Analysis of Daewoo Land Deal in Madagascar: Presentation
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Transcript of Analysis of Daewoo Land Deal in Madagascar: Presentation
HOW TO CREATE WIN-WIN LAND DEALS
STRATEGIC REVIEW OF DAEWOO LAND DEAL IN MADAGASCAR AS CASE STUDY
INAF U6355 GLOBALIZATION
Spring 2011
School of International and Public Affairs, Columbia University
Presented by Kevin Cyrus Hong
GLOBAL TRENDS
DRIVING FORCES
• Price volatility in global markets
• Global food crisis
• Surging demand for agrofuels and other energy and manufacturing demands
• Sharp rise in investment in both the land market and the soft commodities market
CLIENT CONTEXT
• Growing demand for food in China
• Decrease in available arable land due to environmental degradation and urbanization
• Chinese investment in infrastructure development
• MOU signed in June 2007 for Chinese settlers to move to the Zambezi valley
• Government denies such a deal following a public uproar
• Re-visiting the suspended deal
LAND DEALS AS “WIN-WIN”
Investee Country
• Foreign direct investment
• Improved agricultural infrastructure
• Increased employment opportunities
Investor Country
• Increased access to agricultural resources, especially for food-insecure countries
LAND DEALS AS “LAND GRABBING”
• Described as “neocolonial land grabs”
• Exploitation of soil fertility and water access
• Exportation of all produce
• Displacement of local farmers and residents
• No or little tangible benefits to local communities
BACKGROUND - MADAGASCAR
• Capital: Antananarivo
• Area: 587,041 sq km– Arable land: 5.03%
– Irrigated land: 1.85%1
• Population: 21,926,2212
• Median age: 18.2 years
• Literacy: 68.9%3
• GDP: $20.73 billion4
• Economy: primarily agriculture (26.5% of GDP, 80% of employment)5
DAEWOO LOGISTICS
• Set up in 1999 after the spin-off from Daewoo Corp.
• Logistics, shipping and resource development
• Filed for bankruptcy in 2009
• Currently operating under Chapter 7
DETAILS ON LAND DEAL
• 99-year lease for 1.3 million hectares (3.2 million acres), equivalent to half of the total arable land in Madagascar
• Production of food and biofuel for export
• Cost of leasing: $5 vs. $0 per hectares per year
• $2bn infrastructure investment in a port, roads, irrigation, and power plants, along with schools and hospitals for locals
TIMELINE
2008 Nov
Deal reported by Financial Times
2009 Jan
Violent protests begin; Opposition
leader AndryRajoelina calls on the president to
resign
2009 Feb
Dozens of casualties during
opposition demonstration;
ongoing political turmoil
2009 Mar
Military coup; Rajoelina
assumes power with military and
high court backing
DISTRIBUTIVE POLITICS
Supporting Interests Demand Side Supply Side Prediction
Benefits from Supporting Ability to Generate Political Action
Interests Substitutes Magnitude Per Capita Numbers Coverage Resources Cost Amount
Madagasy Government
Other FDIs Large Considerable Small Moderate Large Moderate Moderate
Daewoo Logistics Other
investments Large Considerable Small Little Small Moderate Limited
Madagasy farmers with land tenure
Few Large Large Few Little Small Very high Little
Korean farmers (livestock)
Lower price Moderate Small Large Extensive Limited Very high Limited
Korean citizens Lower price Moderate Small Large Extensive Limited Very high Limited
Opposing Interests Demand Side Supply Side Prediction
Benefits from Opposing Ability to Generate Political Action
Interests Substitutes Magnitude Per Capita Numbers Coverage Resources Cost Amount
Opposition party None Large Substantial Small Moderate Large Moderate Large
Madagasy farmers w/o land tenure
None Large Large Considerable Extensive Small High Large
Madagasy citizens None Moderate Small Huge Extensive Small High Huge
Korean farmers (agricultural)
Few Moderate Moderate Large Extensive Limited Very high Little
WHAT WENT WRONG
Collective Action
Political Instability
Lack of Transparency
Deal Size and Terms
Mediatization/ Heightened
Interest
WILSON/LOWI MATRIXBenefit
Concentrated Dispersed
Co
st Co
nce
ntr
ated
Interest Group Politics
Entrepreneurial Politics
Dis
per
sed
Client PoliticsMajoritarian
Politics
ENTERING MOZAMBIQUE
Political Stability
Previous Deals
Deal StructureDeal Size and
Length
Transparency
MADAGASCAR VS. MOZAMBIQUE
Political Stability
Previous Deals
Deal StructureDeal Size and Length
Transparency
Madagascar
Mozambique (Scenario 1)
Mozambique (Scenario 2)
DISTRIBUTIVE POLITICS
Supporting Interests Demand Side Supply Side Prediction
Benefits from Supporting Ability to Generate Political Action
Interests Substitutes Magnitude Per Capita Numbers Coverage Resources Cost Amount
Madagasy Government
Other FDIs Large Considerable Small Moderate Large Moderate Moderate
Daewoo Logistics Other
investments Large Considerable Small Little Small Moderate Limited
Madagasy farmers with land tenure
Few Large Large Few Little Small Very high Little
Korean farmers (livestock)
Lower price Moderate Small Large Extensive Limited Very high Limited
Korean citizens Lower price Moderate Small Large Extensive Limited Very high Limited
Opposing Interests Demand Side Supply Side Prediction
Benefits from Opposing Ability to Generate Political Action
Interests Substitutes Magnitude Per Capita Numbers Coverage Resources Cost Amount
Opposition party None Large Substantial Small Moderate Large Moderate Large
Madagasy farmers w/o land tenure
None Large Large Considerable Extensive Small High Large
Madagasy citizens None Moderate Small Huge Extensive Small High Huge
Korean farmers (agricultural)
Few Moderate Moderate Large Extensive Limited Very high Little
RECOMMENDATIONS
• Careful analysis of local context
– Land availability
– Land tenure
• Transparent negotiation process
• Innovative business model
• Long-term engagement with local interests
• Image and reputation management