Large-Scale Land Acquisitions: Opportunities for Corruption

Recent years have seen a significant rise in large-scale land acquisitions by foreign investors, generally for agricultural or extractive purposes. Many of these land deals, termed “land grabs,” have had injurious effects on local populations who are often pushed off of their land without their informed consent. (For a description of contemporary land grabs and a land grab bibliography, see here.) Foreign companies and governments secure the majority of these land deals in poorer countries, where large tracts of land can be purchased cheaply, and where many of the local inhabitants do not have the means to contest the deals through the legal system. The land is frequently used for agriculture or production of “flex crops” (such as soy or palm oil), which are then sold abroad, rather than to the host country. Therefore, land grabs can result in not only the displacement of local communities, but also the reallocation of these vital resources to external actors, rather than to the inhabitants of the host country.

Large-scale land deals are often facilitated by corrupt practices perpetrated by the foreign purchaser and/or the host government, through the transactions themselves or through weak institutions. Last November, the International Corporate Accountability Roundtable (ICAR) and Global Witness released a report that details the opportunities for corruption at each stage of large-scale land acquisitions, as well as the current legal frameworks for addressing this corruption. As noted in the report, corruption can occur in each of the six phases of a land deal:

  • The demarcation/titling of land: Individuals may have to pay bribes for land services, increasing the cost of registering or transferring land. Local elites may also use their position of power to demarcate land as their own.
  • The identification of underutilized or vacant land: Land that is untitled or that communities use for intermittent activities, such as shifting agriculture or grazing, may be labeled as vacant by the host government and thus available for investors to purchase.
  • The use of “public purpose” provisions to justify expropriation of land: The host government may abuse (or be bribed by investors to abuse) the use of public purpose provisions by broadly interpreting them to include the seizure of private land for commercial purposes.
  • The selling of land to investors by the government or community leaders: Investors may bribe the government or community leaders, directly or through political favors, to ensure that the land is sold.
  • The remedies in land-related complaints: Communities deprived of their land may be unable to access the judicial system due to intimidation from the police, or if they can access the courts, they may face a corrupt judicial system that acts in favor of the ruling elites.
  • The monitoring of investor obligations after the land has been sold: Many land deals include conditions intended to ensure the deal will benefit local communities and prevent environmental damage. However, corruption may affect how these conditions are monitored, leading to low compliance.

These stages reveal the numerous ways in which corruption can play out during large-scale land deals, and there are countless examples of such corruption hurting local populations, such as in Papua New Guinea and Laos. The responsibility to minimize such corruption should not only be placed on the investing company, but also on the host government, the financial institutions involved, and the home country of the investor. As the report explains, each of these actors can take additional steps to minimize corruption and its negative effects on marginalized populations.

  • First, investors should obtain the free and informed consent of all affected communities prior to purchasing or leasing the land. They should also incorporate human rights due diligence measures into their contracts, not only to prevent corrupt dealings of the company, but also of any subsidiaries, subcontractors, or other agents. Guidelines for such measures have been enumerated in the UN Guiding Principles on Business and Human Rights, the OECD Guidelines on Multinational Enterprises, and the ICC’s Anti-Corruption Clause. Additionally, investors should disclose contract terms to the potentially affected communities as well as allow for transparency in their operations. The current disclosure system remains weak, as exemptions are often allowed for privacy concerns or commercial reasons, which are determined by the company. To best combat corruption, this disclosure system should be altered to one that requires disclosure of all information except for that which the corporation can prove would interfere with commercial competition or not be in the public interest. Finally, investing companies should have internal whistleblower protections, so that corrupt practices are exposed as early as possible.
  • Second, host countries must create secure land and natural resources rights for their residents. They should enact legislative reforms that reduce opportunities for corruption in land deals, such as requiring transparency in the negotiation process, inclusion of local communities, and measures against bribery. Bribery in land deals can be reduced through legislation that requires public servants to divulge their assets at the start and end of their time in office. Additional measures must be sought for addressing bribery of community leaders. Finally, host countries should work to implement institutional changes in the judiciary to ensure that their citizens can seek redress through independent and fair judicial bodies.
  • Third, the home states of the investing companies should aim to prevent corrupt business practices abroad through regulations and criminal prosecutions. Home states should require investing companies to take human rights due diligence measures, as mentioned above, and to disclose the details of large-scale land acquisitions abroad. They should prosecute corrupt practices as criminal offenses and allow victims of corruption in land grabs to bring suits in their domestic courts.
  • Finally, regulations should require financial institutions to undertake due diligence to limit lending to companies with clean corruption track records and to ensure that companies are not using corrupt practices in the land acquisition. Such due diligence must be done prior to granting a loan, as well as during and after the purchase to monitor ongoing transactions. Financial institutions should also be subject to similar human rights and anticorruption obligations as the investors, and bank executives should be subject to prosecution for violations of these obligations.

Ultimately, the current incentive structures do not prompt investors to respect the land and resources rights of local communities or avoid corrupt practices, nor does it compel host countries to prioritize the rights of its poorer populations over their desire to attract foreign investors. The above-mentioned recommendations are just a few ways to alter these incentives, but much of the initiative must come from those who are in a position to monitor and facilitate these transactions, namely the home countries and financial institutions.

One thought on “Large-Scale Land Acquisitions: Opportunities for Corruption

  1. Pingback: Large-Scale Land Acquisitions: Opportunities for Corruption | Anti Corruption Digest

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