Thousands of kilometres away from Romania, the drying up of aquifers in the Gulf states is causing investors to look with new urgency at opportunities to buy up farmland abroad to ensure long-term food security for their populations. Romania is seen as a promising location — but farmland purchases by foreigners are a highly sensitive issue politically and socially.
by Clare Nuttall
A combination of profit and food security were the driving force behind the purchase of the largest agricultural producer in Romania, Agricola Braila, by United Arab Emirates (UAE) based investment fund Al Dahra Holding earlier this year. The deal, estimated at over €230mn, gives the holding company control of 57,000 hectares in the Marea Insula a Brailei on the Danube in eastern Romania.
The investor is part of Al Ain Holding, which is controlled by Sheikh Hamdan Bin Zayed Al Nahyan, the younger brother of the current emir of the UAE, Khalifa bin Zayed Al Nahyan. Al Dahra Holding already owns more than 200,000 hectares with operations in 20 countries, and is keen to expand in Romania and neighbouring Serbia.
Its acquisition of Agricola Braila is part of a longer term trend that peaked in the pre-crisis years between 2002 and 2008. Investors from the arid Gulf states have been particularly avid in snapping up land overseas from Latin America to Europe to Australia. This followed increasing worries about the drying up of aquifers that had been used to irrigate deserts in previous decades. The use of underground water on this scale has proved to be unsustainable, leading to dire forecasts that groundwater could be about to dry up in countries in the region within a few short decades.
While these worrying forecasts have increased the pressure on companies like Al Dahra to seek fertile land in Romania and other overseas locations, Gulf investors are not the only ones snapping up prime farmland in Romania. The country has seen a massive hike in farmland prices in the last few years, a report from real estate company Savills finds. According to the firm’s Global Farmland Index 2018, between 2002 and 2016 farmland prices in Romania rose by over 25% a year on average — the fastest of all 15 countries surveyed by Savills. (Savills, like other international real estate firms, uses prices based on consolidated land sales rather than the considerably lower prices in a European Commission report that looks at all arable land.)
There are various challenges to investing into Romania, not least the small size of many of the plots, making buying up usable large areas difficult and expensive. On the other hand, prices are still among the lowest in Europe, meaning that the opening up of farm ownership back in 2014 led to numerous investments. As of 2015 around 40% of the agricultural land — 5.3mn hectares of the total 13.3mn hectares — was owned by foreigners, a European Parliament study showed. Of these investors, EU buyers owned two to three times as much land as those from outside the EU. As of early 2018, the top landowners in Romania included Denmark’s Ingleby and Italian businessman Luciano Martini, according to local media reports.
Indeed, purchases have continued at such a rate that methods to limit purchases of land by foreigners have been increasingly discussed within political circles over the last few years. The situation wasn’t helped by a series of accusations of small farmers being tricked into selling their land at low prices.
Despite their politically sensitive nature, farmland purchases in Romania are set to continue in the longer-term, as the impetus for international land purchases, including in Romania, remains strong. As Savills’ report notes, “Although pressure on commodity prices has slowed growth in values in recent years, the long term fundamentals of farmland ownership still apply with increased food production and competitive land use driving demand.” Global farmland prices may not be seeing the heady growth rates of the early 2000s, in the longer term growing populations mean fertile land like that in Romania will continue to be a highly desirable asset.