By Julia Meyer
Financiers from countries facing water shortages and increasing demand for food – China, India, and the Arab Gulf region – are investing in foreign farmland in order to gain access to water resources. Fresh money from North American and European funds and corporations has also expanded quickly in recent years, finds a new study.
A new report by the Stockholm International Water Institute (SIWI) points out that millions of hectares of farmland in Africa, Southeast Asia and Latin America have been leased to foreign countries, sovereign wealth funds, and private corporations over the past four years with little or no explicit legal agreement on how water can and will be used on the acquired properties.
According to the report titled ‘Land Acquisitions: How will they Impact Transboundary Waters?’, investments in land have spiked since the onset of the food crisis in 2008, but the actual number and size of investments in land are difficult to calculate as many of the deals are kept out of public record.
The World Bank estimates 56 million hectares of African land were leased in 2009, and other research indicates that over 200 million hectares of land – roughly the size of Western Europe – has been leased in developing countries over the past decade.
With 70 percent of global water withdrawals used in agriculture, the rapid increase in cultivated farmland will require significant quantities of water to sustain production. The majority of land lease contracts, however, contain no legal arrangements for water use on the territories.
“Water has been neglected in the global rush for agricultural land”, commented report co-author Anders Jägerskog of SIWI. “All parties involved in land transactions routinely fail to establish agreed terms for the water that they will need for agricultural production.”
Water use for irrigation in land leased by foreign parties is also absent from regional discussions over transboundary waters in the majority of shared basins around world. “We know very little about the regional repercussions of land deals on water resources,” adds Jägerskog. “There is little data on the subject and actors with a mandate to work for the joint management of transboundary waters are rarely involved.”
African land and water resources
Low land lease prices, weak legislation, inexpensive labour and the relative abundance of land and water have attracted many investors to Africa, and in particular the sub-Saharan region.
While land prices in Brazil or Argentina hover around 5,000 USD per hectare per year, the annual rent for one hectare of land in Ethiopia can cost as little as 2-5 USD. Liberia has been the most aggressive nation in the land market, and has already made 61 percent of total agricultural land, over 1.6 million hectares, available to investors.
Between 2004 and 2009, South Sudan leased out nearly 4 million hectares, roughly 3 percent of the new nation’s total agricultural land area and Mozambique leased over 5 percent of available agricultural land, some 2.67 million hectares during the same period.
The report suggests that water allocations in these newly leased agricultural lands may hinder delicate negotiations over the water resources in shared basins across Africa and around the world.
SIWI’s Ana Cascão says, the ultimate outcome of land acquisitions in Africa remains an open question. “Will the new land acquisitions in Africa spark a “green revolution” and dramatically improve agricultural productivity? Or will it serve to continue business-as-usual and aggravate the already inequitable terms of trade in the global food market?”
While the implementation of the signed contracts is still limited, there is an expectation that the global virtual water trade will increase substantially, as most of the agricultural production involved in these projects will be for export and not for local consumption.
The report says that producing crops where there are resources available and exporting for other regions, such as the emerging economies, where food demands are increasing rapidly, could in theory contribute for global food security. “But critical voices highlight, a potential backlash, which could lead to food insecurity at national and local levels in the hosting countries,” the SIWI study adds.
The report notes that land deals show clear trends to occur in places with low land lease prices, weak legislation, inexpensive labour and relative abundance of land and water. This is why large parts in Africa are attractive for foreign investors.
As specific countries – and usually neighbours – are signing individual contracts with the foreign investors, there is an increased uncertainty about the compatibility of the several national development plans of these countries, namely in terms of their transboundary environmental impacts and water availability.
This is both because water aspects are seldom included in contracts and also because their impact is not considered from a basin perspective, says the report and warns: “The absence of a regional or basin perspective in the land deals might lead in the future to a clash of interests between neighbouring countries.”
Currently several river basins are working on establishing institutional frameworks and com- missions to deal with transboundary water issues, but the report finds little evidence that agricultural development – including foreign land acquisitions – is being addressed, despite the rapid developments on agricultural expansion.
“The risk of ignoring the issue is that it might jeopardise current agreements and negotiations once water allocations become involved,” says the report. However, it finds that the political appetite for this seems to be limited.
Little research has been done so far to understand the impacts that the new land agreements will have on the consumptive water utilisation at the both the national and basin level. In addition, no studies have been made focusing at the hydro- political implications of the deals.
This poses many important questions: “Will they contribute to a change in the transboundary hydro-political relations between the countries, and if so in which direction? Will it jeopardise the current (embryonic, in some cases) transboundary cooperation and increase the inter-state conflict (of interests)? Or will they be used as leverage for riparian countries to discuss and negotiate where and when water should be allocated.”