Analysis of Daewoo Land Deal in Madagascar: Presentation
1. how to create win-win land dealsStrategic review of Daewoo land deal in Madagascar as case study INAF U6355 GLOBALIZATION Spring 2011 School of International and Public Affairs, Columbia University Presented by Kevin Cyrus Hong
3. Driving forces Price volatility in global markets Global food crisis Surging demand for agrofuels and other energy and manufacturing demands Sharp rise in investment in both the land market and the soft commodities market
4. Client context Growing demand for food in China Decrease in available arable land due to environmental degradation and urbanization Chinese investment in infrastructure development MOU signed in June 2007 for Chinese settlers to move to the Zambezi valley Government denies such a deal following a public uproar Re-visiting the suspended deal
5. Land Deals as “win-win” Investee Country Investor Country Foreign direct investment Improved agricultural infrastructure Increased employment opportunities Increased access to agricultural resources, especially for food-insecure countries
6. Land Deals as “land grabbing” Described as “neocolonial land grabs” Exploitation of soil fertility and water access Exportation of all produce Displacement of local farmers and residents No or little tangible benefits to local communities
7. Background - Madagascar Capital: Antananarivo Area: 587,041 sq km Arable land: 5.03% Irrigated land: 1.85%1 Population: 21,926,2212 Median age: 18.2 years Literacy: 68.9%3 GDP: $20.73 billion4 Economy: primarily agriculture (26.5% of GDP, 80% of employment)5
8. Daewoo logistics Set up in 1999 after the spin-off from Daewoo Corp. Logistics, shipping and resource development Filed for bankruptcy in 2009 Currently operating under Chapter 7
9. Details on Land deal 99-year lease for 1.3 million hectares (3.2 million acres), equivalent to half of the total arable land in Madagascar Production of food and biofuel for export Cost of leasing: $5 vs. $0 per hectares per year $2bn infrastructure investment in a port, roads, irrigation, and power plants, along with schools and hospitals for locals
17. Recommendations Careful analysis of local context Land availability Land tenure Transparent negotiation process Innovative business model Long-term engagement with local interests Image and reputation management