Companies that invest in land and resources in emerging economies risk financial and public relations disasters if local inhabitants feel they are getting ripped off, consultants warned in a report last week.
The report was released by a group known as the Munden Project and founder Lou Munden said: "When we looked at companies involved in international land acquisitions, we found that they experience an astonishing amount of financial damage."
This ranged from "massively increased operating costs, as much as 29 times above a normal baseline scenario, to outright abandonment of functional operations when they ignore pre-existing or customary local land rights."
The report was entitled "The Financial Risks of Insecure Land Tenure: An Investment View," and Munden emphasised that the financial risks were many and varied from delays in construction timetables to the expropriation of assets "following the loss of insurance coverage." He commented that "even more troubling, the escalation of risk can be extremely rapid", and that conventional techniques for managing risk were inadequate for coping with insecure local land tenure.
Projects go wrong when local people feel they have not been adequately compensated and are being deprived of their land, jobs, water and forests.
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