March 18, 2009 / 5:14 PM / 10 years ago

UPDATE 1-Madagascar's new leader says Daewoo land deal off

(Adds quotes, details)

By Richard Lough

ANTANANARIVO, March 18 (Reuters) - A deal for South Korea’s Daewoo Logistics to lease over 1 million hectares of Madagascar to grow food crops is off, the island’s new leader said on Wednesday.

Andry Rajoelina — appointed after President Marc Ravalomanana was driven from office on Tuesday — had been heavily critical of the plan announced last year, which had helped fuel anger against the ousted ruler.

The South Korean industrial giant had sought to develop an area larger than Qatar, in one of the biggest deals involving foreign companies seeking to secure swathes of African farmland since food prices spiked last year.

“In the constitution, it is stipulated that Madagascar’s land is neither for sale nor for rent, so the agreement with Daewoo is cancelled,” Rajoelina told reporters.

“We are not against the idea of working with investors, but if we want to sell or rent out land, we have to change the constitution, you have to consult the people. So at this hour the deal is cancelled.”

Daewoo’s long term aim was to replace more than half the corn that South Korea, the world’s third-largest corn buyer, imports and which comes mainly from the United States and South America.

Company officials made no immediate comment on Rajoelina’s announcement.

Daewoo Logistics had planned to start by planting 2,000 hectares of corn and to eventually put 1 million hectares of western Madagascar under corn and 300,000 hectares in the east under oil palm.

The firm, a former unit of the now-defunct Daewoo Group, had promised to spend $6 billion in the next 20-25 years to help build infrastructure such as roads, railways, a port and schools in exchange for developing huge swathes of arable land.

But critics of such deals have said they could deprive African countries of land they need to feed their own people to grow export crops for wealthier populations, often in Asia or the Middle East.

Oil and mining companies in Madagascar said they did not expect Rajoelina’s appointment to affect their operations and he sought to allay any concerns. [nLI958802]

“We call on foreign investors to come to Madagascar and invest,” the 34-year-old former disc jockey said.

Rio Tinto (RIO.L)(RIO.AX), Madagascar’s biggest foreign investor, says it foresees no problems for its titanium mining operation and licence after Rajoelina took power through the military. (Writing by Helen Nyambura-Mwaura; Editing by Matthew Tostevin)

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