Large scale land acquisitions in form of purchases, concessions and leases by advanced nations from developing nations are raising eyebrows with propositions being made that this is a new form of colonialism. Advanced countries are taking advantage of the low production costs in developing countries, the rich soils and abundant water supplies to produce food for their domestic subsistence. Countries with concerns about food security or whose populations are high are also making use of overseas opportunities to produce food for their residents.
These are moves that have been received with fierce opposition with opponents terming these land acquisitions as a bully tactic. This has been the case following China’s proposal to buy land from Madagascar. To many, it is a way of depriving the rural poor of their livelihood most of whom are evicted from the so called government land. According to them, this land could appear underutilized and consequently appear useless but to the rural poor, it is their source of livelihood and should not be leased or sold at whatever cost.
Such large scale land acquisitions could however be viewed in a positive light and seen as a poverty eradication and economic development tactic for developing countries. Foreign Direct Investment in the agricultural sector is bound to infuse large amounts of capital in developing countries. This is in addition to job creation, infrastructure development and sustained food production. Acquisition of land by developed countries is therefore seen as a perfect opportunity for developing countries to tap and secure themselves potential for economic advancement.
The urgency of development in the rural areas as compared to the poverty and the low fiscal ability of developing nations such as Madagascar necessitates such a move. This paper will analyze the positive effects likely to emerge from the recent move by China to extend a land buying offer to Madagascar. Great emphasis is placed on what Madagascar stands to gain from the agreement given its struggling economy and high poverty levels. Discussion China’s investment in the Madagascar’s agricultural sector is a beaming source of hope for the country’s ailing economy.
The country is currently highly indebted and largely dependent on aid (WFP, 2009). The country was among the countries that benefited from debt relief under HIPC initiative (Heavily Indebted Poor countries) provided by the World Bank and IMF in 2000. Telecommunications and transport networks are under-developed and could do better with additional capital injection. The level of poverty in Madagascar is devastating with 70 percent of the citizens living on less than a dollar a day (WFP, 2009).
The country’s Human Development Index is at 0. 533, one of the lowest as ranked by UNDP (United Nations Development Program). Malnutrition in children is quite common due to economic hardship and the purchasing power of the population has reduced drastically. The Global Hunger Index is described as alarming at 28. 8 percent mostly caused by the high levels of poverty and the fact that the agriculture sector on which the country relies on to a great extent is prone to drought, damage from cyclones and other natural disasters (WFP, 2009).
As a result, many have been reliant on food aid from developing countries and organizations such as the World Food Programme. The country’s economy therefore requires a major facelift which definitely requires a huge chunk of capital investment. What China is about to do is essentially Foreign Direct Investment which in most cases forms an effective development catalyst in developing countries helping them to shed off some of their problems (Tambulan, 2004). The investment that China will make in Madagascar may not tackle a big fraction of these problems.
However, the country can be rest assured that there is going to be a significant change in the situation in the country following the land purchase. The next section of the paper analyzes these benefits. Increased Government income Since in this case China will purchase the land from Madagascar, the country stands to gain quite a substantial amount of income. Tambulan (2004) notes that prospective sellers of land stand to gain from a combination of commodity transfers, cash and loans from the purchasing country which if optimally used could promote economic development within the country.
As a result, developing countries have turned to securing funds from agricultural investment and thus making use of the otherwise under-utilized or unproductive land (Braun and Meinzen-Dick, 2009). Madagascar will also receive more income in terms of in terms of income taxes paid by China. This is a good form of investment that the country could use in its favor to develop itself. Job creation The land that China will purchase will most definitely require a large number of laborers to work in the farms.
This is in addition to the off-farm workers such as drivers and distributors who will be given the duty of facilitating the transport of farm inputs and products. Braun and Meinzen-Dick (2009) note that there is bound to be increase in farm as well as off-farm employment opportunities for the residents whenever developed countries make agricultural investments. With job creation, there will be improvement in disposable income and the purchasing power of Madagascar citizens (Klein, Aaron, and Hadjimichael, 2003).
This is a critical development considering the high levels of poverty and economic suffering in the country. This kind of hardship is bound to decrease when China invests in the agricultural sector creating thousands of jobs. This will therefore act as a poverty reduction strategy for Madagascar. Development of complimentary industries The farming activities will require inputs and supplies such as seeds, fertilizers and farm tools. Local suppliers are the ones who stand to benefit from the demand of supplies and equipments required at the farms such that their income will go up.
This is a positive impact on economic development as well as individual development. The government benefits from more income tax levied on these suppliers while the individuals will benefit from the higher incomes they will receive (Weigel, et al, 1997). They can also use this as a basis to improve their capital base following the increased levels of income. Since the farm may require supplies that the local sellers do not stock, this will be a perfect opportunity for business expansion to incorporate these products.