Michael Kirk (1996):
Land Tenure Development and Divestiture in Lao P.D.R.

Executive Summary:

1. With its program of economic reform (NEM) starting in 1986 the Lao People’s Democratic Republic (PDR) has initiated a far-reaching transformation process in economics, politics, administration, and also, partially, in its social structure. The disagreements about desirable property regimes in general, and the land/resource tenure regime in particular constitute a cornerstone of the question of orientation towards socialist principles with central planning or towards the principles of a market economy and of decentralized decision making. Whereas the process of economic transformation in Laos is already well advanced and extensive, the State-party system and the power of the military continue to exercise a crucial influence on the direction and speed of institutional change.
2. It is the objective of this study to discuss the socioeconomic aspects of land tenure in the process of economic and political liberalization in the Lao PDR. It tries to make a contribution to the analysis and evaluation of the land tenure system in the country, in particular to the interrelated dynamics of resource tenure, divestiture and the process of privatization. It will demonstrate which direct and indirect effects the existing resource tenure regimes and tenure reforms have in a country, the wealth of which is based on its natural resources, especially in phases of transition and rapid change which is controlled in part by influential international private investors and public donors.
3. The study will present as well those constraints and difficulties which must be overcome in order to give recently formed or reformed property rights regimes an extensive legal and regulatory framework and to allow them to be effective. The restructuring of resource tenure does not only affect the willingness to invest, the factor productivity, but also the degree of acceptance of the seriousness of democratization, the participation at the village level and thus political stability in the long run. At the same time, the key function of a consistent and practicable land tenure system for agricultural soil fertility, the sustainability of forest lands and the preservation of natural resources for future generations will be dealt with in particular.
4. An overview of the transformation process in Lao PDR demonstrates pin-pointedly that the rule of the law and the previous French-influenced concept of land ownership was dismantled by the revolution in 1975 and replaced by the socialist model of an extensive set of decrees to rule the country. All the land was officially nationalized, many urban private properties owned by Laotians who fled the country were directly placed under state management. In the rural areas, the forced collectivization of agricultural production was urged on with slight success only due to the collapse of the rice production. From the 80s on, the fundamental role of family farms as the safeguard for food security was -in principle- recognized. Following the NEM policy the liberalization of price and trade policy and structural reforms started, including a new institutional and regulatory framework. The new Constitution and new laws on resource tenure were milestones in this process. At the same time economic liberalization also served the objective of holding back any political liberalization (e.g. multi-party system) and of maintaining the power and privileges of the outdated Party apparatus and bureaucracy.
5. The new land policy and resource tenure related legislation is embedded in broader development principles such as the consolidation of the macro-economic reforms, the improvement of the performance of the public sector, an improved living standard for the whole population and halting the degradation of natural resources. To achieve these objectives, the agricultural sector, including the forestry sector and water resources, will form the backbone of any future socioeconomic development in Laos. As a result of past policy failures, the performance of this sector has been poor up to the 90s. Land policy and resource tenure related legislation issues are right at the top of these failures, which led to over-exploitation, deforestation, soil-leaching and loss of biodiversity: insecure property rights and the limited implementation of already existing regulations, the inefficient use and depletion of state-owned assets; poor agricultural support services and low returns from donor-funded projects should be mentioned particularly.
6. A severe lack of individual and group incentives for the preservation of agricultural land, forests and water as well as the prevalence of State property rapidly accelerated the plundering of the production base. The uprooting of families and resettlement, all of this as an immediate result of the war, additionally aggravated this process, created strong, partly ethnic-based tensions increased the uncertainty over property rights to land and placed local customary tenure regimes under scrutiny. The local authorities lost their control over putting a stop to the clearing of land along hill slopes. The pressure grew for an entirely new conception of statutory law, a pressure which was induced more by the international donor community than by Laotian politicians and bureaucrats.
7. Accordingly, a change in the content, scope and quality of government intervention is of crucial importance for future development perspectives. Nevertheless, further serious bottlenecks will continue to exist in Lao PDR: regional differences in resource endowment and development potential, intrusion of shifting cultivators into areas susceptible to forestry and soil degradation. Conflicts in objectives as between economic growth and environmental protection or inconsistencies in the emphasis of the promotion of foreign investments, on the one hand, and due to the simultaneous existence of central and inflexible planning processes, on the other hand are to be expected.
8. The new legislation was worked out under great time pressure and is constantly remodified or completely repealed. Thus, observers criticize an incoordinated proliferation of laws, decrees, etc. giving rise to inconsistency, overlapping, and confusion between the involved organizations. Nevertheless working out a new land, water and forest legislation within a few years and starting with its implementation at the local level was enormous achievement. In important parts, the current resource-related legal framework is already of high consistency and has a "package"-character as its major elements reinforce each other.
9. The new legal and regulatory framework has to do justice to the complex bundle of development objectives of the State and those of international donors: the provision of secure, tradable rights of use and legally enforceable titles for selected land categories, of incentives for individuals as well as for communities or village groups; the guarantee that land can be used as a collateral; a completely changed role of the Government which emphasizes local land use planning; to ensure that the benefits of more efficient land markets are equitably shared within society and, more important than ever, a reasonable consideration of the complex customary rights.
10. Fundamental guiding principles and norms are enshrined in the Constitution of 1991, the Property Law, the Land Decree, the Decree on the Use of Forests and Forest Lands and the Decree regarding the Allocation of Land and Forest Lands. Not only individual but also communal rights to agricultural lands and forests are set down, the role of the private sector is strengthened. Step by step the decrees, which have been quite a flexible instrument for the administration but which created planning uncertainty as well, are replaced by laws.
11. The Constitution explicitly protects private property rights and foreign investments, but it remains consciously ambivalent with regard to the extent of state property. The laws which were first promulgated in the transition process such as the Property Law underline very much the role of the state in and are still strongly marked by the old socialist model of society. Nevertheless, both acknowledge in principle that differing natural resources with varying spatial expanses and yield potentials have to be managed and administered through various resource tenure regimes (private, communal, state ownership).
12. The basic Land Decree codifies long-lasting negotiable land use rights for the rural population and extensive rights to transfer land permanently or temporarily (inheritance, lease, sale). It guarantees land titles for individuals and thus creates preconditions to overcome the hitherto strongly fragmented land markets. This nation-wide standardization brings up the complex problems of the stripping of customary land rights. Whereas neoliberal economists criticize it because of the still strong position of state ownership it is seen by other critical observers mainly as an instrument to ease foreign investment in Lao PDR, with the danger of extensive land purchases by foreign entrepreneurs and land speculation in (peri-)urban areas.
13. As in other countries in transition the core problem of restitution of landownership for those who abandoned their land for political reasons after 1975 is still unresolved. The land legislation remains ambiguous in its message; lengthy court cases can be expected and trust in the rule of the law remains fragile and jeopardizes the successful completion of the transformation process.
14. The Decree on Land Tax not only regulates the calculation and levying of the land tax, but also defines various land categories for land use policy. Actually, it is used as a very coarse instrument for land valuation and initiated a nation-wide land survey.
15. The Decree on the Management and Use of Forests and Forest Land (Decree 169) will play a key role in future resource legislation. For the first time, it allows the participation of the local population in land allocation, recognizes customary communal rights explicitly and offers a broad range of contractual arrangements for resource utilization and conflict resolution between stakeholders. Undoubtedly, it reflects very much the concepts of international donors regarding desirable land tenure regime and land use patterns. Its implementation is pushed forward but is still in a nascent stage. (Water and environmental laws, including the protection of biodiversity, are in preparation.)
16. Thus, the enormous achievements with the build-up of a new legal framework are indisputable; criticisms and disputes also continue: between Laotian politicians and national and international environmental and human rights groups about the speed, the direction of the process and the future state influence. Legal experts complain about the indiscriminate borrowing of legal terms and ideals from foreign cultures (private ownership, collateral); administrators see a flood of regulatory details and miss others and project managers fear that implementation and coordination will be too much for the local authorities. Thus, a further systematizing of the legislation is still necessary and a practicable implementation at the grass-root level is not yet secured. The enforcement of the new rights and obligations at all levels will be another crucial problem in the future.
17. The whole legislation can only be put into practice when an independent judiciary is workable and alternative arbitration authorities at the local level are recognized. Up to now, the conflicting parties have no trust in a former "socialist" judiciary; numerous court cases involving problems of land ownership are pending; courts of first instance in the countryside are lacking, the training of independent judges is insufficient, and the work of lawyers is weakened as long as no legal bar exists.
18. The legal and regulatory framework is only workable when further statutory laws make land rights valid, ensure their transfer and completely integrate land matters in a broader social and economic context. Parts of the new legislation such as the Contract Law are marked by over-regulation and a keenness for detail on the part of former omnipotent state machinery. Besides, part of the legislation was, however, reformed in a painful learning process in which international donors and the business world doubtlessly exercised influence. The Foreign Investment Law fully protects foreign investors’ assets, allows for long-term land leases and tax exemptions.
19. The Family Law and the Law on Inheritance establish valid, nation-wide rules for property relations between married couples and set out the rules for the inheritance of land. It has not yet been made clear, in how far the generally recognized customary family code to settle conflicts, which has existed for centuries, will get into conflict with the statutory law or which role both will be allowed to play in the future in rural or in urban areas.
20. Land titling and the recording of land are still controversial issues in Lao PDR. Land registration constitutes a cornerstone for any comprehensive and consistent land management and administration policy, including functioning land markets. At present a - de jure - standardized land titling system for securing private property rights to land (mainly in urban and peri-urban areas) is being developed parallel to another system of more informal land recording for tax purposes which is mainly applied in rural areas. Although detailed instructions for the local level have already been elaborated for the pilot land titling project of the World Bank, so far, hardly any practical experience has been made in land registration.
21. There remains a basic criticism of the general ideas of country-wide registration put forward by development practitioners, donors, NGOs, environmental organizations and human rights activists: against the World Bank which exclusively pursues allocation objectives and is neglecting, temporarily at least, the negative distribution effects of income and wealth. The eligibility for land registration raises the question about the status of the Laotians who fled the country. The program is oriented towards the partially foreign concept of individual private ownership; communal customary rights remain extensively unattended. The same is true regarding women’s access to registered land. As long as land is surveyed for land tax purposes as well, a considerable ambiguity and lack of coordination between the roles and responsibilities of different government agencies continue to prevail.
22. A functional and flexible land administration is an essential precondition to implement the new legislation locally and to enforce it. In spite of endeavors to apply a decentralization policy, the existing administrative system represents a serious bottleneck in the successful dismantling of the state at the local level. This is reinforced by a weak communication network between the local, provincial and the central administration. The rapid economic change has given the administration additional areas of responsibility and put them permanently under pressure to make decisions. The strain and workload are increased by the high expectations of the international donors. These new challenges are difficult to be meet, considering the state of training of the Laotian staff. They can easily lead to inaction, considerably delayed action through fear of sanction or to making wrong decisions. The letter and the spirit of the recently created legal framework thus remains unfilled in daily practice.
23. New demands for government institutions are also the consequence of the breakdown of the traditional village resource management systems in some areas in the socialist phase. Besides, customary tenure and management systems have continued to vest local communities with an important role in the management of land, water and forests in regions with difficult access from outside and where customary rights survived socialism. In the process of transformation, only little consideration has been given to cultural diversity and customary rights, especially by logging and hydropower companies. International NGOs and donors formed a countervailing power in pointing out the resulting high social (and economic) costs of wiping out or suppressing customary rights for resource protection and conflict resolution at the local level suing the redrafting of planned legislation in favor of women and other holders of secondary rights (animal holders, gatherers).
24. Attempts to integrate customary rights in resource legislation by an Order on Customary Rights, a missing link between statutory law, customary regulations and land use patterns, was controversially discussed in 1995. Instead of adding new layers of legislation, the strengthening and improvement of existing decrees may be more effective for the protection of customary rights, resource preservation and the respect of gender-related problems in the access to land and its use.
25. Especially where customary rights and statutory law come face to face, the situation for women is quite complicated in Lao PDR. Women in rural areas do not fully grasp the male dominated practice of land registration, but they realize more and more that, in cases of divorce, the ownership title of land is an important matter of security for the future. Although the new legislation explicitly deals with gender relations concerning rights to assets and inheritance rules, the question remains open as to how far this claim is enforceable for women. Women, for example, hardly have a chance at present of getting a hearing in court and suing for their rights or to get formal credits.
26. In an agrarian society such as that of Laos, the interaction between access to land, guiding land tenure regimes and the conditions of land use will remain essential. The alteration of land use conditions away from an extensive, low input, low output system towards intensification through the opening of new areas for irrigated cropping and (a still low level of) agricultural technical progress have effects on property rights in favor of individualization and privatization of land. Fueled by nascent land markets, the rate of land conversion is already increasing, especially in the vicinity of towns. Now, land is being sold to town dwellers, a phenomenon which was hitherto unknown in the country. As a consequence, intra-village conflicts and small-scale enclosure movements are occurring increasingly as in the case of village pastures.
27. The Laotian State attaches great importance to the restrengthening of functioning land markets. This did not happen without pressure from influential interest groups. Resolving the problem of landownership is seen as an important indicator of the seriousness and desire of the state to make reforms; the existing informal "gray" land market with its high premium on risks should be dried out. An effective demand for functioning land markets comes mainly from private investors returning to their home country, from the bank sector which demands credit security through state-guaranteed titles and from international donors, led on by the World Bank, who look upon secure private property rights as a precondition for extensive, long-term financial commitments.
28. The actual quantitative weight of land markets is difficult to assess, but there are indicators of vivid, but still inefficient land markets: residential land is mostly sold at a cash basis, but there is inevitably a prevalence of illegal sale and lending as a large number of pending court cases reflects. The pressing question arises in how far the mass of rural smallholders is able to raise its voice in this economic and political bargaining process on land. For them the advantages and risks of land markets have not yet been made clear "from above". They are scarcely able to exert a direct influence on the process of legislation and have to rely on NGOs as their speakers.
29. Urban land markets are fragmented due to the loss of registers, nationalization and only partial restitution to former owners. Land transactions are connected with additional risks, since acquired rights cannot easily be sued for in court in land conflict cases. Although it is the prior objective of land policy to organize the blooming land market, it is illusory to assume that the Lao state will accept a free, unregulated land market in the future for fear of land accumulation, land grabbing and speculation and concentration of power.
30. In peri-urban areas people also sell, lease and mortgage land in ever-increasing amounts; prices have increased enormously. This includes sales of agricultural land to urban-based groups. Together with a narrow segment of dynamic agricultural entrepreneurs, they have the strongest impact on land markets. In addition to being sold, land is also increasingly leased, thus developing informal rental markets, including sharecropping. Rural land is sold and rented as well, although detailed data are scarce. There, traditional villages authorities still hold a strong position in land transfers. In general, there is undoubtedly an effective demand for efficiently operating land markets through influential interest groups. What is hardly discussed within this context are the distributional effects which can be expected when free land markets assert themselves in a hitherto very egalitarian agrarian society.
31. A multitude of interest groups work in Lao PDR as potentially important players in shaping the nature and the pace of reforms in the country’s land policy and administration. Although the impact of domestic actors, as the "old guard" of the State Party, military people, the administration, only partly smallholders and village communities is strong, international actors such as international capital, multilateral and bilateral donors and international NGOs still have an overwhelming influence. Their work is a blessing and a curse as well. They are not only trying to push through basic civil rights, a division of power, the rule of law but also to build up and to implement a consistent legal framework for land allocation and management.
32. National and international pressure groups were quite successful in building up free markets and unhindered entrepreneurship, whereas NGO’s have achieved a lot as lawyers for peasants, women, indigenous people, ethnic minorities in the discussion on customary rights, gender issues and biodiversity. Forming a coalition between former powerful party functionaries, the military and private investors must be judged critically, since this coalition opened up rent-seeking and an increased competition for scarce resources. The mushrooming of interest groups has led to enormous internal coordination problems, whose result has been blockages, for instance in the legislation process, up to the point of a stalemate. One can rarely rid oneself of the impression that the extensive interest groups activities have turned the State, in particular the line ministries, into dependent marionettes for their interests.
33. In the phase of transition and strong impact of pressure groups, land conflicts are increasing. Other reasons are the uprooting of the rural population, migration and resettlement in wartime, restitution claims, land scarcity due to population growth or land conversion. They all act within the tense situation created by incompletely implemented and not yet accepted land legislation and by broken down customary institutions. Reported conflicts include at the local level, those between returning families and those villagers who had occupied their land, between different ethnic groups and already between squatters and landholders. every attempt is made at all levels to satisfy parties in conflict over natural resources, first of all by means of negotiation and compromise through village authorities, whose capacity for conflict resolution is still considered to be great.
34. With the implementation and the enforcement of the new resource legislation, new conflicts arise, e.g. between neighboring villages about boundaries, details of land use planning or the correct registration of plots. The local population and commercial logging companies quarrel on the terms of reforestation contracts and with hydropower enterprises about compulsory settlement for the villages. The unresolved restitution of dispossessed land remains a central field of conflict in the Laotian society. Here as well, all parties have tried so far to resolve conflicts at all levels outside the formal court system wherever possible.
35. International donors are dominant in the transformation process. Are they catalysts for resource tenure development or shadow governments? After an extensive exertion of influence on resource legislation, they often see themselves forced into a successful continuation of their policies and having to replace the lacking implementation capacity of the state or the lack of access to local self-help groups with their own structure. Thus, they run the risk of building up long-term parallel structures.
36. Among the international donors the World Bank and the IMF have guided and driven the economic transformation in Lao PDR and materialized their vision of a private land tenure regime, which influenced, or even restricted, all other donors. Some of the bilateral donors are working to implement the legal and regulatory framework for resource tenure and to help to create tenure security. Besides their own technical projects, some work as implementation agencies for World Bank programmes (land titling) (AusAid, Finida), others do lobby work in "their" divisions to have an influence - within limits at least - on the forest, water, land and environmental legislation (e.g. GTZ funded NAWACOP project). There is still a deficit of coordination of guidelines, objectives, instruments and activities between donors. In the medium term, a far greater flexibility and openness is necessary amongst them to strengthen Laos’ ability to deal with "its" donors and to make them in part superfluous.
37. NGOs have had a solid and sometimes very successful influence on the reformation of the statutory resource legislation and the land administration, relying on topic-specific networks and alliances and on the expertise of international environmental NGOs. They often were the only ones to give information on the living conditions in remote villages, on local land conflicts, internal migration, the strong role of women. The culture of the public debate about controversial land tenure issues (customary rights, gender) and of a custodianship for securing the property rights of smallholders, forest users, women, etc. was developed by them, including open letters, sharp internal statements and insistence on environmental impact assessment.
38. Evaluating the experiences, what are the recommendations for future development cooperation? Land tenure arrangements belong to a society’s most intimate institutions. In addition, development cooperation in the field of land/resource tenure automatically always gives external support to changes of internal political, legal and administrative framework conditions in partner countries. One possible field of action is a policy dialogue, which can make the following contributions: increase the awareness of existing and emerging resource tenure problems, analyze comparable experiences in neighboring countries, clarify future problem areas, initiate broad discussions on the future of land and agriculture in a country, demonstrate alternative policy options, take a very informal influence on the process of legislation and its implementation, act as a lawyer for disadvantaged groups, emphasize the dialogue between international donors and build up international networks.
39. In Laos, as in other neighboring countries, there is a drastic shortage of well-trained staff from the district up to the national level. Training measures should include short and medium-term courses or training on the job for civil servants, including participatory land use planning methods and tools, GIS, methods for organizational development, etc. The advanced training of judges at all levels is highly necessary so as to enlarge the rule of law in land tenure conflicts. In the ongoing setting up of forestry and agricultural schools and colleges in the country, their curricula should pay attention to land and resource tenure issues. Further long-term training is necessary for top local experts, either on a Master level or with further academic qualifications, such as a PhD.
40. In rural areas, specific initiatives to secure property rights, to respect customary rights and to secure the participation of the local population in land demarcation, etc. within different projects or programmes are: to strengthen the implementation capacity for resource-related legislation, to assess existing property rights regimes in a project area, to secure the property rights of all actors involved, to integrate customary rights, to improve the dissemination of the new resource legislation and to encourage the participatory making of legal instruments. In urban and peri-urban areas, the dynamics of existing land markets and the pros and cons of different systems of registration should be an integral part of the project from the beginning.
41. Agencies of development cooperation have not in every case been optimally prepared for a far-reaching commitment in the area of tenure development: They have to overcome administrative barriers and to cross over divisional borders (water, forest, agricultural land, livestock, fisheries) and have - more than in the past - to accept the political embeddedness of primarily technical approaches and projects such as land titling. It must be tested each time in how far activities can be developed out of assumptions ("land policy remains unchanged") so as to politically buffer projects. The potential of joint approaches between technical and financial cooperation has not yet been realized, at least in German development cooperation.