Saudi Star Agricultural Development Plc, which is currently engaged in commercial rice farming in Ethiopia, is to construct rice processing factory with an investment capital of 125 million birr (around 9.6 million USD at current exchange rate).
Haile Asegide, Director-General of Saudi Star Agricultural Development and Shoichi Tanaka, President of the Japanese company Satake International Co. Ltd, signed an agreement to establish the factory, at the Sheraton Addis on Monday, February 15, 2010.
According to the agreement, Satake International Co. Ltd will transfer its technology to other countries so as to enable them produce good quality rice.
The agreement will enable Saudi Star Agricultural Development Plc.to process rice being developed through its project in Gambella Region. The plant enables the company to process 100,000 tons of rice per annum.
To increase the processing capacity to one million tons annually during the next seven years, Saudi Star Agricultural Development plans to invest a total of 350 million Birr.
Saudi Star Agricultural Development Plc is owned by Saudi billionaire Sheik Mohammed al-Amoudi. The company has bought 80 million USD farming machinery from Caterpillar Inc to develop the 10,000 hectares of land it secured in western Ethiopia near the town of Gambella.
Over the next two decades, Saudi Star Agricultural Development Plc plans to cover a total of 500,000 of land in Ethiopia with rice, sugarcane, oilseeds and other grains. Including the expected rice production, which the company plans to export to Saudi Arabia, the company’s target is export market.
The government plans to transfer 2.7 million hectares to commercial agriculture investors in a bid to boost farm productivity and export earning.
Meanwhile, some international organizations advise countries like Ethiopia to reconsider their plans of giving huge farming lands to foreigners, whose target is feeding their own people.
The critics argue that the recent trend, which they called it “land grabbing” will worsen the current food insecurity in countries like Ethiopia as “the land grabbers” such as Indians, Saudi Arabians target is to feed their own people, but not the land owners.
“When national food security is at risk (for instance in the case of acute drought), domestic supply should have priority. Foreign investors should not have a right to export during an acute national food crisis,” advices the international Food Policy Research Institute (IFPRI) in its April 2009 publication entitled “Lend Grabbing by Foreign Investors in Developing Countries: Risks and Opportunities”.
Saudi Arabia established the “King Abdullah initiative for Saudi agricultural investment abroad” which includes credit facilities to Saudi investors in agriculture abroad. Hail Agricultural Development Corporation (HADCO), a Saudi company, invested in Sudan, with the government providing 60 per cent of the funding.
From 2004 to early 2009 a total of 2,492,684 hectares of approved land acquisitions is documented in five African states (Ethiopia, Ghana, Madagascar, Mali and Sudan) by the International Institute for Environment and Development (IIED), the Food and Agriculture Organization (FAO) and the International Fund for Agriculture and Development (IFAD), documented.
That is almost half the arable land of the United Kingdom and three times the arable land of Norway.
“In many developing states, the contracts and treaties provide greater rights and protections to foreign investors over a weak or incomplete domestic legal base on social, economic or environmental issues,” states the United Nations’ January 2010 publication – Sustainable Development innovation briefs.
This is particularly relevant to foreign investments in agriculture, where domestic land tenure rights, water rights, environmental management regimes relating to chemicals, labor law on farms and so on can be weak or absent.
The land acquisitions typically involve lease periods for 50-99 years and are often in excess of 10,000 hectares with some reports of deals of up to 1 million hectares.