Sunday, November 23, 2008

Sweet Deal or Neo-colonialism? South Korea to Lease Half of Madagascar’s Arable Land

Financial Times 1
Financial Times 2
Financial Times 3
Financial Times 4

South Korea’s Daewoo Logistics is set to lease 1.3 million hectares of land in Madagascar to farm corn and palm tree oil. The 1.3 million hectares represent over half of the land already farmed in Madagascar and is about the size of Belgium. The sheer size of the deal has many worried, including the United Nations Food and Agriculture Organization (“FAO”), that the deal is not fair to Madagascar. As the agreement currently stands, South Korea will not have to Madagascar any money for the 99 year long lease.

South Korea will be responsible for investing in the necessary roads, irrigation systems and storage facilities in order to support their farming operations. South Korea also promises to use local labor from Madagascar at its farms. Some experts, however, say that the infrastructure investments and using local labor is not enough to make this deal fair. For instance, the FAO gave an example of a similar deal, albeit on a smaller scale, in the Sudan where capital and expertise were not transferred to the host country in any meaningful way. Others are concerned with the potential environmental impact on Madagascar. The majority of the land being leased by South Korea is currently forest that would need to be cleared if farming were to take place.

The Madagascar deal is but one, although perhaps the most extreme, example of Eastern countries investing in resource-laden African countries. China has long been buying up oil and mining resources in Africa. The Madagascar deal arises out of a need for food security. South Korea is the fourth largest corn importer in the world, and the farmland in Madagascar could produce up to half of the corn it needs. Madagascar, however, may also wish to see some of the Korean corn stay in its country. Over 600,000 people in Madagascar rely on the UN’s World Food Program for food relief. Some experts see a potential for conflict in the future if food scarcity becomes a larger problem for Madagascar. Right now, though, it looks like South Korea is getting a good deal, perhaps at the cost of Madagascar.

1) Do you think that it is fair for South Korea to lease so much land for free? It is true that Madagascar is not being forced into this agreement, but how much bargaining power to you think Madagascar has?
2) What type of additional terms would you suggest if you could modify the agreement? Do you think it would be a good idea to have South Korea provide Madagascar with a portion of the agricultural products it produces? Maybe South Korea could also invest in manufacturing or fertilizer facilities?

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