or underutilized
… then backtracking Moratorium in 2008 Identify available land first
Overlaps can createproblems
AAAAAA
The potential is enormous
Use global methodology to get land prices• Large variation over space• Overall level surprisingly high: Prices > $ 3,000/ha• Considerable potential around Beira (transport)• This area has currently low level of cultivation
Cultivated areas• Average profits about $ 500/ha • Compared to current value of < $ 100• Poverty impact of closing yield gap & expansion immense
Concessions• Even higher potential ($ 700/ha)• But half of them are underutilized • Need cheap models to check (satellite imagery)• Rental fees could yield revenue & discourage speculation• Feed into local revenue; expand land rights
Residual land values; high input scenario
It may be useful to explore options for ..
Using zoning information to feed into a broader rural development strategy Identify yield gap & overlay with pop. density/poverty to define strategic options Add prices & transport cost to potential for actual & potential profits & land values Use this to evaluate potential impact of infrastructure improvement
Making occupancy rights relevant and exploring options for land transfer Use information from ‘top-down’ zoning to feed into ‘bottom up’ land use planning Define ‘community’, its representation, and its land rights (vs. individuals) Eliminate dualism of rights through systematic low-cost delimitation/titling Assess leasing options and study other countries’ experience (Vietnam, China)
Focusing on low-cost & incentive compatible monitoring/enforcement Reduce cost & eliminate dualism by unifying registry & cadastre Design low-cost compliance monitoring to cancel non-compliant DUATs (Brazil) Ensure community consultation is informed, inclusive, and results in clear contract Let lease payments benefit land owners & be determined by local level negotiation Use part of fees to maintain system to make secure land rights accessible to all
Thank you!