Agricultural development in the presence of foreign divestment: Policy options

Abstract

Following the implications of the loss of employment, revenue, foreign exchange, and the negative impact on overall agricultural development resulting from foreign divestment, estimates of the extent of foreign divestment on agricultural development and policy options for ameliorating this effect were obtained. A cross-sectional data of 159 observations was fitted to a derived model and estimated by OLS. One US$ increase in foreign divestment reduces agricultural development by US$ 0.04. Policy mixes involving the combination of domestic investment, aid, and trade in response to foreign divestment in agriculture have been proposed. The best policy mix is the combination of domestic investment, aid, and trade to respond to foreign divestment in agriculture. Aid to agriculture independently was ineffective in promoting agricultural development, however, other variables produced a synergistic effect. Despite efforts to attract foreign direct investment in agriculture, foreign divestment does occur with the associated disbenefits to the sector which is detrimental to agricultural development. It is important to identify the policy options to address this in the study.

Keywords

• Agricultural development
• Aid
• Domestic investment
• Foreign divestment
• Policy mix
• Trade