Processes and Impacts of Investment in Land
The latest food, fuel, and financial crises raised tremendously the interest in global farmland. After decades of neglecting the agricultural sector, investment is urgently needed to close the yield gap in developing countries. While its drivers have been widely discussed, insights on underlying pro...
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|Summary:||The latest food, fuel, and financial crises raised tremendously the interest in global farmland. After decades of neglecting the agricultural sector, investment is urgently needed to close the yield gap in developing countries. While its drivers have been widely discussed, insights on underlying processes and associated impacts are still incomplete. This dissertation therefore analyses how the surrounding institutional environment shapes the implementation of an investment and how this in turn produces varying outcomes. It further provides a rigorous impact assessment with a focus on contract farming as a tool to commercialise farmers’ agricultural production in the vicinity of a large-scale investment in land. The empirical analysis is based on qualitative and quantitative data from Ghana and Kenya.
The first essay (Nolte and Väth, 2013) shows that the present land governance systems in Ghana and Kenya are incapable to cope with the increasing pressure on land. As well-defined rules and proper enforcement are missing, the general process of acquiring land most often disregards the procedures laid down by the legislation. Hence, investors determine to a large extent how their specific project affects the host country. This in turn leads to repercussions for the land governance system. As investors often misuse the ‘institutional self-service shop’ to their own benefit, they provoke resistance by the local population, civil society organisations and the international community. Our comparative analysis therefore reveals that large-scale land acquisitions can trigger institutional reform of the land governance system.
The second essay (Väth, 2013) displays that large-scale land acquisitions produce varying outcomes. A land governance system with poorly harmonised formal regulations and customary rules, as well as asymmetric power relations between investors, state agents and traditional authorities, allows actors to lobby for particular sub-groups of the local population and to convert outcomes of land acquisitions into own benefits. This case study further sensitises to rural social differentiation in the vicinity of an oil palm company. The analysis reveals that investment neither meets a homogenous local population nor yields to equal outcomes. Rather, it produces negative and positive effects depending on households’ distance to the company’s centre of operation, the amount of land a household loses, its possibility to gain permanent or casual employment or its chance to farm under contract. Thus, the essay discloses that large-scale investment in land is often neither completely detrimental nor fully beneficial, but requires accompanying measures to mitigate increasing inequality.
The third essay (Väth and Kirk, 2014) focuses on the analysis of a potentially beneficial outgrower scheme in a competitive setting in Ghana. Here an investor faces excess demand due to large production capacities and offers long-term contracts for oil palm farming to rural households whose property rights remain untouched. Due to a unique setting where contract allocation occurred as a quasi-natural experiment, we are able to estimate causal effects. We find that contract farming enhances participants’ asset endowment and perceived future security, which offers long-term security and thus, enables rural households to invest in non-farm activities. At the same time, we show that farmers earn higher agricultural income and profit per acre when they cultivate oil palm independently. We suggest that economic integration of the local population seems to be most beneficial if investors aim at a mix of outgrower schemes and buying from independently managed plots. However, as the poorest people are often excluded from participation, it is not per se an instrument to reduce poverty.
The fourth essay (Väth et al., 2014) focuses on overall subjective well-being as outcome variable to jointly capture monetary and non-monetary aspects of a contract. Thus, by controlling for income effects, the subjective well-being approach enables us to emphasise on security-related aspects and risk-reducing mechanisms. We find that outgrower schemes mainly enhance subjective well-being by fulfilling security needs, as property rights for land – which are also associated with increased security – play an important role for non-contract farmers but not for contract farmers. We identify a partially substitutive relationship between contract farming and secure property rights to land. However, we do not suggest that contracts can replace secure property rights to land; we rather claim that outgrower schemes can enhance subjective well-being, especially through security gains in a setting where existing local land rights are respected. Hence, this essay reveals that contract farming in the vicinity of a large-scale investment in land can have a beneficial effect as it helps farmers in our case study to overcome lacks of security.|