CAN A PUBLIC-PRIVATE PARTNERSHIP IN LAND REGISTRATION PROVIDE A VEHICLE FOR GREATER INCLUSION AND BETTER GOVERNANCE?

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1 CAN A PUBLIC-PRIVATE PARTNERSHIP IN LAND REGISTRATION PROVIDE A VEHICLE FOR GREATER INCLUSION AND BETTER GOVERNANCE? Mika-Petteri Törhönen, Victoria Stanley, And Victoria Delmon ANNUAL WORLD BANK CONFERENCE ON LAND AND POVERTY Washington DC, April 23-26, 2012

2 MISSION TO CREATE LAND RECORDS Draft Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests 17 (FAO 2012): States should provide systems (such as registration, cadastre and licensing systems) to record tenure rights [where] everyone is able to record their tenure rights... without discrimination Implementing agencies should adopt simplified procedures to reduce the costs and time required for delivering services

3 MISSION STATUS 700+ years of first registration : all countries have some type of land records but most do not provide full coverage urban areas and business sector well served properties in rural areas and those of the poor are not registered Land registers discriminate based on wealth.

4 INCOMPLETE MISSION Promotes marginalization Increases vulnerability (severed by the increasing interest to rural areas and farmlands) Maintains poverty Blocks opportunities for investment

5 WHY LAND AGENCIES FAIL THE MISSION? Full coverage costs a lot Cost/benefit ratio is low in marginal areas First registration not funded other priorities But, land registration is profitable. Should the profit be diverted to pay for coverage? Could a PPP be the way?

6 PUBLIC-PRIVATE PARTNERSHIP (PPP) A contract between a public sector authority and a private party, in which the private party provides a public service and assumes substantial financial, technical and operational risk for the service. Typical PPP: Investment and operation of a public facility for an agreed period against a share of the generated income.

7 PPPS IN LAND REGISTRATION -PROS PPPs in LR have been successful in automating paper based land registration systems. Secondary business developed with LR data. Operators report: Public budget savings Increased revenues Improved efficiency.

8 PPPS IN LAND REGISTRATION - CONS No known first registration PPPs Some LR PPPs failed to meet the objectives Delayed implementation, no efficiency gains, no input to fraud prevention/anticorruption PPPs inflexible stuck with old technologies. At worst monopolies created: fees increased, but services and premises deteriorated data not shared innovations halted.

9 CASE: PPP FOR SYSTEMATIC LAND REGISTRATION IN COUNTRY X

10 LAND ADMINISTRATION IN COUNTRY X? Unified cadastre-registration agency budget funded. Land register coverage in urban areas expands rapidly through sporadic registration. Urban registration profitable (Land revenues are 30% higher than costs, US$40m) Rural coverage incomplete: 50 million parcels, less than 23% registered. Estimated cost to complete rural areas = US$ 650 million.

11 WHY A PPP? No strategy or program for systematic registration in rural areas. No political leverage to fund first registration from budget funds. First registration at current pace will take decades. Impact in rural areas - limited land market, lack of investment, no access to financing; no real estate tax base; no modern agriculture, no climate smart agriculture, abandoned lands.

12 PROPOSAL PPP for ICT and systematic first registration. Government and private partners form Joint Venture (JV) to raise funds and share risks. Government focuses on policy, monitoring, quality assurance, legal reforms, development of standards.

13 PROPOSAL The JV financing with private sector cash input and capital market funding using government assets as the collateral. The JV will complete the systematic cadastre and registration across the country in 5 years. The JV will recover the investment by collecting service fees (as agreed in the PPP contract) chargeable on all real estate transactions nationwide over a 10-year period. The JV will pay for Operations & Maintenance, will return the debt financing and will generate income.

14 OUTCOMES Improved access to services and data in real time. Full conversion of land records to digital form. Improved and expanded ICT system. Systematic registration nationwide. Eventual increase in revenues: Share of the fee to the Governmental partner Increased number of transactions Increased property tax base.

15 RISKS Process may be halted for reasons beyond JV s control (political, legal, technical ). PPP will gather personal information and other valuable data that should be protected. Contractor may not earn back funds invested fees may be raised, citizens will pay. Contracting process can be corrupted. Private partner may not be incentivized to protect land rights of most vulnerable. Government may not provide sufficient quality control.

16 CONCLUSIONS Such a PPP requires thorough preparation in the range of US$0.5 m. Careful consideration should be given to such PPP arrangements to ensure that fees are kept reasonable to ensure wide access to services. Clear, monitorable indicators of service, cost and access should be agreed upfront and should be regularly reported on and publically disclosed, providing full public accountability.

17 CONCLUSIONS PPP should provide clear incentives for technology upgrading Governments should ensure that they remain the owners of all land registry data. Need to ensure that the bidding, contracting and negotiations processes are open, transparent and free of corruption. But Can a Public-Private Partnership in Land Registration Provide a Vehicle for Greater Inclusion and Better Governance? maybe.

18 CAN WE GET FROM MAYBE TO YES? A PPP in land registration that increases the coverage of land registries would require political stability and continuity of policies to reduce the risks of the private sector investors. However, it is clear that this kind of stability is absent from many of the countries that could benefit most from such a PPP. The World Bank and other donors may provide support for such a PPP to minimize risks and ensure that all members of society benefit.

19 THANKS