Industries wanting to site facilities in rural Asia must do more to respect farmers’ claims to land, argues Chandran Nair.

The World Bank recently predicted that capital flows to developing countries could drop by as much as 50% year on year for 2009. The forecast comes after a year in which food prices shot up across the developing world.

In this context, Asian governments must offer stronger support to domestic farmers in order to maintain food security, and strengthen job prospects in agriculture. To support this, companies too have a responsibility to be more sensitive to land use patterns in the process of industrial site selection.

Throughout Asia’s development over the last forty years, agriculture has continuously played a secondary role to industry. It is now time leaders from both public and private sectors took responsibility for striking a balance between the need for industrialisation and agricultural self-sufficiency by preserving and investing smartly in rural areas.

Beginning in the 1950’s and lured by promises of a fast-track road to prosperity, Asian policymakers shifted their focus from a development path traditionally dominated by agricultural self-sufficiency to one mandated by the industrial sector. The common belief was that Asian countries could manufacture their way out of poverty.

As a result, priority for land use has been given over to manufacturing facilities. Together with pricing policies that artificially depress the value of staples, such as rice, farmers have become increasingly impoverished, forcing many to the edges of subsistence.

Region-wide statistics vary but point to the fact that the total percentage of farmland lost to industry since large-scale industrialisation in the 1960’s and 1970’s has been significant – so significant that in April last year the Philippines banned the conversion of farmlands for any other uses, because of acute rice shortages. In the Philippines it was a booming property market which accelerated the conversion of prime farmland for real estate development. But the principle applies across all developing countries – productive agricultural land must be valued and this value reflected in government policy.

Protests

The recent decision by India’s Tata Motors to relocate its Nano car factory in the face of overwhelming citizen opposition once again highlights the issue’s growing scale and importance. Roughly 70% of Indians are still tied to the land. In China also, tensions in the rural sector have concerned national leaders to such a degree that they have made the goal of agricultural self-reliance one of their top priorities.

Government investment bodies charged with attracting foreign direct investment shoulder much responsibility for this situation given the measures they employ to lure investors with incentives that include cheap access to industrial estates and parks, built on land taken from farmers with supposedly little property rights. Going forward, part of any government’s mandate must be to highlight details of the land history so that informed decisions can be made by investors.

In the Tata case, Kamal Nath, India’s minister of commerce, provided a good example by speaking against the conventional neglect of agriculture, suggesting companies select sites that were less fertile and less densely populated. He was pressing for a long overdue balance between the needs of promoting industrialisation and those of protecting farmers and the rights of rural communities.

Site selection

Given the increasing severity of tension over land use, responsible companies must rethink how they approach industrial site selection and feasibility studies, taking into account the agricultural, environmental and social value of the land and what impact the conversion will have, including on food production.

This site analysis must go beyond typical economic considerations of optimum transport links, supplier and distributor networks, and whatever tax breaks are on offer. Indeed management must look beyond the conventional environmental impact assessments of construction and operations that are overlayed on feasibility studies too often done out of regulatory obligation rather than good corporate citizenship.

Companies investing in Asia need to ask questions in their due diligence that go beyond the conventional checklist and include farmland value, before breaking ground on new projects. Even going back to the 1980’s, a high profile example of this is in the case of a titanium plant in Phuket, Thailand, which was constructed and then subsequently burned to the ground by villagers because it encroached on land without due recognition of the communities and their livelihoods. This issue goes well beyond cursory attempts at compensation and is more fundamental to the traditional role of land in society.

Although management will look for the most competitive destination for a project, it must also consider within their risk management and corporate responsibility policies, the livelihoods of the locally displaced farmers, the damage to ecosystems, cumulative loss of fertile land and the opportunity costs of removing previously productive land from the overall agricultural base of the country.

Whilst industrialisation clearly offers benefits, there are also obvious drawbacks to the indiscriminate use of land for industrial development such as air and water pollution, unsustainable resource use and irresponsible solid waste disposal. However, the conflict between agriculture and industry points to the need for companies to look beyond the localised effects of a facility to the broader environmental and social impacts.

Furthermore, in an economic climate of increasing unpredictability, the rational response for both public and private sector leaders would be to work together to promote economic growth whilst also understanding the critical importance of local self-reliance and mitigation of potential food security risks.

However, what we find even closer to home in Hong Kong are some of the largest land developers in the region pressuring government to sell off more agricultural land to benefit from a weaker property market – in a city-state which imports most of its food and which should be looking at ways to increase self-sufficiency.

For everyone’s sake let’s hope that companies add this issue of historical land use and rights to their corporate responsibility agenda, sooner than later.

Chandran Nair is founder and chief executive of Global Institute for Tomorrow.