1 FIAS 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 1

2 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 Policy Land thematic Group

3 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 ( ): land market issues are major barriers to investment and competition in more than half the economic sectors (e.g. retail, housing and tourism)

4 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 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

5 Harder to register property in poor countries DaysPercentage of property value Source: Doing Business database

6 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:

7 Application to the Department of Economy and Planning Head of Municipal Administration Construction Passport Head Directorate for Architecture and City Planning Preliminary technical specifications for preliminary approval of project design and connection to engineering infrastructure State Fire Inspection Head Directorate for Architecture and City Planning Sanitary-Epidemiological Inspection Preliminary lease contact Sketch of the location of the structure Department of Economy and Planning State Judicial Committee Committee for land resources and land use planning Project cost estimate 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 Document Head of Municipal Administration Department of Economy and Planning Issuing Authority Approving authority 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 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: FIAS Total time: 273 days

8 Russia: Longer bureaucratic delays are associated with fewer privatizations Time required to complete procedure (log scale) No. Sales

9 Russia: Higher complexity and higher fees are associate with more frequent bribes

10 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

11 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

12 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 Strategic Investors The State

13 Shenzhen - China’s “incubator” for land market reforms

14 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 :