Saturday, 19 September 2009

FDI in Agriculture by TNCs (and a shallow Op-Ed in The Hindu)

Today’s edition of The Hindu carries an article titled “Developing countries now dominate global agricultural plantation business”. The article was written by Premila Nazareth Satyanand who …"writes on foreign direct investment issues for the Economist Intelligence Unit, UNCTAD and the World Bank".

The primary objective of the article is to extract the key message in the UNCTAD report titled
World Investment Report – Translational Corporations, Agricultural Business and Development”.
The Op-Ed has not done justice to the content of the original report and has selectively highlighted parts of the report to make an unfair case for increased participation of TNCs in the agri-sector India (both inward and outward).

Firstly the Op-ed paints a selective of the agricultural sector. While I commend the writer in sharing the good news, the writer falls short of reality. There is a denial of the crisis that is facing the agri-sector across the world. Farmer suicides, manipulation of seed prices, and the roll of American and EU subsidies in depressing crop prices in favor of TNCs is not touched upon. (In all fairness they were not explicitly highlighted in the UNCTAD report). 

Secondly, Transnational Corporations (TNCs) have historically been a stumbling block to equitable development. The role of TNCs  in the Indian Agri-sector through companies such as Cargill and Monsanto has been more noted for farmer suicides and seed price manipulation than equitable development. 

Lastly, the Op-ed stopped short of directly highlighting the scores of red-flags that the report threw up. After reading parts of just one chapter in the report (Chapter IV – Development Implications of TNC Involvement in Agriculture) it became evident that report holds enough content to put a speed-breaker and erect entry-barriers to TNC participation in the agri-sector. If it is bad for us, why should we encourage our companies to behave badly in other countries?

The UNCTAD Report that forms the basis of the writer’s enthusiasm also highlights several other issues that would be of concern to the small farmer (and of no concern to the typical reader of The Economist).

A few of these issues
  • Adverse impacts of TNC participation in the agri-sector include driving farmers out of business, and making small farmers dependent on global marketplace and pricing dictated by a handful of large TNCs (which does not include any third-world TNC).
  • The report categorically states that the transfer of agricultural technology is constrained by geographic and climatic conditions.
  • Only 1% of TNC budget has been spent on developing crops that are suitable to third world countries.This is much more than a bottle neck as the Op-Ed would have us believe. 
  • Most first-world agricultural innovations are protected by patents, making it close to impossible to appropriate technology locally.
  • The report clearly states that the expectations around technical contributions of TNCs “cannot be high”. Areas of technical participation are, according to the report, limited to seeds, agrochemicals and machinery.We know what seeds have done in Maharasthra, we know the impact of agro-chemicals on the health of farmers and the environment and we know that machinery is not always affordable to the small farmer. 
  • The report also categorically states that “technology transfer to TNC owned farms does not readily diffuse to local producers and nor is this usually in TNCs’ interest.” (!)
  • Most seeds that TNCs provide cannot be replanted and this leads to high degree of dependency on the TNCs for seeds. 
  • TNCs have been participating in the agri sector in India for close to two decades. The impact that they have had on the poor farmer in India is limited in the best of cases. The report still demands an “incentive” for TNCs to help improve the lot of the poor Indian farmer. This to me is unfair. If you have not been able to do anything over two decades with the current level of incentive, what is going to change if incentives are increased?
  • The report admits that TNCs are likely to drive small farmers out of business and says that in “some” (read as rare) circumstances they may have a beneficial  impact on the quality on employment. 
  • On the one-hand the report admits that TNC participation is largely limited to plantation crops. On the other hand, it says that child and bonded labor is part and parcel of the plantation system in many part of Africa. TNC participation has yet to change this reality and needs to go beyond lip-service. Why should we encourage outward FDI in such cases?
  • The report admits that the global supply chain commandeered by retailers is powerful. An example of how this power is used positively to benefit the farmer is not clearly given. What examples are given, benefit consumers in the first world more than they do consumers in the developing world or the farmers themselves. The demands of this supply chain on quality increases the consumption of pesticides and agri-chemicals and puts a greater burden on the farmer and his land. 
  • While farmers enter into contractual agreements with TNCs voluntarily, the report clearly states that it is close to impossible for them to make an exit from such an agreement. This "lock-in" works in favour of the TNC and is un-equitable to the farmer. 
  • Crop variety is compromised by TNCs, which puts the farmers at risk and open to the price vagrancies of the global market.  
  • Funnily, the report says that public investment in rural areas is necessary to encourage private investment. I thought citizens in rural India needed roads as much as a TNC. In other words, public investment should be directed at attracting FDI and not improving the quality of life of farmers! I am expected to pay taxes so that TNCs can make easier profits!
I fail to understand what is at the root of this ebullient enthusiasm in the Op-ed other than the transfer of land-ownership and a control of food pricing in favor of TNCs. The article fails to do justice to the content that has been made available in the report. The fact that the red-flags have almost been brushed under the carpet borders on manufacturing consent for the TNCs and not a case for improved food security. Such a one sided picture is suitable to readers of the Economist but is not in the interests of the Indian farmer (irrespective of whether he is rich or poor). I can not agree with the Op-Ed's argument that the monstrous TNC's from the first world such as Cargill and Monsanto need to be replaced by equally monstrous TNCs from countries such as India.

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