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GTAP Resource #4124

"Economic effects of foreign direct investment in African agriculture"
by Cai, Yiyong

The issue of foreign direct investment (FDI) in African agriculture has received considerable amount of attention over the past several years. There are several factors which are triggering the growth in interest in agricultural FDI. Some of them are ‘push factors’ while others are ‘pull factors’. The ‘push factors’ include: increasing demand for food and feed in major importing countries and the need to seek opportunities to secure adequate food supplies overseas; growing demand for biofuel feed stock as a result of energy security concerns and global carbon mitigation efforts; and continuing concerns about potential vulnerability in global food markets due to climate change. The ‘pull factors’ include: agro-ecological suitability of the FDI recipient countries; relocating food production in regions where land is relatively cheaper and the scope for agricultural productivity growth is comparatively higher; projections of secure returns from land-based investments; and increasing expansion in large scale agro-processing and agro-industrial operations with forward and backward linkages.

It is also important to recognise that current low level of investment in African agriculture is a constraint to expansion in local agricultural production while FDI can play an important role in supplementing the investment requirements. Despite the fact that agricultural FDI accounts for less than 5 per cent of overall FDI in Africa, it has grown by 17 per cent during 2003-10 period showing an upward trend. The significance of FDI in African agriculture needs to be viewed in the context of several other factors such as: greater scope for expanding agriculture into new farm land in Africa; considerable opportunity to raise agricultural productivity in currently cultivated land in Africa; the need to raise farm incomes in Africa; and the possibility that African agriculture could play a potentially important role in the medium to long term in helping to meet the growing glo...

Resource Details (Export Citation) GTAP Keywords
Category: 2013 Conference Paper
Status: Published
By/In: Presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China
Date: 2013
Created: Cai, Y. (4/13/2013)
Updated: Batta, G. (4/15/2013)
Visits: 1,898
- Dynamic modeling
- Foreign direct investment
- Food prices and food security
- Africa (Central)
- Africa (East)

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