INQUIRER - Promoting inclusive growth is the cornerstone of P-Noy’s development
plan. Here’s a simple way to summarize the over-all effort. The “growth”
part of the strategy is linked to the effort to boost infrastructure,
improve economic competitiveness and drum-up private sector investments
(e.g., PPPs or Public-Private Partnerships). On the other hand, the
“inclusiveness” part is linked to the effort to strengthen the country’s
social protection system (e.g., the 4Ps or Pantawid Pamilyang Pilipino
Program and PhilHealth), as well as ensure that the investments and
economic activities are not just concentrated in urban areas (and in
particular, Luzon and Manila) and involve industries where the bulk of
the population could engage (e.g., agriculture and tourism). As noted by
Secretary Arsi Balisacan of NEDA, PPPs need to be leveraged in the
countryside to meet the infrastructure gaps there, too. Anticorruption
efforts then underpin both the “growth” and “inclusiveness” strategies
by helping to ensure that the public gets the most “bang for its buck”
on both these fronts.
Less ballyhooed, an important additional ingredient—the full roll-out
of the Residential Free Patent Act—could also help promote inclusive
growth. Republic Act 10023 (an Act Authorizing the Issuance of Free
Patents to Residential Lands) aims to simplify and speed-up the titling
of unregistered residential lands in the Philippines. You may have
already read in the papers that no less than the Vice President and
Housing and Urban Development Coordinating Council (HUDCC) Chair Jojo
Binay is among those spearheading this effort. By facilitating the
issuance of free patents on residential lands to qualified claimants,
they no longer need to go through the protracted and costly process to
gain legal rights to their properties.
Rough “guesstimates” suggest that only about half of the estimated 22
million parcels of land in the country are titled. Most of these
untitled properties are located in urban and low income settings, and
approximately 39 million Filipinos stand to benefit from the
government’s land titling program. In 2012, some 10,000 titles are set
to be distributed. This is expected to increase in the next years as the
program gains momentum.
Property rights and development
Lack of clear property rights could undermine inclusive growth in
various ways. Unclear and unenforceable rights to property could lead to
underinvestment, as the returns from any improvements and investments
could be seized by others. For low-income households, lack of access to
secure property rights compounds their lack of access to credit by
depriving them of potential collateral. This, in turn, further adds to
their poverty and insecurity. Lack of property rights could also
contribute to conflict within families and communities due to competing
land claims. Poorer families which don’t have clear property rights are
also much more vulnerable to land-grabbing and corruption in property
acquisition.
There are also broader social and economic downsides to a business
environment characterized by fragile property rights. Underinvestment in
communities could contribute to a stagnant economic environment, crime
and urban decline. Lack of (or unenforced) urban planning, due in part
to poor property rights enforcement and over-crowding, contributes to
urban decay, fire and health hazards and other threats to public safety.
Finally, untitled property is not just underutilized at the household
level, it may also be underutilized at the level of the local
government unit (LGU). LGUs also have claims to some of this untitled
property. Vast tracts of untitled property, coupled with
underinvestment, also represent a weaker tax base. Hernando de Soto, an
economist from Peru who did extensive work in this area, called all of
these untitled lands “dead capital” (i.e., capital that does not fuel
investments and growth).
Social and economic impact
While more robust impact evaluation studies on the Philippine land
titling effort are still forthcoming, international evidence on land
titling for low income communities does suggest possible positive gains.
For instance, a study of the 1993 Land Law of Vietnam which gave
households the power to exchange, transfer, lease, inherit and mortgage
their land-use rights, revealed that these additional land rights
increased the share of total area for long term crops and boosted the
amount of labor for nonfarm activities. Essentially, the security of
property rights incentivized investments and economic activity of a
longer term nature. This is good news for sustaining growth, by
encouraging investments that have long and stable pay-offs into the
future.
Similar results were observed in a study of poor urban communities in
Buenos Aires, Argentina. Low-income families that received more secure
property rights increased housing investment and enhanced the education
of their children compared to those families that did not receive more
secure property rights.
Land titling may also have an impact on gender equality and
fertility. One study in Peru examined intra-household allocation of
ownership rights and fertility focusing on a nationwide titling program
in that country. The Peruvian land titling program sought to improve
gender equality by promoting the inclusion of female names on land
titles. Land titling in that country was associated with a significant
and sharp reduction in annual birth rates among program beneficiaries.
The researchers noted that this was likely due to the improved
bargaining power of women in the household, in turn due to their
inclusion in the land title.
Nevertheless, international evidence on using land for collateral to
obtain credit is less clear. Even in the Philippines, focus group
discussions with beneficiaries suggest that they would rather hold on to
their newly titled lands rather than risk losing it to the bank.
International experience on land titling, from slums in Ahmedabad,
India, to those in Lima, Peru, reveal signs of enhanced social status
among land title recipients who could press for their rights to their
property.
A reform LGUs would love to support
Possibly the best thing about this reform is that it’s aligned with
LGUs’ goals of increasing tax revenues. (You might add that it also
doesn’t hurt that distributing land titles is a surefire way to drum up
votes.) Lack of clarity in property rights translates to weaker tax
revenues for LGUs due to weaker economic activity and diminished
property tax revenues.
If we very conservatively “guesstimate” that the average property
value for the estimated 11 million untitled parcels is about P50,000,
and if we apply a 1 percent property tax on this value, that already
translates to about P5.5 billion pesos in tax revenues for LGUs. This
amounts to about 10 percent of total internal revenue allotment (IRA) to
all Philippine cities. This figure is likely to be a gross
underestimate of the potential increase in tax revenues, and it does not
yet consider possible social and economic gains and spillover effects
from increased investments at the national and regional levels, lower
crime, conflict and hazards at the community level, and more financially
empowered property owners at the household level.
Of course, land titling alone cannot solve all the challenges of
rapid urbanization, and careful phasing and additional support for this
reform could help ensure that land titles are effectively enforced and
some risks, like gentrification, are mitigated. However, any way you
look at it, there’s a lot of dead capital that could be resurrected to
promote growth of a much more inclusive kind. These asset-related
reforms tackle some of the roots of poverty, inequality, and anemic and
unsustained economic growth in our country.
Note from MAP: “Inclusive Growth” will be extensively discussed at
the 10th MAP International CEO Conference 2012 to be held this coming
September 11, Tuesday, from 8 a.m. to 5 p.m. at the Makati Shangri-La.
The theme will be “Transformative Change: The Imperative of Inclusive
Growth.” For reservations or inquiries, please email
map@globelines.com.ph or call 751-1149 to 52 or visit
www.mapceoconference.ph.
(The article reflects the personal opinion of the author
and it does not reflect the official stand of the Management Association
of the Philippines. The author is associate professor of economics at
the Asian Institute of Management, and executive director of the AIM
Policy Center. He is a recipient of the 2012 Ten Outstanding Young
Scientists Award of the National Academy of Science and Technology.)
For latest update on real estate
development and its RA 9646, the Real Estate Service Act of 2009, visit
www.ra9646.com.
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