Supporters of large investment argue that, as most of the land in question is located in the lowlands, capital intensive investment is the only way to bring it to productive use and generate spillovers for smallholders. Critics point to cases of land transfers without proper verification of current occupancy or utilization (Rahmato 2011) and argue that such transfers failed to improve local livelihoods (Rahmato 2014). Yet, with quantitative estimates diverging widely,<sup>2</sup> a proper assessment is difficult.

In fact, three studies aim to use quantitative evidence for a more representative and rigorous analysis of this issue in the Ethiopian context. A review of a sample of more than 10,600 investment licenses issued by the Agricultural Investment Agency finds that less than 20% of license holders established a farm (UNDP 2013). Moreover, most lack farming experience, a business plan, or regular record maintenance, pointing towards ample scope for improvement. Based on an effort to establish an inventory of and conduct field visits to a sample of farms with more than 1,000 ha established after 2005, Keeley _et al._ (2014) draw four main conclusions, namely (i) leases cover very large areas of which only parts have been developed; (ii) there are incidences of conflict with existing occupants; (iii) the potential for job generation has not been realized; and (iv) to be effective, government efforts to make lease agreements public, while commendable as a first step, need to be followed by further efforts to improve transparency.

Ali _et al._ (2015) use the census of large farms that is annually conducted by the central statistical agency (CSA) to quantify what had been described qualitatively earlier. Doing so suggests that since the 1990s, about 1.3 mn. ha had been transferred to a total of 6,612 commercial farms,<sup>3</sup> most of which cultivated more than 50 ha. The annual rate of new farm establishment dropped from a peak of close to 800 in 2007/08 to some 250 in 2011/13. Also, 95% of land is transferred to Ethiopians or joint ventures rather than foreigners. With an average area of 200 ha (172 ha for Ethiopians and 840 ha for foreigners), this implies that the extent of land transferred to operational farms is well below media reports (Rahmato 2011; Rulli _et al._ 2013). By respondents’ own estimates, 55% of land transferred remains unutilized, largely due to labor and technology constraints. Less than 20% of farms accessed credit, investments focused on land clearing and machinery, and only 36% made any lease payments. Below we will use these data to explore whether local people were affected by –positive or negative– spillovers from this phenomenon.

# **2.2 Methodological considerations**

A presumption of positive economy-wide spillovers from FDI prompted creation of investment promotion agencies worldwide. But the nature of spillovers and the channels through which they materialize will be

> 2 A report by the Oakland Institute (2011) suggest that “our research shows that approximately 3,619,509 ha of land have been awarded, as of January 2011” (p.18). This is  in line with the land matrix (Anseeuw _et al._ 2012) which reports demand for 3.14 million ha in Ethiopia, second in the world after Mozambique. Yet the most recent revision of this database (as per Aug. 8, 2015) reports that only 1.42 mn. ha had been contracted and production started only on 39,528 ha (see <u>http://www.landmatrix.org/en/get-involved/).</u>

> 3 Small producers are defined as those with a size below 10 hectares and all farms above this size fall into the ‘commercial’ category.

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