Economy, Domestic Economy

Joining the Club of Land Outsourcers

Joining the Club of Land OutsourcersJoining the Club of Land Outsourcers

Iran is set to join the club of capital-rich, land-scarce countries involved in agricultural outsourcing as a way to protect its food supply and reduce imports.

The Ministry of Agricultural Jihad envisions the project called "Beyond Border Farming" to be implemented “soon” involving agreements with up to three countries, namely Kazakhstan, Ghana and Ukraine.  A total of 500,000 hectares will be leased, according to Forsat-e Emrooz.

Cultivable land lease agreements have become an increasingly common phenomenon between capital-rich countries of the global North and countries with underutilized land in the global South as a way for the former to protect their food supplies in a world where volatile food prices pose a risk to national food security programs.

Some Middle Eastern states, being rich in oil but confronted with problems of water scarcity, have played a particularly active role in securing lease agreements.

“Purchases are about water. For with the land comes the right to withdraw the water linked to it, in most countries essentially a freebie that increasingly could be the most valuable part of the deal,” Peter Brabeck-Letmathe, the chairman of Nestlé claimed, according to The Economist.

Over the last years, Iran has faced a deepening water crisis, causing some officials to warn against attempting self-sufficiency in agricultural production, which others interpret as a principle of the Resistance Economy, a set of generic principles articulated by Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei, which in essence seeks to promote domestic growth and reduce reliance on oil.

“Water shortage is reaching such critical levels that the government, parliament and the Leader’s Office have to get their hands on the issue,” Isa Kalantari, former agriculture minister and currently adviser to the vice president told Eghtesad News.

“The degree of self-sufficiency assuming viable and stable policies is for the country to produce basic materials for at most 40 million people and we have to import all the rest.”

However, outsourcing is seen as more strategic than importing, especially since the 2008-09 world food crisis saw future contracts on essential commodities spike and endangered food security in import-dependent Middle Eastern countries, like Egypt.

Land outsourcing remains a controversial topic. Liberal economists encourage the idea of land outsourcing, pointing out that it will boost overall production as underutilized and fallow land in poor countries receive a capital injection.

Critics believe that poor African states leasing their land are often too dependent and weak to negotiate contracts to their benefits. In an interview with The Guardian, Jacques Diouf, former head of the UN’s Food and Agriculture Organization, called some of these projects “neocolonialist.” For example, in 2009 South Korea’s Daewoo wanted to lease 1.3 million acres of land from Madagascar—the size of the deal sparked a coup.

However, the Ministry of Agricultural Jihad’s aims for the Beyond Borders Farming are much in line with the general logic of land outsourcing.

The ministry’s main strategy to ensure food security in the country is “lowering and stabilizing food prices, increasing water efficiency and crop yield, boosting productivity and expanding mechanized agriculture,” according to Mohammad Reza Shafe’i, the CEO of Jahad-e Esteghlal Institute, which is affiliated to the ministry.

Last Iranian year (ended March 20, 2015), Iran posted a $5.5 billion deficit in the trade of agricultural goods. That number has improved this year, but even the most optimistic forecasts put the deficit no less than $3 billion. This dependency on foreign-produced food makes stable food imports a necessity, according to advocates of the Beyond Border Farming project.

In line with values against imperialism and exploitation, the Ministry of Agricultural Jihad will certainly want to negotiate viable agreements for both sides. This aim is also reflected in the ministry’s preference for former-Soviet states of Kazakhstan and Ukraine, which already have developed agricultural industries and generally require less investment than Ghana.

Although the government has not made clear which produce will be grown on the leased land, wheat seems to be a priority, not least because Kazakhstan is already one of Iran’s main wheat suppliers.

Although this year’s wheat harvest was exceptionally good, supply and demand have increasingly diverged over the past decade, making wheat imports one of the largest government expenses, together with rice.  

Economists hope that the Beyond Border Farming program will actively involve the private sector.

“We should not allow management of outsourced land to fall in the hands of the government. Instead, it should be executed by the private sector, with governmental support. Each private company should, for example, hire or buy 5,000 hectares and produce products that the government needs. The government should in return offer the necessary help for these firms to import and sell their products,” Ramazan Tahmasebi, an expert on agriculture and water scarcity, said.  

Tahmasebi warned that the Beyond Border Farming program “should not make us neglect domestic production and our own capacities,” adding that “a country with 80 million inhabitants should produce its own food in every way possible.”