The recent G8 Meeting highlighted yet again the plight of people and nations in less prosperous parts of the world. Despite substantial aid over the years, the view expressed is that not enough is being given to make a real difference. Furthermore, concerns are growing that the aid that has been provided is often diminished by administrative activities on its route to providing help on the ground, and that the activities funded by such aid, while worthy, do not necessarily actually help the recipient countries to stand up for themselves. Dependency rather than independence is created. Lastly, the attention of celebrity, although potentially beneficial, tends to result in eye-catching initiatives which do not bring long-lasting benefit.
As a general principle, aid should support programmes which encourage self-reliance, with the ultimate aim of enabling people to help themselves – which in turn requires that the rule of law must operate, rather than arbitrary and selective application of policy. (see separate paper on Domestic Direct Investment –DDI)
Only when this is achieved will the full benefit of individual action be realisable.
Such fundamental reform can be achieved systematically. But it needs political support from the highest level, and a determination to organise the resources of the State to achieve fundamental reform for the benefit of each individual citizen. Each element of the reform programme must develop and move forward the development of the rule of law.
A case in point is the use of an interest in land to provide an asset that the holder can then use flexibly to support the interests of family and business. Land rights in this sense basically involve digital recordation of parcels of land and interests in them in a form that is secure.
Several crucial and important benefits will flow from the creation of a secure system of land rights. First is constitutional benefit. Given that an inherent requirement of the notion of establishing individual land rights is that such rights should be protected by a transparent and reliable system of law, the establishment of an independent judiciary – free from political and administrative interference - will be paramount. This in turn will demonstrate the benefit of living under the rule of law.
The second is economic benefit. Development of land rights is often solely thought of in terms of real estate markets and profiteering. Such a view is short-sighted and ignores the crucial role that land rights play in all successful developed market economies – all of which have active real estate markets. By definition, every country has land. It is a resource available for use. It does not need to be mined, transported nor is it only realisable at the end of a complex chemical process. All it needs, in order to exist in useable form, is the creation of a system of regulations and law which recognize it as an asset which can be deployed for the benefit of individuals and companies alike.
Once established, an interest in land can be used to create a capital sum (by sale or by the use of it as security for a loan) or develop an income stream (by letting). This benefit can be used by an individual to support his family or enable the provision of support for small start-up business activities. Where companies are concerned, land can be a major asset in the business activity, both by providing a base from which the business operates and security for loans.
Thirdly, people become empowered, which in turn brings immense social benefit. The individual attains a real stake in his country, and visibly and directly benefits from reform which has devolved responsibility to the individual. It also helps the mobility of labour within a country and can help to stem economic migration – the brain drain. The critical significance of this to the maturing of a country should not be underestimated.
Fourthly, the development of a reliable and independently enforceable system of land rights can help solve practical problems when they occur. Compare what happened after the Tsunami in South-east Asia and Hurricane Katrina in New Orleans. The former by and large relied on traditional custom based unrecorded systems of land rights. The latter had a recorded land rights system. Two years after the catastrophic events, New Orleans is back in business, federal aid having been directed to those entitled having been identified in large measure by title records. In contrast, in parts of South-East Asia, funds provided for aid lies unspent because identification of recipients based on occupation of land devastated by the tsunami cannot be confirmed. Instead, profiteers and carpetbaggers are making spurious claims.
As is clear, many fundamental and practical benefits flow from the creation of an independent and recorded system of land rights, which will lead to the creation of a viable market in real estate which in turn brings essential economic benefits. This in turn will contribute significantly to the country in question being able to participate on an equal basis in the global economy.
It is not suggested that this is easily accomplished. It confronts difficult issues – restitution and fairly dealing with customary land rights with respect to land. It is for each country to decide whether it wants to give its citizens the opportunity to utilise land as an asset to help the country and its inhabitants develop self-reliance and economic power. Systems adopted will properly reflect local custom and practice.
Developed economies should encourage the attainment of the use of land rights leading to the establishment of a viable market in real estate as a truly lasting way of enabling developing economies better to look after themselves. In turn they will be helping to establish new markets for themselves as developing economies grow and individuals and companies have greater disposable income. It involves utilising intelligently for the benefit of a country an asset which every country by definition has – land.
Every successful modern market economy has a viable functioning market in real estate. That must be the target for all developing economies.
Bob Hall,
International Real Estate Advisory Network Ltd
International Real Estate Advisory Network Ltd