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Saturday, Dec. 18, 2010

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Location, location: Multigrain AG farmland in Brazil, in which Mitsui & Co. has invested, stretches to the horizon. Below: A for-sale sign stands on Hokkaido forest property. MITSUI & CO., TOKYO FOUNDATION

Fears growing over land grabs

Foreigners buying here; Japan may be tardy overseas


Staff writer

When the news first broke in June that a Hong Kong-based investor had two years earlier purchased more than 50 hectares of forest in Kucchan, near the Niseko ski resort in Hokkaido, shock waves ran through local residents.

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Then in September, the Hokkaido government confirmed that several other parcels covering more than 400 hectares were also in the hands of foreign investors.

Since then, fears have been growing that foreign interests are increasingly buying up aquifers in Hokkaido.

"Water is apparently one of their targets, along with lumber. But trees have the ability to absorb carbon dioxide and sustain biodiversity," said Hideki Hirano of the Tokyo Foundation and the chief researcher behind two reports raising alarm bells about the increase in foreign ownership of Japan's forests.

Such purchases have experts worried that Japan's natural resources or even national security could be under threat. This nation has no law regulating land purchases by foreign interests and once an acquisition is made no one can infringe on the ownership, even if the land contains natural resources or is deemed crucial to national security.

With water and food security becoming a hot topic in recent years, aggressive land purchases by foreign interests are also taking place worldwide.

Many emerging economies, including China, South Korea and the United Arab Emirates, have reportedly snapped up farmland in Africa with the aim of producing crops there. Perhaps belatedly, Japan has also started investing in overseas farmland.

In Hokkaido, 29 contracts have been purchased by foreign interests, including Chinese, Australian, New Zealand and Singaporean enterprises.

Together they cover 556 hectares, according to a Forestry Agency report issued Dec. 9.

"With the report, we have finally figured out the scale of the purchases that had long been unknown," said Takayuki Doi, a senior official at the agency. He said this clarified the situation, whereas previously the media had been playing up rumors and speculation.

It is a worrying issue not only for Hokkaido but for the rest of mountainous Japan.

Hirano said there is speculation that dozens of plots, including in Mie and Nagano prefectures, as well as on Tsushima, Amami Oshima and the Goto islands, are being targeted by Chinese and other foreign investors.

The growing sense of alarm finally prodded local governments, as well as officials in Tokyo, to start talking about ways to limit such purchases.

Last month, Hokkaido Gov. Harumi Takahashi said a local ordinance is needed to force foreign interests to report an intended land purchase before the contract is signed.

At the national level, Prime Minister Naoto Kan indicated in October the possibility of restricting foreign ownership of land where it could jeopardize national security.

"(The government) wants to study the issue. I will instruct the justice minister to look into the issue and put together ideas," Kan said.

This increase in fear of a potential national security risk emerged among government officials when word started to spread that South Korean interests three years ago had purchased a resort hotel next to Self-Defense Forces facilities in Tsushima, Nagasaki Prefecture.

The Alien Land Law of 1925 allows the government to regulate land purchases in areas crucial to national security, but the law has been ineffective for decades because government ordinances specifying restricted areas were abolished soon after the end of World War II.

Hirano of the Tokyo Foundation said there are many things the government must do before it starts regulating foreign ownership of land.

First, local governments need to complete the forest land registry, which isn't even 60 percent complete. Currently, owners and buyers make deals based on very rough boundaries.

The government must also identify areas for protection, such as those containing vital natural resources or considered key to national security. Also, transactions involving forest and mountain areas should be disclosed to the public, Hirano said.

"Making deals open means making it clear who owns the mountain," Hirano said. "It would be more difficult for someone to strike a deal on the sly."

Meanwhile, fears of an impending food crisis are spreading around the world, with emerging countries that are scrambling for food, energy and natural resources aggressively investing in foreign farmland.

Experts say the land grab accelerated when fear over global warming and rising demand for ethanol in 2007 and 2008 caused a grain shortage. A number of countries clamped down on their wheat and rice exports, which in turn panicked other countries.

According to the agriculture ministry, population growth has doubled demand for grains in China and India since 1970, a major factor affecting global food levels.

Japanese trading houses, which have long lagged behind their global competition, recently began to join such moves and actively invest in overseas farmland.

In 2007, Mitsui & Co., the nation's second-largest trading house, bought a 25 percent stake in Multigrain AG, a Sao Paulo-based grain producing and trading firm, to secure more supplies of soybeans and corn from Brazil. It has since increased its stake to 45 percent and now owns 116,000 hectares of farmland.

"Brazil is the only place that we believe has large-scale potential (for Japan) to buy up farmland," said Takuya Saito, general manager of Mitsui's foods and retail business unit, citing the nation's vast amounts of level land and ample water as essential factors for cultivation.

Out of Brazil's 260 million hectares of land, a merely 60 million hectares have so far been cultivated, according to the U.N. Food and Agriculture Organization.

"Brazil definitely beats other countries in terms of potential," Saito said.

Sojitz Corp. announced Nov. 17 that it was setting up a wholly owned unit in Argentina to start leasing farmland with plans to grow 30,000 metric tons of staples for export to Asia.

By 2017, the trading company plans to grow as much as 1 million tons of soybeans, corn and wheat in Argentina, Brazil and other South American countries, it said.

Mitsui's Saito said direct farming will be a new business model for Japan as it seeks food safety and security.

To encourage Japanese companies to invest more in overseas agriculture, the government set up in August a support system, including consultation services, run by the Agriculture, Forestry and Fisheries Ministry and the Foreign Ministry.

It may appear contradictory for the government to support aggressive investment in overseas land while seeking ways to restrict purchases by foreign interests at home.

But Hirano of the Tokyo Foundation said to do anything else would be criminally naive, and it is important to protect national interests whether it is in Japan or overseas.

"Countries such as China and South Korea have restrictions on foreign interests buying their land, but are very aggressive in buying up overseas land," Hirano said.



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