Foreign countries scramble for agricultural land in quest for food

Photo by: TRACEY SHELTON

Cambodia looks set to capitalise on its vast swaths of underused farmland.

The Phnom Penh Post

Written by Brendan Brady and Nguon Sovan
Thursday, 27 November 2008

The food crisis this year generated unprecedented interest in Cambodian agricultural land, and governments are scrambling for access to the country's vast food-growing potential

ARAB and Asian countries are in talks with the Cambodian government to access large tracts of farmland, in a deal that could double the Kingdom's agricultural revenues, government officials say.

Over the last six months, representatives from Kuwait, Qatar, South Korea, Indonesia and the Philippines have signalled - during meetings with Cambodia's Ministry of Commerce - that they are intent on bolstering food stocks following a year of high commodities prices that set off food security crises around the world, said Suos Yara, an undersecretary at the Council of Ministers.

According to Suos Yara, the countries were "very interested" and there was "high potential" of reaching agreements that, combined, would develop Cambodia's infrastructure and double agricultural revenue from US$1.5 billion to $3 billion.

Yuos Sara said foreign officials have been offered three types of deals: economic land concessions, land leasing and contract farming.

Economic land concessions would involve unused public lands, while contract farming and land leasing would be conducted through direct contracts with farmers, he explained.

"The countries are currently conducting economic feasibility studies, and then we'll know what kind of contracts there will be."

He added that any transactions would be made at current market prices - not fixed future rates - but he would not specify the profit-sharing scheme with the farmers owning or working the land.

"Cambodian farmers need access to markets, and this will secure business for them," he said. "This will be good for the Cambodian people."

Farming or leasing?

While Cambodian officials have remained mum on the expected outcome of the talks, Tim Purcell, director of the Cambodian office of the private consulting group Agricultural Development International thought the countries would opt for contract farming over land leases.

Contract farming would see foreign governments secure produce at the beginning of the harvest, rather than lease the land and wait for years before seeing results.

"If these countries need to secure food for the next couple years, it would need to be through contract farming since land concessions take a while to become operational," he said.

For Kuwait and Qatar, land concessions or leasing seems to be in the works, as Cambodian officials have spoken of Gulf state companies providing feedstocks and infrastructure investment.

"If it's an economic land concession, it's more risky," said Purcell. "They bring technology, infrastructure and cash investment in exchange for something. But the land set aside for concessions tends to be less arable; otherwise, it would have been used already."

"I'd wonder about the expectations of investors who want to develop this kind of land for food production."

High commodities prices have made food exports lucrative, and Cambodia, with its vast swaths of underutilised farmland, is in a strong position to partner with cash-rich nations.

" Farmers need access to markets, and this will secure business for them. "

Despite requesting a $38 million emergency food aid package in September from the Asian Development Bank, the government's actions suggest it will continue with plans to establish itself as a major regional food exporter.

Food prices have recently fallen but a global food crisis early this year, in which dozens of countries faced acute shortages, has governments clamoring to guard against the problem arising in the future.

The Middle East faces an especially pressing need to buttress its food security.

The Gulf Research Center, a Dubai-based think tank, in May highlighted the region's increasing food vulnerability.

In a report, it advised the Gulf Cooperation Council's six member states, which includes Qatar and Kuwait, to forge ties with foreign countries rich in arable land.

High food prices were a key contributor to the Middle East's inflation problem this year, as a lack of fertile land and water forces the region to import more than two-thirds of its food.

Well before the recent round of talks, Cambodia, Qatar and Kuwait had courted each other for commercial engagement.

Qatari Prime Minister Sheik Hamad bin Jassem bin Jabor al-Thani visited Cambodia in April to offer technology in exchange for arable land. During the visit he announced plans to invest $200 million in Cambodian agriculture.

Kuwaiti Prime Minister Sheik Nasser al-Mohammed al-Ahmed al-Jaber al-Sabah visited Cambodia in August, as part of an eight-nation Asian tour to secure agriculture-related investments. Talks during the Kuwaiti premier's visit included offers of technical assistance for oil exploration and a proposal to exchange agricultural technology for leasing large swaths of land dedicated to growing food for export to Kuwait.

Kuwait also announced it would provide Cambodia with more than $546 million in soft loans for infrastructure projects, largely in the agricultural sector. The deal marks the second largest influx of cash to the Kingdom's coffers from a single country, after China, which last year gave some $601 million.

And in a statement published during the tour, the Kuwaiti finance minister said his government's proposed commercial partnerships with each country involved $3 billion to $4 billion in investment.

While ostensibly the deals appear to match countries with complementary resources, there are risks tied to land investments in a country notorious for official land-grabbing and poor land ownership rights.

Son Chhay, a parliamentarian and spokesman for the opposition Sam Rainsy Party, doubted the government would broker major agricultural deals responsibly. He said that, especially with big bucks on the table, the government could not be trusted to respect local land rights.

"Already, two million hectares of land have been given away in these concessions over the last decade - some of it taken from people - and it's not used."

But he acknowledged the overwhelming appeal of what the deals could offer Cambodia as it braces itself for the local impact of a major global economic recession.