Session 4 a kenneth strzepek, sherman robinson and brent boehlert
5 a dardari_muhadinovic
1. The Sustainability Challenge for FDI:
How to Have it Work for All
Abdallah Al-Dardari Milena Muhadinovic
Director Associate Economic Affairs Officer
Economic Development and Economic Development and
Globalization Division Globalization Division
UN ESCWA UN ESCWA
February 7 2012.
2. Increasing
Urbanization
population
Land and
Food import
water
dependency
constraints
Climate FOOD Food prices
change
SECURITY volatility
3. Rethinking development in the Arab region
Poverty
reduction Limited fiscal
space
Low public
investment in
Long term Food agriculture
prospects for Social
economic insecurity as cohesion
growth a threat to
Decreasing ODA
to agriculture
Public Commercial bank
finances lending for
agriculture
4. Share of food bill in total merchandise imports
The food share in household consumption versus GDP per capita
70
Food imports as % of merchandise imports, 2010
Household spendings on food (% of total consumption)
Morocco
60
Djibouti 30.10
Sudan
Algeria Mauritania (2009) 29.00
50
Syria
Yemen (2009) 27.82
Egypt
40 Egypt, Arab Rep. 19.08
Tunisia Libya
Algeria 16.30
30 Lebanon Kuwait
Saudi Arabia Lebanon 16.30
20 Jordan 16.23
Saudi Arabia 15.72
10
Syrian Arab Republic (2009) 15.05
0 Sudan (2009) 14.93
0 10,000 20,000 30,000 40,000 50,000 60,000
Malawi 13.61
GDP per capita
Oman 12.28
Bahrain 11.94
Tunisia 9.35
The relationship between development level and Qatar 8.24
the share of food in household consumption OECD members 7.43
World 7.41
United Arab Emirates 6.90
0 5 10 15 20 25 30 35
Source: World Development Indicators
6. Governments’ responses to 2007-2008 global food crisis
Budget
Macroeconomy Labor market and social transfers balance
Increase of Increase of
Increase of Increase of targeted other
Reduction of food or energy Reductio public sector transfers to the social
import tariffs subsidies n of taxes salaries poor transfers 2010 (% of GDP)
Algeria x -2.7
Bahrain -7.8
Egypt x x x x -8.1
Jordan x x x x x -5.4
Kuwait x x 17.4
Lebanon x x x -7.2
Libya 9.2
Morocco x x -4.2
Oman x 6.2
Saudi
Arabia x x x 7.7
Syria x x x -4.8
Tunisia x x -1.2
Yemen x x x -4
Source: Adapted from Breisinger et al. (2011) Economics of the Arab Awakening: From Revolution to
Transformation and Food Security (IFPRI)
7. 10
Mauritania
Syria
Surplus
5
Less import dependent, Least vulnerable
fiscally strained
Food balance (%GDP)
QUANTITY RISK
0
Tunisia
Morocco
Sudan Saudi Arabia
Egypt Kuwait
-5
Lebanon Jordan
Djibouti
-10
Yemen
Deficit
Comoros
Most vulnerable Import dependent, but fiscally sound
-15
-15 -10 -5 0 5 10 15 20 25 30
Fiscal balance (% GDP)
Deficit Surplus
PRICE RISK
Source: ESCWA calculations based on data from FAOSTAT, IMF and World Development Indicators
8. Arab countries running price risk and quantity
risk to a different degree
Arable land (% of total land)
Comoros 43.0
Syrian Arab Republic
Tunisia 18.2
25.6
• GCC countries fiscally sound so
18.0
more exposed to quantity risk
Morocco
Occupied Palestinian Territory 16.8
Lebanon 14.1
Iraq
World
11.9
10.7
• de-coupling of oil and food
Low & middle income
Sudan 8.7
10.6
prices
Algeria 3.1
Egypt, Arab Rep. 2.8
Yemen, Rep. 2.4
1.8
• MDEs fiscally constrained but
Bahrain
Saudi Arabia 1.7
have more potential for
Jordan 1.7
Somalia 1.6
Qatar 1.1
Libya
United Arab Emirates
1.0
0.8
agricultural production
Kuwait 0.6
Mauritania 0.4
Oman 0.2
Djibouti 0.0
0.0 10.0 20.0 30.0 40.0 50.0
Source: World Development Indicators
9. FAO estimates $83 billion annually to be
invested in agriculture in order to meet food
needs in 2050
10. How to finance: the food import bill and
agricultural investment? Arable land (% on total land)
Comoros 43.0
Syrian Arab Republic 25.6
Tunisia 18.2
• Limited fiscal space + Low public Morocco
Occupied Palestinian…
18.0
16.8
spending on agriculture
Lebanon 14.1
Iraq 11.9
World 10.7
Low & middle income 10.6
Sudan 8.7
Algeria 3.1
Egypt, Arab Rep. 2.8
Yemen, Rep. 2.4
Bahrain 1.8
Saudi Arabia 1.7
Jordan 1.7
Somalia 1.6
Qatar 1.1
Libya 1.0
• Private investment and FDI to fill United Arab Emirates
Kuwait
0.8
0.6
0.4
the investment gap in the
Mauritania
Oman 0.2
Djibouti 0.0
agricultural sector in those 0.0 10.0 20.0 30.0 40.0 50.0
countries which have the West Bank and Gaza
Agricultural irrigated land (% of total)
4.63
potential for agricultural Tunisia 3.89
Syrian Arab Republic 10.05
Morocco
FDI for technology transfer and 4.11
modern agricultural techniques Lebanon 19.94
0.00 5.00 10.00 15.00 20.00 25.00
11. ‘Responsible FDI’
Investing country Receiving country
Food security Technology transfer
Poverty reduction
Relief on public finances Food security
Job creation
Trade balance Increased tax base
improvements Infrastructure
Positive
sum game
12. Receiving country
• The responsibility lays upon the particular state to
crowd-in large investments in agriculture by
undertaking investments in infrastructure
(especially in rural areas)
• Comprehensive agricultural development (backward
and forward linkages) + complimentary investments
13. ‘Land grab’ issue
• The amount of land acquired by foreign investors in
Africa estimated at up to 20 million hectares
• i.e. Sudan: only 13 per cent of the arable land is
cultivated and only 1 per cent of this is land under
foreign control*
• Alternatives to land acquisition
*OECD Global Forum on International Investment, Session 2.2
14. Key success factors for FDI in agriculture
• Enforceable property rights and contractual agreements
for both locals and investors
• Sharing of benefits
• Inclusion and empowerment of local community
• Transfer of agricultural techniques and technology for
greater productivity
• FDI directed more towards rural areas
15. Final considerations
• FDI should be made part of a comprehensive
rural development strategy, as well as the
overall macroeconomic framework of
particular countries
• ESCWA’s involvement in ensuring key success
factors to be implemented
16. Thank you!
UN Economic and Social Commission for Western Asia
Economic Development and Globalization Division
P.O. Box 11-8575, Riad el-Solh, Beirut – Lebanon
aldardari@un.org
muhadinovic@un.org
18. External debt stocks
total (DOD, current US$)
40,000,000,000
35,000,000,000
30,000,000,000
25,000,000,000
20,000,000,000
15,000,000,000
10,000,000,000
5,000,000,000
0
2000 2005 2009 2010
Djibouti Jordan Egypt, Arab Rep. Lebanon Mauritania
Morocco Sudan Tunisia Yemen, Rep.
Source: World Development Indicators
19. Public spending on agriculture vs defense
millions of respective national currencies
Egypt Jordan
25,000
1,000
20,000
800
15,000
600
10,000
400
5,000
200
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Defense Agriculture, forestry, fishing, and hunting
Defense Agriculture, forestry, fishing, and hunting
Lebanon
1,400
1,200
1,000
800
600
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007
Defense Agriculture, forestry, fishing, and hunting
Source: International Monetary Fund,
Government Finance Statistics Database
20. Aid flows to agriculture mainly targeted
sub-Saharan Africa (31%) and South and
Central Asia (22%). The share of aid to agriculture in DAC
members’ aid programmes has declined
sharply from 17% in late 1980s to 6% in
recent years.
Source: OECD, Measuring Aid to
Agriculture, April 2010, OECD-DAC
21. Trend in cereal import dependency in the Arab world and
cereals price index
250 70
60
200
cereal import dependency of the Arab region (%)
50
150
40
cereals price index
30
100
20
50
10
0 0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Cereals price index (left axis) Cereal import dependency (right axis)
Source: ESCWA calculations based on data from FAOSTAT, IMF and World Development Indicators
