regional training
Land Policies as an Impediment to
Investment: Evidence from FIAS
Case Studies
Land Policies & Legal Empowerment of the Poor
November 2-3, 2006, Washington DC
FIAS
1
1
Why do we study land?
Many interest groups are looking at land through specialized lenses
and work towards the implementation of particular land policies.
BUT limited focus
on land from PSD
perspective
Urban/Rural
Development
Financial Sector
Land Policy
Land thematic Group
(Especially, limited
discussion based on
developing countries
experience)
Environment and
Natural
Resources
Social
Development
2
Securing property rights
encourages private investment
Investor surveys: access to land is a major
constraint to operations
Doingbusiness 2007: large economic benefits
can be reached from protecting property rights
McKinsey (1991-2004): land market issues
are major barriers to investment and
competition in more than half the economic
sectors (e.g. retail, housing and tourism)
3
Land has been a major obstacle to
investment in many countries
Percentage of respondents claiming that procedures for accessing the
land are an obstacle for their business operation and growth
100.0
89.3
90.0
81.3
80.0
72.9
71.0
69.2
70.0
58.2
60.0
54.9
53.8
50.0
52.0
50.6
44.1
41.5
40.0
32.7
30.4
30.0
20.0
10.0
a
Za
m
bi
Fa
so
in
a
Bu
rk
ga
nd
a
U
Ka
za
hs
ta
n
M
ac
ed
on
ia
Ar
m
en
ia
Bu
lg
ar
ia
Yu
go
sl
av
ia
ha
na
G
Se
ne
ga
l
C
ap
e
V
er
de
Al
ba
ni
a
Ve
ne
zu
el
a
R
us
si
a
0.0
Percentages are calculated on the base of respondents giving an answer to this question. Respondents had an
option not to answer, which usually means that they had no experience with land obtaining or no need for land.
Overall the share of non responding businesses is 41.4%. Source: ARCS
4
Harder to register property in poor countries
Days
34
116
4.8
OECD: High income
51
East Asia & Pacific
54
Middle East & North Africa
56
South Asia
62
133
Percentage of property value
4.2
6.8
6.1
5.6
Latin America & Caribbean
Europe & Central Asia
Sub-Saharan Africa
3.2
14.4
5
Source: Doing Business database
Examples illustrating reform efforts to overcome land
obstacles
Issues:
Concerns:
Land availability
• State owned land
1. Is land available and
at what price?
• Tribal Communal land
• Ownership/use restrictions
• Zoning/planning
• Property tax (rate & coverage)
Land rights
2. What are my rights?
Are my property
rights secure?
• Titling system
• Registration process
• Collaterals
• Transfer of property rights
• Dispute resolution mechanisms
Land development
procedures
3. Time and cost of land
related procedures?
Selected Case
Studies
• Shenzhen (China)
• Red Sea (Egypt)
• Hong Kong
•Vietnam
• Ngamiland
(Botswana)
• Makuleke (SA)
• Mozambique
• Peru
• Thailand
•Location permits
• Construction/building permits
• EIA
• Utility connections
• Property tax (administration)
• Novgorod (Russia)
• Cape Town (SA)
6
Russia: Getting access to land can be
extremely time consuming and costly
Flowchart of the procedure for allocation of land plot for business use (Nizhny Novgorod)
Document
Issuing Authority
Application to the Department of Economy and
Planning
Approving authority
Committee for land resources and land use planning
Construction Passport
Preliminary technical specifications for
preliminary approval of project design and
connection to engineering infrastructure
Department of Economy and
Planning
Preliminary lease contact
Sketch of the location of the structure
Department of Economy and Planning
Head of Municipal Administration
Head Directorate for
Architecture and City
Planning
Project cost estimate
Head Directorate for Architecture and City Planning
Draft of the Approval of the Local
Administration Head for the
construction/reconstruction permit
Sanitary-Epidemiological Inspection
Lease agreement for the land plot for the period
of construction/reconstruction
Head of Municipal
Administration
State Fire Inspection
Registration of the land lease contract in the
Book of Land Registry
Draft of the Approval of the Local Administration
Head for the Leasing contract on the Lease of
land plot
Obtaining of the proof of lease and the lease
contract (a.k.a. registration of the lease in the
Book of Land Registry)
Committee for land
resources and land use
planning
State Judicial Committee
Total time: 273 days
7
Source: FIAS
Russia: Longer bureaucratic delays are
associated with fewer privatizations
No. Sales
Time required to complete procedure (log scale)
8
Russia: Higher complexity and higher fees
are associate with more frequent bribes
Level of unofficial payments
Effect of procedure cost and complexity of the level of
unofficial payments
0.39
0.40
0.25
0.30
0.20
0.12
0.10
High complexity
0.00
0.00
Low complexity
Low cost
High cost
Official costs of procedures
per stage
Complexity of
procedures
9
Vietnam land program
Background
• Vietnam is in a protracted
period of economic transition
after 1986 ‘Doi Moi’ reforms
• Relatively good investment
climate but land remains
problem
Basic Land Issues
• Land market a field of tension
between growing private
sector and state ownership
of all land
Following land issues impede
PSD:
•Limited availability
•High prices
•Unclear security of tenure
•No market-oriented, long
term leases
IFC study of informality showed
that 80% of firms surveyed
would expand if land were
available
10
Vietnam land program
What are the obstacles?
What is being done?
• Strict and complex land
administration system
• Land Law, 2003 aims for
efficiency of a true land market
despite all land being state
owned – not fully acheived
• Land difficult to obtain /
poor allocation by state
• Formal process costly and
time consuming
• Unclear that formal registered
possession confers security
benefits
• Gov VN has asked FIAS to
assess the impact of Land Law
on PSD
• FIAS implementing a multi-year
program to strengthen the Land
Law and the administration of
business access / rights to land
11
Three Southern African case studies
Tribes/
Local Community
•
•
•
•
Strategic
Investors
• Long-term investment
• Efficient process
• “Good citizen” status
Employment
Income
Social development
Cultural preservation
The State
• Strategic sector growth
• Sustainable development
• Environment protection
• Social development
12
Shenzhen - China’s “incubator”
for land market reforms
13
To Conclude:
1.
Land related constraints present a major impediment
to investors.
2.
Land problems are complex and country specific;
they need to be dealt with accordingly.
3.
Fundamental land system reforms require sustainable
efforts over time. In the meantime, countries should
and could explore practical and interim solutions to
help overcome the difficulties in providing land to
investors in the transitional period.
4.
There is a further need to fill the knowledge gap on
reform experience in developing countries.
5.
Final solution design requires collective efforts of all
relevant departments within the WBG, and with our
clients.
14