THE continuing wave of land acquisitions, mostly in Africa, is now being redefined as “water grab” rather than “farmland grab.” It is argued that when a country gets one ton of wheat from the purchased land abroad it is saving about 1300 cubic meters of domestic water. And water is becoming the most precious commodity for some countries. The purchases made or being made in poor states, says the chairman of Nestle, Peter Brabeck-Letmathe, in an article published in Foreign Policy journal, are not essentially about land but about water. Hence, he says, it should be called “the great water grab.” He wrote: “purchases weren’t about land, but 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.”
Nestle’s statement captures the essence of the problem that the so-called “land grabs” are in fact “water grabs.” Neil Crowder, an investment banker, said at a recent conference in Geneva, “in Africa the value is not in the land. Water is the key aspect for what we are looking for with our investments.”
A recent research says that oil-rich Arab countries are the most “water stressed” and, in a bid to export their water stress, they are looking for water-rich land in other countries to secure their food supply. The Water Stress Index, developed and released by Maplecroft, a research firm, on May 25 rates 17 countries as ‘extreme risk’ with the Middle East and North African nations of Bahrain, Qatar, Kuwait, Saudi Arabia, Libya Wstern Sahara, Yemen, Isreal, Djibouti and Jordan on top in the ranking of 186 countries. Water stress in this region is not surprising as it only receives one per cent of the world’s annual rainfall, of which 85 per cent is lost, for example, through evaporation.
The research says that the factors of climate change and population growth will combine to squeeze water resources and affect the food security of governments across the world, regardless of how water secure they may be today. In 2008, Saudi Arabia, which was one of the Middle East's largest wheat-growers, announced it was reducing its domestic cereal production by 12 per cent a year to conserve its water.
However, the key economies of Australia, South Korea, India, China and the US have all been rated as ‘high risk’ due to massive ‘extreme risk’ areas of water stress, where demand is exceeding 80 per cent of total renewable water resources. Water shortages in these countries can lead to a slow-down in economic development and create social unrest. To offset shortfalls, these countries along with the oil-rich Gulf states are acquiring water-rich land for agricultural purposes, mainly in Africa.
The index is one of over 100 created by the firm to identify risks across supply chains, operations and investments of multinational companies and is calculated by measuring the four key areas surrounding the issue. These are access to improved drinking water and sanitation; the availability of renewable water and the reliance on external supplies; the relationship between available water and supply demands; and the water dependency of each country's economy.
According to another index, the Water Security Risk Index, released earlier by Maplecroft, Somalia, Mauritania, Sudan, Niger, Iraq, Uzbekistan, Pakistan, Egypt, Turkmenistan and Syria are the countries with the least secure supplies of water.
The research states that the countries in the extreme risk category, including the emerging economies of Pakistan, Egypt and Uzbekistan, are already experiencing internal and cross-border tensions due to limited water resources. Besides, as the global climate changes, water stress will become more acute in these regions and has the potential to threaten stability.
Pakistan's long-running dispute over Kashmir with India is in part fuelled by competition for critical water resources that are needed to maintain the growth of industry and investment. The country is facing a dozen serious water issues and the continuing delay in resolving them is destroying national economy and harming the agriculture. Some of these issues, according to experts, are absence of management to control ‘super floods’, failure to build hydropower projects that has destroyed its industry, and acute water shortage in the irrigation system adversely affecting agriculture and causing food insecurity.
However, the countries with the most stable supplies of clean water include Iceland, Norway and New Zealand. Other low risk countries are the UK and Brazil.
According to Carin Smaller, advisor to the International Institute for Sustainable Development (IISD), in many of the states where farmland investments are taking place, there is either no, insufficient or vague domestic law concerning land and water rights. But the international investment-law framework provides hard contractual rights to protect foreign investors. Some of the key provisions enabling foreign investors to secure water rights when they invest in land are as follows:
(1) Investment treaties often contain the concept of a “legitimate expectation” of the investor to secure not only the title to the investment but also rights to maintain its operations, for example, to draw water for agricultural purposes. This could provide a secure right to foreign investors, even if it conflicts with existing or future local water needs.
(2) All farmland investments rely upon the availability of water, and many of them are for 50-99 year lease periods. If water resources drop to a level below the requirements of the investment, the host state will not be able to do much and compensation could not be foreseeable. However, if there is sufficient water available, but the amount allocated to the investor is reduced to meet the needs of other users, this reduction may be viewed by a tribunal as an expropriation of the right to operate the business.
(3) A stabilisation clause in contracts will enable the investor to avoid complying with, or be entitled to compensation, when new regulations come into force such as environmental measures to reduce pollution or to protect against runoff of pesticides and fertilisers.
(4) Almost all investment treaties today include a dispute settlement mechanism to allow foreign investors to challenge governments if there are any changes that substantially affect an authorised foreign investment and its profit levels. Where rights to water are granted, any changes in those rights could cause an investor-state dispute.