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Logo of Phnom Penh Post newspaper Phnom Penh Post - Costs outweigh the benefits of foreign direct investment: FAO

Costs outweigh the benefits of foreign direct investment: FAO

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A farmer ploughs a field on the outskirts of Phnom Penh, November 2012. Photograph: Hong Menea/Phnom Penh Post

Cambodia has been featured as a case study in a new report launched by the Food and Agriculture Organization of the United Nations (FAO) focusing on the effect of foreign direct investment (FDI) in developing nations’ agricultural sectors.

While the report acknowledges the positive effects of FDI in terms of job creation and infrastructure development within local communities, it concludes that in the Cambodian context, the costs of FDI projects tend to outweigh the benefits.

“Although this dramatic surge in foreign engagement in agriculture could be favourable at the macro level, negative trends could arise at the micro level,” the report said.

Specifically, the study notes the elimination of traditional community income generation and the filling in of streams by some projects - leading to water shortages - as negating factors to any benefits gained.

The study cites figures from the Cambodian Development Council, which show Cambodian Investment Board-approved FDI into agriculture from the top three countries – Thailand, China and Vietnam – accounts for 54.1 per cent of total investment into the sector.

The case study was written by the Cambodia Development Resource Institute (CDRI); specific projects evaluated in the study operate on economic land concessions.

According to Christophe Forsinetti, CEO of venture capital organisation Devenco, the negative effects highlighted do not necessarily mean that FDI is not good for Cambodia.

“We’d have to quantify how many people are affected,” he said. “If more than 50 per cent of ELCs [economic land concessions] given includes the population in land grabbing issues then it’s a very serious issue. If we’re talking about 10 per cent or five per cent, then it’s an issue we should address but we cannot say that FDI are not good for the country in those kinds of projects,” he added.

In Forsinetti’s view, the main contributions of FDIs to Cambodia’s agricultural sector are at the infrastructure level.

“The agriculture sector in Cambodia is very primitive,” he said. “We’re still lacking basic irrigation infrastructure; the land ownership is an issue, logistic access, techniques to increase the yields – all of this is at a very early stage in Cambodia,” he added.

According to Forsinetti, FDI is important for addressing and developing issues in Cambodia’s agricultural industry. “All those people doing that work that is needed on their own, I don’t think they’re reaching a very good economic viability,” he said.

Peter Brimble, deputy country director for the Asian Development Bank believes that the impact of foreign direct investment on agriculture has been limited. “My impression is that the role of FDI in agricultural development in Cambodia has not been that significant,” he said. “I haven’t yet seen an actual number on concrete investment, those numbers are only approvals from the CIB.”

According to Brimble, the negative impacts highlighted by the FAO in their case study could also occur as a result of domestic investment. But Brimble’s views do mirror the FAO in terms of the involvement of local farmers as being key to successful foreign investment.

“If you can really put together a small-scale holder, economy-of-scale building-up model, it would minimise social disruption because it would be a little bit more labour intensive because there would be less tendency toward mechanisation,” he said. However, he believes this would only be good in the short-term.

To contact the reporter on this story: Erika Mudie at erika.mudie@phnompenhpost.com

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