By Sarah Lowery, Economist and Public-Private Finance Specialist, USAID’s Office of Land and Urban
Last year, USAID (U.S. Agency for International Development) and our partners set out to answer a critical question that is essential to informing how we work with businesses, communities, and governments on land rights and economic growth: how does the private sector think about and deal with risks to their investments stemming from unclear or weak land tenure and property rights?
To date, there had been no systematic study of how investors and business operators actually assess and seek to mitigate land tenure risks. Without a clear understanding of these issues, USAID and other development agencies are limited in our efforts to develop policies, programs, and partnerships that create win-win scenarios for both businesses and local communities.
With this in mind, USAID initiated a first-of-its-kind Investor Survey on Land Rights, along with partners Indufor North America and the European Investment Bank. We gathered information from dozens of companies, some of whom were kind enough to allow us to write detailed case studies about their experiences.
The results provide useful insights into private sector perceptions and practices regarding land tenure risks in land-based investments, as well as a unique glimpse into the workings of land-based investment projects.
In addition to analysis of general perceptions and experiences, the report features seven case studies from survey respondents that provide a more detailed picture of how investors and operators perceive and confront land tenure challenges in specific investments and seek to provide benefits to local land rights holders.
Here are six key findings from the investor survey:
- Land risks are mounting. The private sector perceives land tenure risks as increasingly important to their organizations. Fifty-eight percent of all respondents noted that land tenure risks had increased significantly or very significantly during the past five years. When asked to rank land tenure risk amongst a variety of business risks, land tenure was ranked as the second most important risk among operators and the seventh most important risk among investors.
- The biggest issue is local communities’ rights. Local community rights to access resources and local community land disputes were cited by more than 50 percent of respondents as increasing over the past five years. Fewer than 20 percent of respondents cited governance issues such as expropriation or overlapping concessions as increasing.
- Performance standards are more widely used than tenure guidelines. Sixty percent of respondents were aware of the International Finance Corporation Performance Standards while only 20 percent knew of the Voluntary Guidelines on the Responsible Governance of Tenure (VGGT). A quarter of respondents were unaware of any land tenure guidance or standards.
- Every respondent company assesses land tenure risks. All respondents undertake qualitative tenure risk assessments, and many use more than one approach. The majority of respondents undertake community consultations and field verification of land titles. Fewer than half map land holdings or conduct environmental impact assessments or environmental and social impact assessments. About half of respondents assess land tenure risks quantitatively via scenario analysis and shadow pricing.
- Active community engagement works better than exclusionary tactics. Of the tenure risk mitigation strategies reportedly used, those perceived as being successful in more than half of reported projects focused on stakeholder engagement, community development programs, participatory mapping of land rights, establishment of grievance mechanisms and support to local communities to obtain land titles. The strategies that succeeded in fewer than half of reported projects included working with government authorities, installing guards to protect plantations, employment of local community members and building fences around plantations.
- Land tenure risks led to forgone investments or operational interruptions. Land tenure risks led to the rejection of at least 66 percent of reported projects with a combined value of approximately $1.6 billion. At least five out of 63 reported projects were abandoned due to tenure risks after investment with a reported combined value of approximately $25 million. The case studies provide examples of how companies budgeted and planned for long-term community engagement in efforts to reduce tenure risks to operations.
For more information, including on the implications of these findings, visit www.land-links.org/investor-survey. The full report on the Investor Survey on Land Rights will be available on May 30,2018.
USAID will host the discussion forum, Investor strategies for land tenure risk mitigation to scale up landscape investments at the Global Landscapes Forum Investment Case Symposium in Washington, D.C. on May 30.