Land, Industrial Policy and Earth Systems Governance in sub•Saharan Africa: The Relationship between Land Tenure and Foreign Investment Strategy in Uganda and Tanzania Mark Purdon Department of Political Science Université de Montréal Email: [email protected] —Paper Presented at the 2016 Nairobi Conference on Earth System Governance— Nairobi, 7-9 December 2016 ABSTRACT Changes in land tenure and agriculture sectors in East Asia are often credited with laying the foundations for successful industrialization there. What are the opportunities for such development in sub•Saharan Africa? This paper contributes to discussion about earth systems governance and industrial policy in the sub•Saharan Africa by demonstrating how land tenure and foreign investment strategy interact to shape the outcomes of foreign investment projects involving land. It is based on extensive field investigation of large•scale forestry and bioenergy projects in Uganda and Tanzania (including 300 household surveys) in conjunction with key stakeholder interviews and review of relevant legal/policy frameworks. Results demonstrate that land tenure and foreign investment strategy can be effectively combined to boost smallholder incomes, spur domestic investment and allow the state to retain strategic control. While projects in Uganda were more modest in size than those in Tanzania, the risks involved in Uganda's projects were more equitably distributed between investors and smallholders. In Uganda, smallholders were able to secure considerable economic benefits from projects because their Uganda's land tenure system recognizes individual land rights. At the same time, the selectivity of the Uganda Investment Agency and Uganda's foreign investment regime placed important restrictions on foreign investment, effectively putting a brake on large•scale land acquisitions. Institutions in Uganda promote domestic investors in the forest and bioenergy sectors. In contrast, the institutional framework in Tanzania for rural development places the burden of risk on villagers themselves through a collective land tenure system in combination with an aggressive foreign investment regime that does relatively little to spur domestic investment. The land tenure system in Tanzania does not allow villagers to engage directly with foreign investors to realize the economic potential of their land, but instead requires that they first transfer it to the central government who then leases it out to investors. This offloads project risks onto villagers who only receive compensation for their lands and not payment that reflects its true market value. At the same time, the Tanzanian investment regime is highly liberalized with the result being that it has created few incentives for domestic investors to become meaningfully involved in forestry or bioenergy. Overall, these findings suggest that there are ways that the African state can combine liberal economic reforms with its developmental aspirations. Implications of these findings for the debate on elements of earth system governance such as international free trade and environmental regimes are considered. 1 INTRODUCTION This paper contributes to discussion about industrial policy in sub-Saharan Africa by seeking to determine effective domestic institutions for the promotion sustainable forest and bioenergy industries. The forest and bioenergy sectors hold some of the most potential for economic development in sub-Saharan Africa, though concerns about land grabs and biodiversity conservation colour debates. Rural areas also remain home to the majority of the world’s poor and marginalized and are linked to the urbanization of poverty in sub-Saharan Africa through rural out-migration (Millennium Project, 2005: 16-17; Mwabu and Thorbecke, 2004; Ravallion et al., 2007). A robust and sustainable rural development strategy also lays the foundation for industrialization and human development (Kay, 2002; 2009). Indeed, sustainability plays an increasingly greater role in development policy. Tanzania and Uganda claim to aspire to sustainability in some form in their key strategic development plans—whether sustainable development, sustainable industrial development, sustainable human development or sustainable growth and shared benefits (MFEA, 2010: 27; MoFPED, 2010: 41; MTTI, 2008: 25; Planning Commission, 1995:3; VPO, 2005: 26). Many of the projects investigated here were related to international climate policy, particularly offsetting under the Clean Development Mechanism of the Kyoto Protocol (Purdon, 2015b). The paper is unique for three reasons. First, too much of the literature on sustainable development remains at the level of assessment—an ex-ante effort to identify conditions that should lead to sustainable outcomes prior to an intervention (Raggamby et al., 2012: 214-215). There is little actual evaluation of projects or policies operating under the banner of sustainable development to determine if outcomes achieved are in fact sustainable. I address this gap by investigating the socioeconomic impact of six investment projects in the forest and bioenergy sectors—many but not all being international carbon finance projects—using methods of comparative policy evaluation. Second, the paper accommodates different perspectives on “sustainability,” which continues to remain a problematic term (Bernstein, 2001: 62-131; Lélé, 1991; Ott et al., 2011). I argue that evaluation of investment projects in the forest and bioenergy sectors depends on what definition of sustainability is used—strong or weak sustainability (see Neumayer, 2003)—which I discuss in more detail below. Considering findings from both perspectives allows clearer understanding of what is at stake. But aside from empirics, the paper’s contribution is to explain sustainability outcomes through the political economy of the state. My findings suggest that as a broad process involving many factors, the prospect of unsustainability cannot be entirely eliminated in the forest and bioenergy sectors but its risk mitigated through better institutional design. My results indicate that weak sustainability in forest and bioenergy sectors is best promoted by a coherent set of rules for land tenure and investment that offers opportunities for smallholders to engage directly with international markets at minimal risk—embracing key elements of liberalism—but also creates incentives for domestic investors through a selective foreign investment regime—embracing elements of developmentalism. Following Ban (2012), I describe this as “liberal developmentalism”, which was a hallmark of Uganda’s institutions in contrast to Tanzania’s more “developmentalist” approach, where the state’s role was more heavy-handed. But land tenure also plays an important role in shaping risks of land scarcity and food insecurity. I argue that the risk that land comes to represent an element of critical natural capital (CNC) is due to the stability and clarity of boundaries between state lands and those of society. Tanzania’s land tenure system maintains a relatively clear distinction between state and village lands, despite clear signs that the state has sought to open up village lands to foreign investment. Uganda’s history of state collapse reverberates into the present day, with local communities having long settled on state lands which leads to conflict when these lands are opened up for investment. Prospects of reforming institutions to better accommodate strong and weak sustainability appear more promising in Uganda, where solutions are already manifest, while in Tanzania it would require opening some fundament issues of state-society relations. As such, the paper makes a 2 contribution to both comparative political economy but also emerging comparative approaches to earth systems governance (Cao et al., 2014; Desai, 2002; Harrison and Sundstrom, 2007; McBeath and Rosenberg, 2006; Purdon, 2015a; Steinberg and VanDeveer, 2012). THEORY The Role of the State in Economic Development Because neoliberalism has been dominant in the practice of international development and liberal environmentalism in the practice of sustainable development (see Bernstein, 2001), the role of the state has not given the attention it deserved. However, particularly since the 2008 financial crisis, there has been a shift in thinking about the role of the state in economic development (Ban, 2012; Khan, 2010; Khan and Jomo, 1999; Khan and Christiansen, 2011; Schmidt, 2009; Stiglitz and Lin, 2013; Stiglitz et al., 2013; Wade, 2009). Common to this new thinking is a definition of economic development that stresses the need to build a country’s productive capacities in contrast to neoliberalism’s focus on markets. For example, Lin and Monga (2013) argue that “[s]ustained economic growth is a process of constant industrial and technological upgrading, associated with parallel and consistent social and institutional changes that guarantee shared prosperity” (p. 20), while Khan (2011) defines development as “transforming production structures and achieving an endogenous technological capacity” (p.6). Within this community, debate turns on how best to harness the state towards the process of economic development: should states design industrial policy to conform with their current comparative advantage, a comparative advantage following strategy, or should a state seek to defy its current economic endowments to build a competitive advantage in specific sector, a comparative advantage defying strategy (Lin and Chang, 2009)? Inspired by