Politics of Poverty

Land conflicts will burn you, big ag

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(Or… The business case for respecting land rights in the developing world)

Access to land has become a critical front in the long-running battles between big business and local communities. Land conflicts are nothing new (extractive industries, big infrastructure projects), but they pose a novel and growing risk to those commodity speculators, land investors, and big ag companies fueling the most recent “land rush.”  According to the IMF, much of the arable land targeted by these investors sits in weakly governed countries that have poorly-titled land and multiple claimants. Traditionally that needn’t have concerned unscrupulous companies or investors, but today it poses a serious business risk.

Large land deals often mean evicting local communities and farmers to make way for industrial export-oriented agriculture. Africa has been a particularly attractive target given that the majority of its lands are still untitled and governments have been eager to make quick deals to the highest bidders. Similar conditions prevail in countries throughout Asia and Latin America. (See Oxfam reports, “Our Land, Our Lives” and “Land and Power”.) Under these circumstances, investors may gain official title to lands, but find themselves mired in conflicts down the road.

There is a strong business case for companies/investors to avoid risks by ensuring respect for traditional land rights in their own dealings and by insisting on fair and effective land governance of local governments. However because these risks are too easily overlooked, companies continue to blunder into conflicts. Work to bring these risks to the fore for the corporate sector is happening along three promising lines.

Chanthy Dam (center) leads the Highlander Association, which helps teach indigenous leaders about their rights to control communal land under Cambodia's land law. Oxfam supports the work of a number of local indigenous and environmental groups in Cambodia seeking to help communities defend their lands and natural resources from illegal land grabs. Photo: Chris Hufstader / Oxfam America.
Chanthy Dam (center) leads the Highlander Association, which helps teach indigenous leaders about their rights to control communal land under Cambodia’s land law. Photo: Chris Hufstader / Oxfam America.

First, the actual risk to companies and investors needs more precision, but estimates are improving. The Munden Project and the Rights and Resources Initiative have made good progress in two recent reports, respectively “The Financial Risks of Insecure Land Tenure” and “Global Capital, Local Concessions.” The first report elaborates the actual risks running from project delays to abandonment, and attempts to quantify them, with estimates running from “substantial” to “catastrophic.” The second looks at 12 emerging market economies and calculates that of the 153.5 million hectares of industrial concessions on public lands examined, 31% overlaps with locally-demarcated territories. In other words, in almost a third of industrial concessions, investors were likely to run up against local land claims (and potential conflicts). The report notes that this is a conservative estimate given that many governments haven’t bothered to demarcate lands, leaving informal or customary land claims unrecorded. Where governments have been rigorous, the report note much higher overlap figures, e.g. 95% in Peru.

These estimates are supported by studies of other large-scale infrastructure projects. Released this week, a study by First Peoples’ Worldwide of 370 oil, gas, and mining projects on or near indigenous lands reported 92% pose a “medium to high risks for shareholders and investors.”  In 2008, a Goldman Sachs study of 190 oil projects determined that the time taken for projects to come on-line had nearly doubled in the prior decade and a 2010 report for the UN Human Rights Council determined that stakeholder conflict was the most significant “non-technical” factor in causing that. More recent research by SHIFT of 25 typical mining conflicts determined that projects with expenditures of between US$3-5billion should expect to suffer roughly US$20 million per week of delayed production due to land tenure issues.

Second, NGO campaigns are highlighting and heightening the risks to companies and investors. Oxfam’s own Behind the Brands campaign has targeted some of the largest brands in the world around their role in fueling land conflicts and “land grabs.” This campaign complements the likes of Greenpeace, Rainforest Action Network and other NGOs targeting companies for the environmental impacts associated with large land deals. Collectively, these campaigns serve to raise public awareness and to force discussions at corporate headquarters and investor circles. They also add more evident reputational risks to the project risks on the ground.

Finally, a body of land rights standards and norms targeting business and investors is growing. The revised IFC Performance Standards (5 and 7) are now strong on land, including Free, Prior and Informed Consent (FPIC). FPIC is also now part of the Equator Principles, covering its 75+ member banks. The UN Principles for Responsible Investment, with over 1000 signatories, include land grabs among social issues that must be addressed. The Voluntary Guidelines on Responsible Governance of Tenure provide an authoritative standard on all aspects of land rights and governance and include a section on investor responsibilities. Industry bodies like the Interfaith Center on Corporate Responsibility, the International Council on Mining and Metals and commodity roundtables like the Roundtable on Sustainable Palm Oil have adopted FPIC and other land rights provisions. And large institutional investors like TIAA-CREF have elaborated policies on responsible investment in farmland.

Progress in these three areas is complementary. As the business case is developed, as the risks are publicized, and as the case for land rights is legitimized and standardized, we should expect to see increasing action to address land grabs at the local level. Much will depend on the ability of local stakeholders and advocates to leverage these commitments into stronger land rights on the ground and more effective land tenure regimes.

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