3.1.1. The Impact of International Rules on Responsible Overseas Investment
(1) Theoretical Analysis and Proposition
In recent years, the international community has expressed concerns about the rapid growth in overseas farmland investment, often labeling it as “land grabbing” or “neocolonialism”. Irregular overseas farmland investment may create difficulties for the land rights of residents of the host country. For example, in the case of Border Timber Company of Zimbabwe, the indigenous people who returned from the land it mined were violently expelled, the houses of local residents were burned down, and even the serious consequence of children’s death was caused; in the case of EcoDevelopment in Europe AB and EcoEnergy Africa AB v. United Republic of Tanzania, the indigenous people leased land in Tanzania and carried out land clearing during the development phase, causing the indigenous people to lose the land and houses on which they depended for survival. At the same time, while irregular investment has negative impacts on the host country, it also increases the risk and uncertainty of the project itself. The host country may resist foreign investors’ investment in its land due to concerns about irregular investment. Therefore, placing investment under a controllable supervision system will help promote the state to improve land ownership governance and regulate corporate investment, thereby creating a better institutional environment for the circulation of various factors involved in overseas farmland investment. Major international organizations such as the Food and Agriculture Organization of the United Nations, the World Food Security Committee, and the World Bank are actively promoting the formulation of specialized policy documents in the field of overseas farmland investment. PRIAF aims to guide investors to invest in farmland in a responsible manner. According to the agreement of the system, all signatory members will voluntarily adopt the annual report and evaluation framework recommended by PRI to publish the progress of farmland investment activities, enhance the sustainability of farmland investment, improve transparency, and promote accountability. As the current major overseas arable land investor, the G20 group has become an active promoter of this principle. G20 members have expressed their willingness to strive to achieve sustainable development of productivity by improving market transparency, increasing farmers’ income and job opportunities. According to the theory of corporate ownership advantage, international rules, on the one hand, help companies gain specific advantages in the market by promoting the establishment of a sound land ownership system in the host country, and form competitive advantages through the monopoly and application of certain factor resources. Foreign investment may have adverse effects on the environment and human rights of the host country. In order to coordinate corporate investment behavior with the public regulatory goals of the host country, it is necessary to guide companies to abandon investment profit methods at the cost of polluting the environment or infringing on labor rights, and coordinate the relationship between corporate performance and public interests. In the case that the host country’s regulations may fail, international rules with actual influence may have a guiding and regulatory effect on corporate investor behavior. Some scholars have found that the introduction of the PRIAF will have an impact on overseas farmland investment in terms of improving the investment environment, influencing investment methods, and raising investment thresholds. In practice, leading institutional investors have incorporated responsible farmland investment concepts into their own investment philosophy, aiming to achieve sustainable financial and social returns through responsible farmland investment practices, and to balance the interests of overseas investors with the environmental, social, and governance interests of host countries. Some scholars have noted the possible limitations of the farmland principle. For example, since developing countries are in the early stages of foreign investment and have not yet fully integrated into the international community, this is not conducive to the development of their overseas farmland investment activities. Therefore, PRIAF provide a reasonable framework for the rights and obligations of national farmland investors in the areas of ecological protection and labor rights. However, this also increases the uncertainty of companies’ investment in overseas farmland to a certain extent. It is crucial to underscore that the formulation of international rules is primarily driven by developed countries, who assert their interests and requirements through international conventions and policy documents, thereby shaping commonly implemented practices. As a result, the rules framework often aligns with the interests of developed countries and holds a dominant position in the system. In contrast, with their limited response and experience in rule formulation, emerging economies find themselves in a more passive position under these international rules. Based on the above analysis, we can preliminarily infer that formulating international rules significantly influences countries involved in overseas farmland investment. This leads us to propose the following proposition:
Proposition: Will the formulation of international rules impact overseas farmland-investing countries, and will this impact promote or inhibit them?
(2) Baseline Result Analysis
We conducted empirical analysis using a random effects model in a benchmark regression. Our empirical testing, which involved gradually adding control variables, yielded insightful results. The coefficients of the explanatory variables in models (1) to (6) indicate a positive and significant impact of international rules on the scale of farmland investment, as shown in
Table 5. There is a notable negative correlation between energy density and the scale of farmland investment, while factors such as per capita GDP, total population, and level of openness exert a significant favorable influence on the scale of farmland investment. More specifically, the significance of the core explanatory variables suggests that international rules can effectively stimulate overseas farmland investment by investing countries, thereby partially validating the previous literature on the role of international regulations. The Principles for Responsible Investment in Agriculture, in particular, guide investing countries to comprehensively consider economic benefits and social responsibilities, thereby addressing the concerns of host countries in a fundamental manner. These rules also stipulate that overseas farmland investment companies must collaborate with the land ownership governance system of the host country, operate in compliance with regulations, and respect the legitimate rights and interests of local farmers. This proactive approach can help mitigate conflicts between overseas farmland investment companies and local farmers, boost the host country’s confidence in such projects, and encourage host countries to be more receptive to overseas farmland investment projects.
The regression analysis results, when controlling other variables, are consistent with expectations. From the food security perspective, three indicators, namely cultivated land scale, grain yield, and population, passed the significance test at multiple statistical levels. The regression coefficient of cultivated land size has a positive relationship with grain yield, while the regression coefficient of population has a negative relationship. Although the scale of cultivated land and grain yield passed the significance test, their regression coefficients were negative, indicating that countries with less cultivated land and vital food self-sufficiency are more inclined to invest in overseas cultivated land. The population coefficient shows a significant positive relationship, indicating that food demand significantly impacts overseas farmland investment. To sum up, food security is still the most critical factor driving overseas farmland investment by investing countries, which also verifies the research results of [
31]. This further confirms that countries with developed economies and higher levels of export-oriented economic development tend to invest in foreign farmland.
(3) Further Analysis
Based on the previous analysis, we can see that the promulgation of the international treaty on farmland investment has had a significant positive impact on the level of international farmland investment. However, due to the slow growth in international agricultural land investment after 2016, we speculate that after the promulgation of the international agricultural land investment treaty, there may be differences in investment scale among investor countries that invest in agricultural land. This study incorporates the double difference indicator into the fixed effect model, establishes a clear control group and experimental group, and analyzes the factors that affect the scale of overseas farmland investment in the investing country.
In order to test whether international agricultural land investment regulations have a promoting effect on international agricultural land investment, we construct individual and time dummy variables for analysis to form the independent variables of this article
. Specifically, the 24 countries with the largest agricultural land investment in 2023 (accounting for 25% of the total sample) are used as the experimental group
= 1, and the remaining international agricultural land investment countries are used as the control group
= 0. In addition, a time dummy variable
is established according to the time of promulgation of the International Agricultural Land Investment Regulations, that is, 1 in 2014 and later, and 0 before that. We present the group difference analysis and parallel trend test in the
Supplementary Materials.
As shown in
Table 6,
regression coefficients on the scale and quantity of international agricultural land investment reached significance levels. This study found that overseas agricultural land investment treaties have a greater and more obvious promotion effect on international agricultural land investment in countries with larger investment scales. In comparison, countries that are less involved in international agricultural land investment benefit from international agricultural land investment. The positive effects harvested from the treaty are more limited. This conclusion is also consistent with the aforementioned statistics research. Therefore, we urgently need to establish a more fair, open, and responsible international agricultural land investment market.
As shown in
Supplementary Materials, we conducted a placebo test by constructing a virtual group and virtual distribution, confirming the exogeneity problem of PRIAF, which also proving that the results in
Table 6 are robust.
3.1.2. Challenges Faced by Current International Rules for Overseas Farmland Investment
While international rules for overseas farmland investment have achieved certain results, they also face some challenges.
(1) International documents promoting responsible overseas farmland investment lack legal binding force
International organizations such as PRI and PRIAF clarify the roles and responsibilities of countries, investors, and other stakeholders in responsible investment in agricultural systems and develop principles of action for all stakeholders involved in agricultural and food systems, aiming to promote responsible investment in agriculture and food systems, and investments in agricultural systems that contribute to food security. However, these international rules are international soft laws and are not legally binding on their members. Traditional international law believes that only states are the subject of obligations under international law. Therefore, the direct imposition of responsible investment obligations on multinational companies through international rules still needs to be revised. However, international soft law can propose initiatives that require multinational companies to take the initiative to assume obligations such as respecting the land rights of host countries, although it has limited effect on regulating the possible infringement of the legal land rights of residents of the host country by multinational companies. Whether such obligations are fulfilled by investors, and the extent of the fulfilment, remains dependent on an investor’s social responsibility. Since current international law lacks coercive force when regulating overseas land investment, it is more difficult for investors to put the economic development of poor countries above their profits [
1].
(2) International rules face the coordination of multi-party interests
First, it is crucial to understand the intricate web of interests that investing countries and host countries navigate. Investing countries, driven by the desire to open the host country’s market, enhance the investment environment, safeguard the stability of their companies’ overseas funds and projects, and strive to formulate international rules. Conversely, the host country’s aspirations revolve around introducing international rules to regulate investing companies’ conduct, fostering local community support from these companies, and facilitating technology transfer and infrastructure development, thereby propelling social and economic progress. A notable instance is Egypt’s bold stance at the Food Security Committee meeting, where it questioned the Responsible Investment Principles. Egypt argued that while the principles outlined the host country’s responsibilities in accepting foreign investment, they failed to clarify the obligations that investor countries should bear when conducting investment activities in developing countries. This lack of clarity was a significant concern, especially regarding the dispute settlement mechanism for agricultural investment issues or violations of relevant laws by foreign companies.
Second, it is enlightening to observe the contrasting strategies of investing countries. Developed nations like Japan and the United States have established comprehensive national support systems to bolster overseas farmland investment. They have mainly completed their overseas farmland investment layout and seek to protect their companies’ interests by formulating international rules. These rules aim to confirm and safeguard existing overseas farmland investment projects while curbing the scale of investment in emerging overseas farmland investment countries. In contrast, emerging countries like China and India are just beginning their foray into overseas farmland investment. They lack well-defined overseas investment strategies and robust support systems. They aim to leverage international rules to enhance the investment environment and address international criticism of overseas farmland investments. However, they are wary of international rules that could potentially bind their existing and future investment projects, as this might escalate investment thresholds and costs, rendering them relatively passive in the international rule-making process.