News Land Grabbing / Agrofuels – April & May 2014

The World Bank’s “Doing Business” ranking and African agriculture

In the 1980’s the World Bank (WB) imposed liberalization measures on developing countries through its Structural Adjustment Programs (SAP). In order to receive conditional loans cash-strapped developing countries were obliged, amongst others, to open up their economies to foreign investors, to lift import and export restrictions and encouraged to export commodities (raw materials) to spur economic growth. These programs were withdrawn in 2002 after heavy criticism from civil society and the academic world. The WB’s “Doing Business” (DB) ranking is based on the same economic philosophy as the SAP’s with a focus on liberalization and Foreign Direct Investment as the engine for economic growth.

The DB-ranking classifies countries on their merits in the “ease of doing business”, in other words to what extent the national regulations are favorable for private businesses. This ranking has substantial implications for private investment in a country since it is used as a reference by private investors and it also influences funding decisions of donors. The DB-ranking has encouraged many developing nations to deregulate their economies and to reduce social and environmental safeguards for investment in order to improve their position in the ranking. The DB-ranking includes indicators such as “paying taxes”[1]; and “Trading across borders”[2], and “registering property”[3] to name a few. These indicators give the best scores to governments that impose the least (regulatory) burden on investors. This motivates governments to apply reforms as suggested by the WB, such as reducing regulations, lowering export and corporate taxes (an important source of revenue for developing countries) in order to attract foreign capital and investors.

Although the ranking is not specifically focused on agriculture, it does impact developing countries’ agricultural policies, because it favors industrial agriculture. This is clear in the WB-Group’s Agriculture Action Plans:  the WB has reasoned in favor of “land registration reforms and a systemic shift from subsistence to commercial agriculture”[4]. This ignores off course the African reality. Firstly, family farmers are the most important food producers in many African countries. Promoting large-scale agriculture will directly reduce their access to land and resources endangering their survival and risking increasing poverty and hunger on the continent. Family farmers have the capacity to improve food security by sustainable farming techniques; they need support and accompaniment rather than being squeezed by big firms establishing large plantations. Secondly, the WB’s logic regarding land reforms ignores existing customary land systems in Africa as well as the complexity and the length of a land reform. The land reform promoted by the WBG encourages governments to sell and lease large surfaces of land to private (foreign) companies. The result for the local population has been disastrous. Such reforms as promoted by the WBG have led to the loss of 20 % of arable land held by local communities in Sierra Leone, which was awarded to foreign palm oil and sugar cane producers. Similarly, in Liberia palm oil multinationals have acquired approximately 607.000 ha of farmland previously owned by the local population.

For more information consult the report of Oakland Institute here and the joint statement signed by AEFJN

The World Bank’s official page of the Doing Business Ranking here