Is Private Ownership of Natural Resources an Essential Condition for Sustainability?
FACILITATOR: M. GINGULD
To deal with this question, group members first coined working definitions for the terms they would be using.
Private ownership: Not limited to individual/exclusive forms of possession. It denotes a wide range of economic, social and legal arrangements, and includes communal (e.g. clan, tribal) forms of possession. This wider definition includes rights of exclusiveness in usage and utilization, assurance by group consensus and/or legal documentation, and ability to transfer owned assets.
Natural resources: Assets present in a particular area (below, surface or above) and available for potential use and utilization by its owners. These resources include renewable (reproducible) and non-renewable (non-reproducible, mined) resources, although many resources can be included in both, depending on region or specific conditions (water in Saudi-Arabia vs. water in Canada). The group did not differentiate between private and public goods/assets, because this also depends on specific conditions (water in Fiji is privately owned as opposed to many other parts of the world).
Sustainable usage of natural resources: A management system that allows natural resources to be accessed and used beneficially by present and future generations.
A second stage of discussion examined the potential benefits and damages of private ownership of natural resources.
Potential benefits include an identification with and attachment to an owned area that should lead to a more efficient usage of its resources; the ability to use resources to acquire capital and collateral for credit; and the possibility for more equitable division of sources of livelihood in a given population.
Potential damages include underutilization from a regional, state or cultural point of view (because of absenteeism, for example); and negligence and or harmful management of privately-owned areas.
Using examples from different regions and times, members determined that benefits could become damages in cases of abuse and mishandling of privately-owned areas and assets. Members also agreed that public ownership can lead to sustainable use of natural resources with, for example, multiple or alternating use of areas for different sectors, such as pastoralists and farmers.
This apparent contradiction led to the conclusion that the real issue is proper and beneficial usage and management (socially, economically, etc.) rather than ownership.
Thus, while private ownership, as defined here, can contribute to more sustainable and equitable uses of natural resources, the way that the resources are made available for use by the owners and supporting/surrounding systems (markets, governments and other agencies) is what really determines the prerequisites for sustainable resource usage.
Addressing the issues of proper usage and management of natural resources in the manner proposed here allows the examination of a multitude of tenure arrangements without being forced to adhere to culture-specific definitions of ownership, thereby preventing the imposition of alien (and often unworkable) notions on a given reality, an imposition which often seems to have caused developmental efforts to fail at their plenary stages.
What is the impact of different forms of property rights on agricultural production?
FACILITATOR: E. LETSOALO
The group considered three forms of property rights: state (including all levels of government institutions); private/freehold (including individual, community or cooperative); and communal/commons.
Leasehold and open access were excluded because leasehold denotes a contract for use rights rather than property rights, and open access is not a form of property rights, but rather the failure/non-functioning of mechanisms of control, use and enforcement of these three basic forms.
The group identified six dimensions of the impact of property rights.
Efficiency: for example making use of economics of scale, different aspects of productivity, namely technical, biological, factor productivity in an economic sense, innovations and technical progress due to research
Risk management capacity: for example, diversification within farming systems to enhance food security
Equity: in terms of access to natural resources and making use of the benefit of these resources
Sustainability: including economic, socio-cultural, political and environmental dimensions
Motivation: of individuals and of groups, including the impact of land on cultural or historical identity
Infrastructure: as related to agricultural production
An analysis of the impact of the three forms of property rights on agricultural production, based on different country experiences, revealed a positive and negative mixture.
a. State land has mixed efficiency. Generally, it is not cost-effective, due to large overhead production costs, and not labour-effective because of a lack of worker incentive or lack of management which often leads to inefficient resource allocation, including capital. The positive impact, on the other hand, comes from the capacity to support innovativeness and to create technical and organizational innovation and from its scale efficiency, which has been a strong argument in the past for large, mechanized state farms.
The results of risk management are mixed as well. In most countries, state land has not contributed significantly to food security nor encourage diversification processes in international agriculture, although some specific positive county experiences were mentioned.
In terms of equity, results have been negative because of the displacement of family farms, villages, etc., which often preceded the establishment of state land and state farms.
State land has a generally negative impact on economic and socio-cultural sustainability (long- term economic performance in centrally-planned economies, suppression of customary land use patterns, displacement, etc.). The impact of political and environmental sustainability was generally considered to be negative. b) Private property must be differentiated as small holders, small/mid-size commercialized (family) farms and large commercial units. The impact of these three units on agricultural production varies according to such things as differences in scale, labour organization and efficiency or access.
b) Private land has a positive impact on capital efficiency and innovative processes. The efficiency of other factors, such as labour, has mixed results. Its risk management capacity is also mixed, depending on the farming systems. With regard to diversification, a wide range of options is possible due to the broad definition of "private."
Its impact on equity is generally negative. Sustainability issues also have mixed results, generally positive economically with the exception of small family farms that may over exploit their resources.
The impact of motivation and identity is very positive although this may depend on the importance of agricultural production in relation to existing alternative income opportunities (trading, handicraft, part-time farming combinations).
c) Communal land is positive in cost and labour (mobile pastoral systems) but negative in land efficiency and mixed in innovation. With regard to scale, no definite decision is possible as it depends on the land use patterns in a specific socio-economic and natural environment. The impact is positive on risk management (high species diversity can be maintained on natural pastures) and on equity. The impact is positive on sustainability with some exceptions in economic, political and environmental cases, when the group size is too big, and mixed on infrastructure.
What is a land market? How is it related to other markets, especially to labour and credit?
FACILITATOR: C. GRAEFEN
The group defined the preconditions for both a well-functioning/ideal land market and for an imperfect market.
WELL-FUNCTIONING ECONOMICALLY EFFICIENT LAND MARKET
· Acceptance by the entire society that land is a tradable commodity
· Spatially and legally well-defined titling or registration procedures, indexes, guarantees by the state
· Well-established information systems that serve as marketing tools (e.g. mass media, newspapers)
· Exchangeability/functioning capital market (e.g. banking system, credit institutions)
The group concurred, however, that real markets are imperfect everywhere, but particularly in developing countries.
IMPERFECT MARKETS-FORMAL AND INFORMAL
In general, informal markets are more relevant, particularly in rural areas. However, both markets and their features usually clash in peri-urban areas of small to medium towns. The following characteristics of land transfer were identified.
Complete transfer in informal markets
· Not legally recognized (by legislation and state/ government institutions)
· Spatially well-defined even under customary tenure
· Socially guaranteed (negotiated within a local society)
· Varied means of exchange (cash, labour, services, gifts)
· Cost-effective (processing costs are nil or very minimal)
· Difficult to use as collateral in informal financial institutions, yet possible to gain credit from local savings groups
· Restricted to persons of the local society/same ethnic group
Complete transfer in formal markets
· Legally recognized and spatially defined
· Usually restricted to urban and peri-urban areas and high-valued lands (e.g. rural South Africa)
· Totally exclusive usage (with certain exceptions)
· Easy exchangeability (including inheritance)
· Titling restrictions for non-nationals
· Costly (titling, processing, enforcement, necessary utilization of courts, lawyers)
· Easy to use as collateral
· Risk of foreclosure (easy to loose title due to unfulfilled credit obligations)
· State guarantee
Temporary transfers in informal markets
· Not legally recognized by state/government structure
· Easy and cheap contracts
· Socially-based with tendency to bilateral negotiations
· Often connected to exchange of labour, products, and services, e.g., sharecropping, strong linkage to labour market and credit market (money lenders, pledging)
· Frequent disputes
· Utilization of consumption and production credits through informal institutions
· No long-term investment possible, e.g. fruit tree planting, stone wall construction
Temporary transfers in formal markets
Contracts in different forms (but in general rare)
Long-term leases to individuals or groups
Costs of transaction
Does not reflect market prices (highly subsidized)
Usually official credit not available, labour exchange not applicable
Credit available, labour exchange not applicable usually
Managing access to natural resources
The group discussed various aspects of managing access to natural resources in light of the ongoing trend of transferring either state or collectively owned public land to private property. It recognized that private ownership is not a panacea for solving all problems of resource utilization and does not constitute a guarantee for achieving sustainability. While private property has a general advantage of stimulating more efficient resource use due to the personal attachment and interest of the owner and due to its character as collateral for obtaining credit, it was pointed out that private ownership of resources could also have damaging effects, such as:
a) non- or under-utilization by those who keep them as objects of prestige or speculation,
b) misuse due to inexperience or lack of inputs, or
c) over-exploitation because of emergency requirements.
In reviewing the advantages and disadvantages of private property, the meeting stressed the need to differentiate among farming systems, such as small, medium and large farms, family farms and commercial farms. In general, it was concluded that the impact of private property on motivation, identity, capital efficiency and in overall economic terms was positive, whereas its impact on equity is negative.
In discussing the merits of state-owned and state-managed lands, reference was made mainly to the experience in the former socialist countries which had large areas of land under public property. It was acknowledged that this form did not offer a guarantee for sustainability either. Here, centrally-prescribed production patterns led to the suppression of customary land use practices, the promotion of mono-crop agriculture with large supplies of chemical fertilizers and pesticides, the loss of biodiversity, and caused erosion and salinization. It was observed that farming units under state property were in general not cost effective because of large overhead costs, and not labour effective because of the lack of incentives for farm labourers and managers. As for equity, the group came to a negative conclusion recalling the coercive manner of disbanding family farms which had frequently preceded the establishment of state farms. Their advantage was seen in their economies of scale and capacity to adopt innovations.
Communal property, the third main form of property of natural resources reviewed, was considered positive with regard to cost, labour efficiency and equity, but negative on land efficiency.
In conclusion, the group agreed that the implications of different forms of property vary considerably from country to country, depending on the role and function of governments and market forces. It concluded also that the issue of ownership is less important than proper resource use and management. In this context it recommended that in appraising the advantages of different forms of access to natural resources, the existing national and regional land tenure arrangements should be investigated without adhering to culture-specific definitions of ownership, which will prevent the imposition of alien notions on a given reality.
In order to overcome problems of under-utilization of natural resources and to avoid their over-exploitation, the following is recommended.
a) Private property - Establish or improve the land market and market-based institutions and provide tax incentives to facilitate temporary land transfers through leasehold and other contracts. A minimum farm size should be established that considers the needs of the next generation, to avoid future need for land consolidation.
b) Indigenous property - Support self-enforcing mechanisms, such as village councils, to allow the transfer of land to those who use it properly. In order to make best use of the limited amount of funds available for rural development and to achieve solutions which are adapted to the local situation, farmers and rural communities should be involved in this process from the beginning.
c) State property - Promote lease arrangements and temporary land transfer through the establishment or strengthening of land markets. Promote the transfer of land from the state to local institutions to regulate land use. The divestiture of state land through privatization should not be carried out in a hurry. This would only cause shocks, since the required institutions are not yet established. There is a need to foster research and policy dialogue on the advantages and disadvantages of the different forms of property of natural resources in order to guarantee their most efficient use. Similarly, further research is needed regarding the links between the private sector and the state in the smooth operation of land markets.