What is Papua New Guinea doing to reform land ownership?

 

Accelerating land reform has been a key priority in enabling socio-economic progress in Papua New Guinea, and several development programmes have been put in place to this end. Since being elected in 2019, Prime Minister James Marape and his administration have placed a particular focus on mobilising large areas of customary land for development, while also emphasising the empowerment of customary landowners.

Legal Considerations

Owing to PNG’s colonial history, the legal system recognises both English common law and customary land rights, as land ownership has historically been guided by customary traditions and passed verbally between generations. Around 97% of land in PNG was under customary ownership in 2018, with recorded land titles rare. While this type of ownership is not uncommon across the Pacific region and customary land can still be purchased or leased, it poses several challenges to real estate development. Not only must all community members agree to the title transfer, but owners may face legal difficulties in the future should the transaction be questioned.

Development

The first phase of the National Land Development Programme (NLDP) was initiated in 2005 to improve the administration of customary land, including dispute resolution. Reform has the potential to result in significant gains for the local economy: if more land was released onto the market, officials estimated at the time that nearly 700,000 jobs could be created by 2030, alongside a boost of PGK18bn ($5.3bn) to GDP if secure tenure and transparent market conditions spurred investment.

However, many aims of the first phase of the NLDP had not been met by 2018, according to a review by the National Research Institute (NRI). The report found that of the 54 recommendations made in 2006 by the National Land Development Taskforce, the overwhelming majority of these had not been implemented, despite funding allocations to numerous government and non-government entities responsible for the tasks.

The report partially attributed the lacklustre performance of the NLDP’s first phase to an institutional reluctance to push through these much-needed reforms. For instance, two of the recommendations that were eventually implemented were amendments to the Land Groups Incorporation Act of 1974 and the Land Registration Act of 1981, both of which sought to establish a legal basis for customary land groups to register land titles and enable them to lease their land to government agencies or private investors. While these amendments were passed by Parliament in 2009, implementation was delayed by three years when it reached the Department of Lands and Physical Planning (DLPP). In addition, progress was slowed by objections from interest groups, which led to the closure of a Customary Land Development Office in 2017 that had opened the previous year. Many customary landowners are hesitant to release their land for fear of exploitation and taxation, highlighting the challenges that are inherent in balancing the interests of the state, developers and customary landowners.

Resolutions

The National Land Summit held in May 2019 in Port Moresby aimed to create a policy, legal and administrative framework to regulate the mobilisation of customary land, while at the same time prioritising the interests of customary landowners. Participants at the event identified 17 key issues and created a resolution to address each of these challenges, seeking to overhaul guidance for the formalisation of customary land titles and the conversion of these titles into marketable assets. The 17 resolutions were then endorsed by the National Executive Council in September of that year.

In December 2019 Prime Minister Marape announced the allocation of PGK15m ($4.4m) per year over the subsequent five years to the second phase of the NLDP. Key goals of the second phase include the creation of a customary land development agency; review of existing customary land legislation; strengthening of the related land court system; reform of existing agencies responsible for the management of customary land; and implementation of measures to ensure the bankability of customary land titles.

Overcoming Obstacles

There has been a growing recognition of the need to move forward with land reform. In October 2019 John Rosso, the minister of lands and physical planning, announced that a land reform committee and programme management unit would be established to implement the 17 resolutions that had been endorsed in September that year. The committee’s membership will include representatives not only from the DLPP, but also from the Department of Justice, the office of the Attorney General, the Department of National Planning and Monitoring, the Department of Treasury and the NRI.

To alleviate landowner concerns, Prime Minister Marape has continued to assert that the government’s aim is not to alienate land from its traditional owners, but to ensure that land is properly titled and documented. He also maintains that the country’s land, owned by the people, is a vehicle to empower Papua New Guineans, who can use land as collateral for investment and to help sustain their livelihood.

It is also vital to ensure that the benefits of land sales can be passed on to future generations. According to some industry players, the concern with making customary land available for development is that payment will be made at the point of sale, and it is therefore the seller – the current members of the incorporated land group (ILG) – who would benefit. One proposed solution to mitigate this would be to offer any commercial properties, such as retail, fuel stations or sustainable income generation, to the ILG in the first instance, which could generate income for future generations.

Benefits

Unlocking customary land for development is needed not only to cater to the higher end of the market, but is also crucial for narrowing PNG’s affordable housing gap. The scale of the latter challenge is evidenced by the high rate of informal settlements, which were thought to contain around one-third of the country’s population as of 2010. Growing urbanisation is compounding the issue, as more settlements have appeared in the areas surrounding Port Moresby. These new communities are another barrier to the government’s aim of lowering the share of people in informal housing to 15% by 2030 (see overview).

Formalising land titles would enable the improved provision of ancillary services in these areas, including water and electricity: estimates suggest that 20-25% of the water supplied to Port Moresby is distributed to informal settlements through illegal constructions, while the authorities are working to expand PNG’s electrification rate from 13% in 2010 to 70% by 2030 (see Energy chapter). The government cannot plan for the proper installation of these essential public utilities until informal settlements are converted to formal housing. Three strata title bills, which are awaiting presentation to Parliament, could also help by enabling multiple owners to collaborate for the installation of utilities before land development commences.

Making more land available for development could benefit areas beyond Port Moresby as progress continues on large-scale projects in other sectors. For instance, easier land dealings would move along the proposed $5bn Wafi-Golpu mine in Lae in Morobe Province (see Mining chapter). Negotiations regarding the project’s mining lease are set to continue once regular business operations resume after Covid-19-related restrictions are lifted. The mine would likely see the city experience demand from workers seeking nearby accommodation. Indeed, some developers were reportedly searching for locations to build hotels and residential units in the first half of 2020.

While the improved management of customary land is likely to provide new opportunities for all parties, the country’s limited pre-existing infrastructure – including road access – could deter construction efforts. However, investor interest in large-scale projects might prove to be the impetus required to catalyse the development of related essential infrastructure. Such improved infrastructure is expected to lead to added value for local communities, as well as enable landowners to use their land as collateral.

Moreover, as additional housing calls for more land, care must be taken to ensure that it is released incrementally. Some sector stakeholders have argued that if large swaths of land were suddenly open to development, PNG’s real estate industry could become a buyer-driven market, causing the assets of real estate companies to fall. As a result, they have advised that measures are taken step by step by step.

The arrival of Covid-19 and the introduction of restrictions to mitigate the public health risk likely stalled progress to reform efforts in the second quarter of 2020. Nevertheless, the early actions taken by the Marape administration should signal some hope for landowners, for developers and for those searching for formal housing in Papua New Guinea, if sustained commitment to publicly stated goals leads to success.

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The Report: Papua New Guinea 2020

Construction & Real Estate chapter from The Report: Papua New Guinea 2020

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