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Land Policies and Land Reform
in PSIAs
Klaus Deininger,
Jan. 25, 2005
Outline
! Justification and the need for PSIA
! Tenure security: Principles & interventions
! Land access: Principles & interventions
! Practical suggestions for PSIA
! Conclusion
The challenge
! Greater awareness of importance of land
! Equity (gender), food security, and social safety net
! Investment climate and credit market access
! Transparency, trust in government, local revenue
! Sustainable resource management
! International benchmarks through IC project
! Many conflicts & failed states rooted in land issues
! Broader institutional reforms undertaken
! Macro-adjustment and advantages of private property rights
! Decentralization and empowerment of communities
! Greater emphasis on good governance & transparency
! => Need to follow this up with specific interventions
Initial Land Distribution and Economic Growth
8
Average GDP
growt h, 1960-2000 T aiwan (China)
6 Korea
T hailand China
Viet nam
Japan
4 Malaysia
Dominican Indonesia
Colombia Republic
Sri Lanka Egypt
P araguay
Brazil India
2 Mexico
Cost a Rica
Guat emala
Argent ina Kenya
Sout h Africa
P eru Honduras
El Salvador
0
Venezuela
Nicaragua
Init ial land dist ribut ion
-2
0.9 0.7 0.5 0.3
Landownership Distribution & long-term development
Indicators Colombia Costa Rica Guatemala El Salvador
Structural characteristics
Land privatization 1870–80 1820–40 1870s 1870s
Farms < 10 ha (%) 61.0 42.2 13.1 13.5
Farms > 50 ha (%) 14.0 37.5 79.5 57.1
Coffee in exports (%)
1900 49 76 56 83
1929 55 58 77 93
Social and economic development
GDP pc 6,130 5,850 3,340 2,610
Adult literacy (%)
1900 34 36 12 26
1910 40 50 13 26
1930 52 67 18 27
1980 85 91 54 64
HDI (rank) 51 33 117 112
Democracy since 1958 1948 1996 1992
The opportunities of PSIA
! Newly emerging consensus
! Focus on tenure security instead of titling
! Measures to support increased land access warranted
! Land use regulations often inappropriate – rent seeking
! Importance of process and menu of options in national policy
! Carefully assess local specificities
! Land tenure highly complex; adapted to local realities, culture
! Identify who is affected and prioritize sequence of actions
! Get stakeholders on board through policy dialogue
! Accompany process of reform
! Conduct pilots; fine tune, before scaling up to whole country
! Demonstrate benefits from interventions
! Establish benchmarks against overall targets
Tenure security: Principles
! Secure tenure will increase investment
! Doubling of productive investment in many cases
! Significant increase (43-81%) of land values
! This is compounded by transferability/formality
! Even where credit is not an option (China, Ethiopia)
! Formal title facilitates use as collateral/ formal credit
! Effect may be size differentiated, depends on supply
! Equity benefits can be substantial
! Reduce efforts to secure property rights – welfare effect
! Women’s empowerment and access to self-employment
! Less manipulation by state; governance; (Mexico, Africa)
! Resource conservation and management
When to intervene?
! Insecure tenure is pervasive
! Informality in peri-urban areas, extra-legality in rural ones
! Investment to increase security; direct demand
! Conflict or overlapping rights undermine productivity
! State ownership prevents optimum use
! Basis for rent seeking by bureaucracy
! Unregulated expropriation undermines security, livelihood
! Inequitable distribution of cost of regulation
! Formality & institutions are a problem
! Demand for credit and use of land as collateral
! Overlapping institutional responsibilities or legal situation
! Registry outdated, incomplete, or non-viable financially
How to intervene?
! Strengthen customary institutions
! Legal recognition of rights/institutions if conditions met
! Demarcation of external boundaries; group management
! Recording of transfers; conflict resolution
! Devolve state lands, review land use rules
! Recognize occupants; long-term transferable leases
! Full privatization if leases not credible enough
! Abolish outdated regulations; shift to fiscal instruments
! Systematic titling/upgrading of registry
! Legal review and harmonization (incl. basis for land admin.)
! Information campaigns followed by adjudication
! Long-term sustainability (benefits>cost; fees&taxes)
! Multiple institutions can co-exist; if ways for transition
Examples
! Security: Ethiopia, Nicaragua, Peru
! Credit: Thailand, ECA (e.g. Kyrgyz Rep.)
! Gender: Honduras, Vietnam
! Governance: India (Karnataka)
! Conflict reduction: Mexico, Uganda
! Post-conflict: Cambodia, Mozambique, …
Increasing land access – rental markets
! Tangible benefits from rental
! Productivity-enhancing transfers; participation in non-farm
! Little working capital; tenancy ladder; consumption smoothing
! Equity benefits depend on environment, outside options
! Empirical evidence
! Very important (long-term contracts) in developed countries
! Particularly important in situations of rapid transition, growth
! Transfer land to poor & efficient better than government
! Supply of land enhanced by more secure tenure
! Policy implications
! Ensure tenure security, incentives for long-term transaction
! Restrictions on rental with negative equity consequences
! Scope for longer-term advancement?
Increasing land access - sales markets
! Advantages and disadvantages
! Sales can provide direct basis for financial market development
! But will be affected by market imperfections: Distress sales,
segmented markets, speculation & macro factors
! ->Mortgage based land acquisition by the poor difficult
! Can (widespread) restrictions be justified?
! Sales markets restrictions to avoid distress sales widespread
! Reduce credit access and benefits poor can derive from land
! Safety nets to prevent distress sales much preferable
! Can facilitate large-scale land transfer to poor?
! Barriers to sales markets: Not important to transfer to the poor
! Land reform needed if very unequal land ownership distribution
Increasing access- redistributive reform
! Conceptual Justification
! Asset inequality damaging for overall growth, social peace
! Inefficiencies & unproductive land use in many countries
! Lack of assets & opportunities for participation in growth
! -> Land reform can be a worthwhile investment
! Empirical examples
! Positive social and productivity impact in Asia; some African
! Incomplete and costly in most of Latin America
! Limited impact: Political orientation; land only, high cost
! Implications
! Land reform as element of poverty strategy: Access & use assets
! Different approaches to complement; credit & markets key
! Transparent & participatory process; fiscal sustainability
! Rigorous impact assessment (PSIA) absolutely critical
Implications for PSIA
! Combine qualitative & quantitative information
! Qualitative to identify constraints & rare events
! Focus groups to identify “real” issues, formulate hypotheses
! Test broader applicability with quantitative analysis
! Build on & expand existing data
! Some LSMS with considerable information on land
! Panels more common – can build on existing cross sect.
! Add retrospective questions (easy w land), pull out for re-survey
! Pay attention to methodology
! Non-trivial selectivity issues for titling/reform programs
! Control group/baseline essential -> Stratification
! Local ownership equally important
What to ask at the community level?
! Rules and regulations
! Officials’ awareness of legislation (test)
! -> to cross-check against household information
! Changes in rules & over time (transferability)
! Issues related to local institutions
! Process; variation in (un)official transaction costs (updating)
! Enforcement of existing laws (women)
! Glimpse at legitimacy, costs, sustainability
! Rare but public events
! Land takings/conversions, land conflicts (if filed)
! Even land sales/rentals in some cases
! -> can use as a sample frame later (e.g. China)
What to ask at the household level?
! Tenure security
! Rights to land (sell, plant trees, etc.), control by gender, prices
! Past land-related investments (trees, bunds, maintenance)
! Credit access and collateral requirements/possibilities
! Non-agricultural land; scope for expropriation & redress
! Past conflict; concern about disputes; perceived security
! Knowledge about legal situation and institutions to administer law
! Preferences among different tenure options
! Land access
! Land acquisition history & changes in tenure status
! Characteristics of the other party for rentals
! Willingness to rent in/out or buy/sell at hypothetical price
! Demand for land as compared to more liquid assets
Conclusion: Why we need PSIA on land
! Land will remain an important issue
! Population change & increased value drive dynamics
! Valuable asset; interest group pressure
! Inappropriate land tenure can set countries back by decades
! Goal is clear - means are debated
! Little Bank activity before 1990s; 1975 policy paper outdated
! Knowledge gaps, e.g. recognition of informal tenures
! Long-term political process even w optimum conditions
! Don’t want to the poor to loose out
! Inclusive growth need to deal with deep-rooted discrimination
! Put land on policy agenda; facilitate comprehensive debate
! Good start has been made – there is much more potential
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