1 fias land policies as an impediment to investment: evidence from fias case studies land policies...
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1FIAS
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
regional training
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Why do we study land?
Urban/Rural Development
Environment and Natural
Resources
Social
Development
Financial Sector
BUT limited focus on land from PSD
perspective (Especially, limited
discussion based on developing countries
experience)
Many interest groups are looking at land through specialized lenses and work towards the implementation of particular land policies.
Land PolicyLand thematic Group
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Securing property rights encourages private investment
Doingbusiness 2007: large economic benefits can be reached from protecting property rights
Investor surveys: access to land is a major constraint to operations
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)
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Land has been a major obstacle to investment in many countries
89.3
81.3
72.9 71.0 69.2
58.254.9 53.8 52.0 50.6
44.141.5
32.7 30.4
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Percentage of respondents claiming that procedures for accessing the land are an obstacle for their business operation and growth
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
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Harder to register property in poor countries
34
51
54
56
62
133
116
OECD: High income
East Asia & Pacif ic
Middle East & North Africa
South Asia
Latin America & Caribbean
Europe & Central Asia
Sub-Saharan Africa
4.8
4.2
6.8
6.1
5.6
3.2
14.4
Days Percentage of property value
Source: Doing Business database
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1. Is land available and at what price?
3. Time and cost of land related procedures?
2. What are my rights? Are my property rights secure?
Land rights
• Titling system
• Registration process
• Collaterals
• Transfer of property rights
• Dispute resolution mechanisms
Land availability
• State owned land
• Tribal Communal land
• Ownership/use restrictions
• Zoning/planning
• Property tax (rate & coverage)
Land development procedures
•Location permits
• Construction/building permits
• EIA
• Utility connections
• Property tax (administration)
Examples illustrating reform efforts to overcome land obstacles
Selected Case Studies
• Shenzhen (China) • Red Sea (Egypt)• Hong Kong•Vietnam
• Ngamiland (Botswana)• Makuleke (SA)• Mozambique
• Peru• Thailand
• Novgorod (Russia)• Cape Town (SA)
Concerns:Issues:
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Application to the Department of Economy and Planning
Application to the Department of Economy and Planning
Head of Municipal AdministrationHead of Municipal Administration
Construction PassportConstruction Passport
Head Directorate for Architecture and City
Planning
Head Directorate for Architecture and City
Planning
Preliminary technical specifications for preliminary approval of project design and connection to engineering infrastructure
Preliminary technical specifications for preliminary approval of project design and connection to engineering infrastructure
State Fire InspectionState Fire Inspection
Head Directorate for Architecture and City PlanningHead Directorate for Architecture and City Planning
Sanitary-Epidemiological InspectionSanitary-Epidemiological Inspection
Preliminary lease contactPreliminary lease contact
Sketch of the location of the structureSketch of the location of the structure
Department of Economy and PlanningDepartment of Economy and Planning
State Judicial CommitteeState Judicial Committee
Committee for land resources and land use planningCommittee for land resources and land use planning
Project cost estimateProject cost estimate
Draft of the Approval of the Local Administration Head for the
construction/reconstruction permit
Draft of the Approval of the Local Administration Head for the
construction/reconstruction permit
Lease agreement for the land plot for the period of construction/reconstruction
Lease agreement for the land plot for the period of construction/reconstruction
Document
Head of Municipal Administration
Head of Municipal Administration
Department of Economy and Planning
Department of Economy and Planning
Issuing Authority Approving authority
Registration of the land lease contract in the Book of Land Registry
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
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)
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
Committee for land resources and land use
planning
Flowchart of the procedure for allocation of land plot for business use (Nizhny Novgorod)
Russia: Getting access to land can be extremely time consuming and costly
Source: FIASTotal time: 273 days
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Russia: Longer bureaucratic delays are associated with fewer privatizations
Time required to complete procedure (log scale)
No. Sales
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Low costHigh cost
Low complexity
High complexity
0.25
0.39
0.00
0.12
0.00
0.10
0.20
0.30
0.40
Le
ve
l of
un
off
icia
l pa
ym
en
ts
Official costs of procedures per stage
Complexity of procedures
Effect of procedure cost and complexity of the level of unofficial payments
Russia: Higher complexity and higher fees are associate with more frequent bribes
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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
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Vietnam land program
What are the obstacles?
• Strict and complex land administration system
• Land difficult to obtain / poor allocation by state
• Formal process costly and time consuming
• Unclear that formal registered possession confers security benefits
What is being done?
• Land Law, 2003 aims for efficiency of a true land market despite all land being state owned – not fully acheived
• 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
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Three Southern African case studies
• Employment• Income• Social development• Cultural preservation
• Long-term investment• Efficient process• “Good citizen” status
• Strategic sector growth• Sustainable development• Environment protection• Social development
Tribes/Local Community
StrategicInvestors
The State
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Shenzhen - China’s “incubator” for land market reforms
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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.
To Conclude: