Will Speller

Economist, Investment Issues Section

United Nations Conference on Trade and Development

Investment Contracts for Agriculture:Practical Guidelines

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This paper draws together two bodies of research on agricultural investment…

UNCTAD and World Bank (2014)

• Detailed primary field research on 39 mature agribusinesses in Africa and South East Asia.

• Investigates what investors are doing to promote economic, social and environmental gains and sustainability.

• Shows how communities and other stakeholders living around the investment perceive and are affected by it.

IISD (2014)

• Review of 80 agricultural investment contracts between investors and host governments.

• Provides a guide for negotiating contracts for farmland and water.

• Outlines a model contract, including model provisions, which investors and host governments can adapt.

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…with a view to operationalising the responsible conduct of agricultural investment through practical guidance.

• Demand for more detailed, practical guidance on how, in concrete terms, to ensure that agricultural investments are not only sustainable in the long-term, but also beneficial and with minimal risks or negative effects in the short-term.

• Proposal of contractual solutions (based on IISD research) to the key positive and negative outcomes of large-scale agricultural projects (drawn from UNCTAD and World Bank research).

• The contract cannot solve all problems, but is one approach to generating positive, sustainable outcomes for investors, governments and communities.

• One element of a programmatic approach of the inter-agency working group of FAO, IFAD, UNCTAD and World Bank.

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Top 5 positive and negatives from farmland investments

Positive Negative

Employment Creation Loss of land and poor resettlement plans

Integration of local farmers Lack of openness and engagement with local communities

Expansion of market opportunities Weak assessment of commercial viability

Establishment of community development programs

Poor management of environmental and social impacts

Increased incomes improved food security

Insufficient mechanisms to raise grievances

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Stages in the contracting process

Preparing for

contract

negotiation

s

• Assessment of suitability and availability of land, soil and water;

• Meaningful inclusion of communities;• Feasibility studies and business plans;• Pre-screening of prospective investors.

Negotiating

the contr

act

• Defining rights and obligations;• Stating applicability of domestic laws;• Engaging with communities;• Defining what information is public.

Monitoring and

enforceme

nt

• Monitoring adherence to domestic laws and terms of agreement;

• Reporting requirements and indicators;• Enforcement of sanctions for non-compliance;• Application of contingency plans.

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Examples of how to maximise key benefits of agricultural investment through the contracting process…

Preparing for contract negotiations

Drafting the contract Monitoring and enforcement

Employment Creation Consider likely composition of employees and jobs.

Require training to integrate local staff.

Integration of local farmers Include provision requiring the establishment of an outgrower scheme.

Participate in and monitor price setting mechanisms.

Expansion of market opportunities

Give priority to investors which will set up local processing facilities, where viable.

Establishment of community development programs

Establish terms and process for community development programmes or financially-inclusive business models.

Increased incomes improved food security

Monitor impact of investment on local food security.

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Examples of how to minimise the key risks of agricultural investment through the contracting process…

Preparing for contract negotiations

Drafting the contract Monitoring and enforcement

Loss of land and poor resettlement plans

Map out and identify all existing users of the land, including formal and informal rights.

Lack of openness and engagement with local communities

Engage with local communities during the design of the project and drafting terms of the contract.

Weak assessment of commercial viability

Screen investors with respect to technical and financial capabilities.

Design contingency plans for cases in which investors fail.

Poor management of environmental and social impacts

Incorporate findings of impact assessments and management plans.

Insufficient mechanisms to raise grievances

Include a provision for establishment of grievance and redress mechanism.

Thank you!