Property is the basic building block of all business interactions that occur in our daily lives. But as a recent report from The Property Rights Alliance shows, the lack of secure property rights is holding many countries back from reaching their true economic potential.
Long before the United Nation’s enshrined it as a human right, property has been the medium through which we trade. Without the right to property, an individual is left with no means to securing the basic necessities and is left reliant on others. When property rights are secure, we have the freedom to seek innovative business opportunities. Through property rights, we are able to invest in our future, improve our circumstances, and, in turn, contribute to the growth of the market and economy in which we function.
As an extension of this human right, small businesses and entrepreneurs must have secure rights to their property. Peruvian economist and expert in the informal sector and property rights Hernando de Soto has termed the absence of such security “dead capital.” He pointed out that even though a business might have the physical resources such as land or a building, its hands are tied in putting it to work unless property rights to such resources are well established and secure. When such assurances are absent, businesses and individuals are forced to operate in the informal sector, costing all parties in potential revenues in the forms of taxes and the subsequent services from the state.
As we have seen through countless studies and recent articles, property rights go hand in hand with the development of families, communities, and nations – especially women’s ownership. When women own their property, they invest more in food, education, and the security of the next generation. Yet, in many places around the world today, property rights are under siege and women’s property rights are not guaranteed because of inheritance laws or through outright gendered policies favoring men.
It is within this context that The Property Rights Alliance released its 2013 International Property Rights Index (IPRI). The IPRI report is an annual evaluation of 131 nations on their performance in property rights in four categories: overall property rights, the legal and political environment, physical property rights, and intellectual property rights. The IPRI report demonstrates the connection between a nation’s property rights and its economic development. In this year’s Index, Finland receives the highest overall score of 8.6 (out of 10), while Yemen is ranked last at number 131.
By Xingyuan Feng, Christer Ljungwall, and Yeliang Xia
This article originally appeared in the 2013 International Property Rights Index report, a project of the Property Rights Alliance.
In 2010, China became the world’s second largest economy in terms of GDP and joined the list of middle-income economies with a per-capita GDP of USD 5,432 and 6,100 in 2011 and 2012. However, a number of political, economic and social problems have created a bottleneck in maintaining sustainable economic growth. As has been seen in many other middle-income economies, this can result in a “middle-income trap”. To escape this “trap”, China must work to improve the efficiency of production factors to maintain high economic growth over an extended period of time. This is a necessary step for any country that ultimately wishes to move into the high-income bracket.
A public-private dialogue session with President Macky Sall in Senegal. CIPE partners organize such sessions in countries around the world.
In a webinar on July 11, Elias M. Dewah, former Executive Director of the Botswana Confederation of Commerce, Industry, and Manpower (BOCCIM), and other panelists shared prominent lessons from their experience with public-private dialogue initiatives in Africa and Eastern Europe and the Caucasus. Here are some of the highlights, addressed to private sector participants in advocacy.
- Be consistent and persistent in advocacy and dialogue to overcome government inertia.
- Remain independent from government but work with officials in an advocacy capacity.
- Be proactive and constructive. Don’t just criticize but offer alternative policy solutions.
- Come to the table with well-researched evidence. Link up with independent think tanks as needed.
- Be representative and inclusive of various sectors, not just a few elite businesses.
- Speak with one voice at all times.
- Move from issues involving transactions to systemic change.
- Make use of existing legal frameworks that provide for transparency and consultation.
- Find the most effective point of engagement in the legislative process – this could be in the drafting stage.
- Evaluate the impact. Look beyond dialogue processes at what is actually achieved.
A steady stream of rural workers coming into urban areas has fueled China’s rapid economic rise. Yet, these migrants remain constrained in their upward social mobility by the household registration system – hukou – that assigns an individual residency status as either “rural” or “urban” and is very hard to change. As a result, some 260 million migrants – or about 20 percent of the country’s population – live as second-class citizens in their adopted cities. In the biggest cities, as much as 40 percent of the population does not have the city hukou.
In the 1950s, the Communist Party started using the ages-old hukou family tracking system to restrict population movement. The intent was to spur industrialization through the “iron rice bowl” deal: urban workers were compensated for low wages by the promise of lifetime employment, health care, pension, and education for their children. For the system to work, rural workers had to be kept on farms to supply cities with cheap food.
Many now recognize hukou as unjust and an obstacle to China’s further development, and the government is contemplating reform. For the time being migrant workers still lack the status of permanent urban residents and the access to public services that city residents enjoy. This, in turn, makes just paying rent a struggle and creates high demand for affordable housing.
Enterprising farmers on the outskirts of fast-growing cities took notice. They started renting or selling their houses to migrants and building new ones. In some cases the entire villages invested in such developments – which include not just housing but also small factories, shops, and hotels. The owners received certificates of “ownership” (actually a limited land use right that can’t be sold, inherited, or mortgaged) recognized by their rural collectives. But when cities expand, these so-called “small titles” have no outside legal standing. The owners are supposed to be fairly compensated for expropriation but that rarely happens given the incentive structure: city governments have a monopoly on buying rural land and converting it into urban land by reselling to commercial property developers at a considerable financial gain.
The central and city governments maintain that construction and sale of “small title” properties are illegal. Yet for decades they were tolerated or even encouraged by local governments to facilitate their land take as “sideline payments” or accommodate migrant workers or lower-income city residents. Once urban land prices exploded, and following the 1994 fiscal reform that centralized fiscal revenue and put more pressure to raise revenue on local governments, the incentives changed. Not surprisingly, though, the central government’s efforts to remove “small title” properties and re-develop the land are encountering strong local resistance. In fact, conflict over land accounts for 65 percent of the more than 180,000 mass protests occurring in China annually.
President Benigno Aquino III with “Team PNoy” candidates (Photo: Yahoo)
The recent mid-term elections in the Philippines brought both change and continuity. At stake were 12 of the 24 senate seats, 229 district seats in the House of Representatives, and more than 18,000 local posts, including mayors and governors. President Benigno S. Aquino III and his political allies, Team PNoy, gained important wins, notably in the Senate. This augurs well for the advancement of the President’s anti-corruption and economic growth program of the “straight path” or “tuwid na daan.” Many credit these policies for the March upgrade of the country’s sovereign borrower rating to an investment grade by Fitch for the first time in history. But is the top-level commitment to make government more effective through good governance and economic reforms enough to affect change on the ground? The peculiar kind of continuity in Philippine politics poses that question.
The election results indicate that, as in the past, the biggest winners were the political dynasties and their often questionable tactics involving “guns, goons, gold, and glitter” to mobilize voters. There were, however, some significant upsets by candidates who ran on a good governance platform and won against entrenched political dynasties. Leni Robredo’s win of the congressional seat in Naga City ended the 35 year reign of the Villafuertes family, and Rolen Paulino’s mayoral win against Anne Marie Gordon in Olongapo City ended the quarter-century rule of the Gordon family. But many other dynasties still continue to dominate.
Just 29% of Shanghai’s college graduates had jobs on graduation.(Photo: Wikimedia Commons)
This week marks another anniversary of the 1989 Tiananmen Square protests, which were brutally suppressed by the Chinese government. Not surprisingly there isn’t much talk on the subject in China, where search terms such as “June 4,″ “Tiananmen,” or even “uprising” censored on China’s Twitter equivalent, Sina Weibo. One factor contributing to the atmosphere of forced silence is the fact that about 500 million of China’s billion-plus population is under 25 years of age, i.e. born after 1989. Most of them simply don’t know what happened and are preoccupied with more immediate concerns such as finding a job, which is becoming harder and harder for young college graduates.
What is Asian development going to look like in the near future? Given that China remains the region’s leading giant, and one of its fastest-growing economies, the challenges for the new Chinese leadership have became the focal point of recent discussions on this topic.