Tim Curtin

Visiting Fellow, National Centre for Development Studies

Australian National University

Introduction

This chapter sets out the case for establishing individual land ownership in Papua New Guinea. After distinguishing the differences between that and PNG’s existing system of communal land ownership, the chapter examines the claims that the latter has not held back economic development. The chapter shows that output of those of PNG’s exported cash crops that are mainly produced by smallholders using communal land has not kept pace with population growth, and that production of food has at best grown no more rapidly than the population. The chapter cites experience in other countries that indicates land reform can be successful in raising productivity in the rural economy, and provides evidence indicating that tenure issues do much to explain the very low level of bank lending to agriculture in PNG. A concluding section makes some suggestions for how a land reform programme could be managed in Papua New Guinea in such a way as to win the support of most of the country’s people. 

Land ownership in Papua New Guinea

Almost all Papua New Guineans claim to be landowners, and indeed they are, but only collectively, since they may not as individuals freely buy, sell or otherwise dispose of their land. There is a clear difference, all too often overlooked by some anthropologists, between say buying, owning, and, when one chooses, selling a car, without reference to third parties, and “owning” land that one has not bought and may not sell. There is no doubt that landowners in PNG may have some rights of ownership, extending to entitlements to build homes and to the output from identified trees and gardens, but those rights generally do not extend to disposal of existing, or purchase of new, trees and gardens. Moreover merely registering customary land holdings does not of itself create individual tenure, by which in this chapter is meant the right to buy and sell land like any other commodity.

(individual land ownership) confers a number of definite rights: principally the right to use the land, the right to exclude others from its use and enjoyment; the right to transfer it by sale, lease, or gift; and, perhaps most notably the right to receive income from the property independent of use. This particular combination of rights – use, exclusion, alienation, and income – does not occur in any Papua New Guinea society.

‘Anthropologetics’ of Communal Land Tenure

Some – but by no means all – anthropologists and other social scientists are staunch defenders of the belief that communal land tenure is compatible with economic development. Thus although Hartmut Holzknecht (1999, p.141) correctly states that only some 3% of PNG’s land area has been alienated from customary owners to the State, he is wrong to add that “the unequivocal corollary of this is that some 97% of the land area and resources are currently held in private hands (sic)” (my italics). The fallacy is clear from Holzknecht’s further comment that “development of any kind cannot proceed without the explicit approval of the customary owners…through decisions made by customary corporate groups”. That requirement to obtain collective consent to any development from groups, rather than from private individuals acting independently of each other, is the crux of the land issue in Papua New Guinea.

Ironically, in 2000 every single Papua New Guinean man, woman, and child could have been allocated title to 8.8 hectares, for Papua New Guinea has a land area of over 452,000 sq. kilometres, not to mention its very large oceanic area between and beyond its hundreds of islands, and a population in 2000 of just over 5.1 million. This implies a crude population density of about 11 persons per sq.km. (i.e. per 100 hectares), up from 6.5 in 1980, but still very low compared with Indonesia’s 114, if not with Australia’s 2. To be sure, much of PNG’s terrain is mountainous and some coastal areas of the mainland are swampy, but compared with say Afghanistan, with its 27 million people in 640,000 sq.km. of equally rugged but arid mountains (a density of 40 per 100 hectares, i.e. 2.5 hectares of desert per person), PNG’s land endowment cannot be considered either small or ill-favoured. Indeed, with the average family household comprising 5-6 persons, the land availability per household is about 45-50 hectares, almost all of it well wooded, with large potential for expansion of tree crop production, many unexploited arable areas that are also suitable for intensive livestock production, and all generally within relatively short distances of clean running water, although that becomes problematic in (the relatively infrequent) drought years[1]. 

Yet despite the evident plentiful availability of land per se, almost none of it is available for purchase for agricultural, commercial, or residential purposes, and there is as a result a serious shortage of land (Ploeg, 1999). One potent sign of PNG’s land scarcity is the extraordinary absence across the country of both modern housing in general, except in the towns, and of large-scale tourist resorts in particular. 

The low levels of mortgage financing for homes in PNG are discussed below. In the case of tourism, while PNG’s long southern coastlines face part of the Great Barrier Reef, and other similar reefs with world-renowned diving possibilities, there is but a single tourist resort (Loloata Island) that exploits this resource, in contrast to both the hundreds on the other side of the reef in northern Queensland and to the dozen or tourist resorts that have been developed on PNG’s northern coast and the New Guinea islands, where there is access to alienated land, mostly on former copra plantations. Self-evidently, PNG’s southern coastline provides little access to the credit secured against title that is usually necessary to develop the infrastructure for tourism.

The lack of development of PNG’s tourist potential, which is as great in the highlands as along the coastline, results in total annual inflows of foreign visitors (including business visitors) of less than 40,000, compared with Kenya’s 500,000 or Australia’s 2.5 million. Tourist resorts are labour intensive, create markets for local farm produce, and provide income opportunities for cultural groups.

But of more immediate importance perhaps, if land ownership were clearly demarcated, it would greatly facilitate both the development of PNG’s still largely untapped mineral resources and the more equitable distribution of the royalties and compensation payments required of the developers. Disputes between putative landowners - many of whom were new arrivals in the project areas whose claims could not easily be contested by residents who had no evidence to support their own claims- helped to delay some projects (e.g. the Gobe and Moran oilfields) and prevent others (Mount Kare goldfield) (Filer, 1997; Ballard 1997, p.55).

Holzknecht (1999: 144) excuses the opposition to land reform by contending that “it cannot be overemphasized how important land is for individual and group identity, survival, continuity, security, and well-being in PNG: to be landless is to be a person without roots, without merit, unpredictable, and undependable, a tripman” (Pidgin for a drifter). Yet whatever the psychic and cultural benefits Papua New Guineans derive from their land, there is no doubt that the income it yields them under present arrangements is not impressive and is indeed falling, certainly in terms of cash incomes from crops like copra, cocoa and coffee, and quite possibly also in terms of food consumption per head. 

Agricultural Performance of Communal Landowners in Papua New Guinea

That is certainly not the case in and around the great oil palm plantations in New Ireland, West New Britain, Milne Bay, and Oro Provinces. The casual visitor to these can hardly fail to be impressed by the evident prosperity of the neighbouring villages, based not only on supply of labour to the estates, although much of that tends to be from other parts of the country/province, but on their own production of oil palm and on the general economic activity underpinned by the estates. 

It is also suggestive that oil palm is the only tree crop to have increased output consistently faster than the population growth rate (Fig.1B). But two-thirds of PNG’s palm oil is grown by foreign companies (3 British, one Malaysian, one Belgian) on alienated land, and the balance by smallholders – and many of these, notably in West New Britain, also own their land. There are some small-scale outgrowers working customary land and supplying fresh fruit bunches to the estates’ mills in Milne Bay, Oro, West New Britain, and New Ireland, but they depend heavily on the estates for a range of services as well as access to mills which are of course all on alienated land, and their productivity even so falls well short of the nucleus estates’, by as much as four times in the case of Milne Bay (Koczberski et al. 2002: 21). The five estates mostly occupy land alienated for copra or cocoa estates during the German and British colonial periods, i.e. pre-1914. 

Believers in the development potential of customary land have yet to explain why there has been no attempt by its “owners” to organise palm oil production in other feasible areas (e.g. East New Britain, East Sepik and Madang). They could build their own milling facilities, perhaps using the incorporated land groups (“ILG”) offered by Holzknecht as an alternative to land alienation, to raise finance, but as explained by Lea (2001), such groups may well fare no better than individuals offering only their customary land rights as collateral to banks (see below). Moreover Henao (2001) has documented how all too often as many as five ILGs claim to have title to the same land.

Similarly, PNG’s landowners have failed to develop their livestock resources to their full potential. Hide (2002:19,84) has documented the low productivity of the country’s pig industry, citing Gibson and Rozelle (1998:19) who estimated a rural production figure of 60,000 tonnes a year in 1996, from a total stock of about 1.8 million animals, valued at K243 million. This does not compare well with Australia’s annual output of 370,000 tonnes p.a. from a total stock of 2.6 million animals in 1999 valued at K1.4 billion Kina (ABS 2001: 641-3). 

Logging is the only other of PNG’s primary industries to have grown more rapidly than the population (Fig.1B), and then only until 1996. Since the World Bank obliged the government to impose penal taxation on log exports in 1996, logging exports have also fallen like exports of all other crops apart from palm oil (Hunt 2002). As with oil palm, it is foreign companies, mostly Japanese and Malaysian, which play the leading role. These companies operate under licences issued by the Government, nominally with the approval of, or in association with, local “landowners”. The licences are a form of lease, but do not constitute transfer of ownership of the logging areas, and that in itself is enough to inhibit the loggers from replanting trees whose useful life would only emerge after their licences expired. 

Various reports (for citations see Holzknecht, 1999, p.147) have revealed the extent of malpractice in the logging industry, beginning with the bribing of successive Ministers for Forestry and their departmental heads to secure licences, through breaches of permit conditions and transfer pricing to avoid PNG taxes, to exceeding sustainable cuts, and “persistent manipulation of resource owners (sic)”. Holzknecht’s final point should have undermined his faith in customary land tenure, since the history of logging in PNG is one of failure by the putative owners of the resource to establish their rights and secure an equitable distribution of the industry’s profits, because of their inability to prove their title to any given area (Filer,1997).

In short, the problem has been that the “resource owners” have had no proof of their own ownership rights, so that the logging companies were free to treat with a range of so-called landowner companies that had no legal title but represented themselves as the “resource owners”, when in reality they were no more than the satraps of local politicians: “agreements about access to resources were made behind closed doors, with very little if any broad consultation with the majority of resource owners, (and the landowner companies) inevitably side with the loggers against their own people” (Holzknecht, 1997b, p.98; 1999, p.149). As a result the royalties and other devolved benefits due from the licensees do not reach the customary residents of the affected areas who are the putative “landowners”.

Another indicator of the poor development outcomes in PNG’s logging industry is a tendency for population growth to be slower in the main logging areas than it is in the census districts where mines or oil palm estates operate on alienated land. Western Province is a case in point, with the fastest population growth in the North Fly district that hosts the Ok Tedi mine, and the slowest in the Middle and South Fly Districts where the loggers have moved in. Similarly in West Sepik, where the only significant commercial activity is a large logging project, population growth since 1980 is well below the national average (NSO, 2001). In the absence of title or long-term leases, loggers there have had little incentive to replant logged-out areas with the plantation timber that is necessary to sustain the large-scale capital investment needed to establish a timber processing industry with its significant labour requirements. By contrast PNG’s until recently only plantation and timber processing industry, in Bulolo, largely accounts for the growing density of population in the Bulolo valley.

Food Production of Communal Landowners in Papua New Guinea

The limitations of subsistence food production are illustrated by the Western Highlands survey: some hundreds of families in each district were asked in 1982/3 what they had eaten the previous day: in a typical district 97 per cent reported eating sweet potato, 15 per cent banana, 5 per cent taro, 2 per cent cassava, 2 per cent fish, and 24 per cent ate rice (Hide et al., 1995, p.25). All except the rice was grown locally. Apparently no meats or poultry were consumed, and apart from pork, reserved for special feasts, virtually none is produced. 

Duncan and Temu suggested (1995, p.37) that the value of subsistence production in the national accounts is under-estimated, for example, at only K396 million in 1989, and that it is likely to contribute more than half of agriculture’s share of GDP. Gibson and Rozelle confirm this view by indicating a value of total rural household food production of K1.3 billion in 1995 (1998, p.19). But that apparently large amount reduces to only K362 per person of PNG’s rural population in 1995, i.e. less than one Kina per person per day (equal to US$0.70 in 1995, and less than the US$1.00 per person per day considered by the World Bank to be the bare minimum for survival). 

It should however be noted that such per capita data, which averages total production over the rural population as a whole, conceals considerable variations. Compensation paid to some of the landowners in the Porgera Valley by the mining company varied from K15,000 per hectare for unimproved bush to K35,000 per hectare for land under active cultivation with many improvements, at a time when the Kina was nominally worth slightly more than US$1.00 (Burton, 1997, p.123). The latter figure implies an annual income of around K3,500 per hectare – but confirms Hernando de Soto’s vision (1999) of the underlying but unrealized wealth ofthe poor in developing countries like PNG. With security of K35,000, a titled landowner could expect to borrow as much as K100,000 if he or she envisaged projects (e.g. housing for rental to Porgera’s mineworkers, pumps, fencing, purchase of stock) yielding enough to service that debt – see below for a discussion of the low level of bank lending for agriculture in PNG.

Part of the explanation for the minimal growth of the smallholder cash crop sector may be that it has switched much of its effort from non-food cash crops to food production for the growing population. Data to document any such trend, if it exists, is not available, other than the evidence in the 1996 Household Survey of insufficient food production to provide an adequate intake of calories by the rural population, with 42 per cent of the rural population receiving less than 2000 calories per day (Gibson, 2001, p.409). In addition there are seasonal deficiencies, like those reported in the Eastern Highlands by Muntwiler and Shelton (2001, p.439). Gibson also noted that “the risk of child stunting and chronic energy deficiencies for mothers” was twice as high in the rural areas as in the towns, and Mueller (2001, p.428) reported how satisfactory child growth was critically correlated with household cash crop production, and in that context the failure of the output of crops like cocoa and coffee to keep pace with population growth is alarming.

Thus the demonstrable poor performance of PNG’s smallholder cash crop producers has considerable implications for the future standard of living of the mass of the population, with, as noted above, output below the population growth rate of 2.7 per cent p.a. The Government’s response in the 2002 Budget is to allocate additional funding of K30 million for the coffee and copra industries, but if that funding is merely provided to the industry boards, both notorious for misappropriation of growers’ funds, it is unlikely to achieve much. 

Holzknecht argues that the existence of food production on customary land is enough “to refute economists’ claims that customary land tenure can be seen only as a severe impediment to development activities” when he mentions what he regards as the “extremely high value” of food production to supply urban markets and of cash crops like betel-nut (1999, p.146). But the only specific data he mentions is an estimate of the gross value of betel-nut production of about US$4.5 million in 1995 (then about K6.4 million) in Central, Morobe, and East New Britain provinces (the main producers). This is an important and valuable crop for the communities concerned, but after adjusting for costs, the net income from betel-nut translates to a per person figure in those provinces’ total population of perhaps K3-5. Holzknecht’s “extremely high value” of rural food production was, as noted above, estimated by Gibson at only K1.3 billion in 1995, or less than one Kina per head of the total rural population. Thus in reality the available evidence provides scant support for Holzknecht’s view that customary tenure has not prevented development of the rural economy.

It was noted above that PNG’s customary landowners have failed to respond to opportunities for growing the world’s most profitable food crop, palm oil, except where they live in proximity to a foreign estate and mill. Another possibility for these landowners is the large potential for both red and white meat production. PNG’s annual consumption of red meat (beef, sheep, and goat) has trebled over the last twenty years, growing at 6 per cent p.a., to about 52,000 tonnes of cwe (carcass weight equivalent), but almost the whole increase has had to be met by imports, amounting to 41,800 tonnes in 1998. Domestic production is dominated by commercial producers on alienated land, such as Ramu Sugar. “Expansion of red meat production would lessen import requirements and save foreign exchange” (Vincent and Low, 2000) – as well as providing gross income of K130 million (the value of imports in 1998), an amount double the estimated value of commercial betel-net production reported by Holzknecht. 

Red meat demand is mostly for sheep meat, but PNG is not well suited for sheep, despite attempts in the Eastern Highlands. Suitable areas of grassland exist to allow for much larger production of beef, but this requires bigger holdings than most smallholders have access to, and clear property rights over herds. Goats, well suited for smallholder production, are a possibility but have not been widely adopted. PNG has maintained self-sufficiency in pork production – but has evidently failed to develop commercial production sufficiently to compete with imported beef for a bigger share of the total increase in meat consumption. For as shown in Table 1, pig meat’s share of total estimated meat consumption in PNG has fallen from 53 per cent in 1980 to 20 per cent in 1998. The Table indicates the failure of PNG smallholders to respond to the significant opportunities for commercial sales from their main livestock resource.
 
 

Table 1 Meat Consumption in Papua New Guinea 1980-1998

Source: Vincent and Low (2000).

Note:Domestic production accounts for about 15-18 per cent of beef consumption; while almost all sheep meat is imported; all goat meat consumption is locally produced; PNG is self-sufficient in poultry, which was protected first by an import ban and then by prohibitive tariffs, and in pig meat. There are no estimates for production of sheep, goat, poultry, and pig meat for own (i.e. subsistence) consumption since 1980. 

Anton Ploeg offers rather different arguments against the hypothesis that “the continued existence of customary land tenure, in other words the lack of registered land rights, especially individual ownership and leasehold, is a main factor hampering growth” (1999, p.165). First he notes that the adoption of cash cropping by PNG’s subsistence farmers did not lead to any significant change in techniques, apart from the adoption of steel tools in place of tools made from sticks and stones, which continued to be based on manual labour and employed little capital: “accordingly labour productivity is restricted [and] production requires relatively much time which limits the expansion of cash cropping” (p.178). However this lack of adoption of labour saving equipment of all kinds, of which water pumps are an obvious example, that would be the norm in say Queensland or even any Australian suburban garden, is itself as much a symptom of the land tenure regime as an explanation for the continuing low productivity of PNG agriculture.

Secondly, Ploeg notes that the amount of land where individuals can have secure customary rights within their existing villages is limited, because land is parcelled out in small lots, and new lots can only be acquired at some distance from existing settlements, adding to walking time between plots (p.178). Claims on such new areas may be contested and lead to disputes, which explains the prevalence of unused land through much of PNG’s rural areas. Moreover since inheritance systems exclude primogeniture, there is a tendency towards fragmentation of existing household plots. When even some households’ larger aggregate holdings comprise many small and scattered plots, the scope for economies of scale with equipment of any kind becomes limited.

Thirdly, Ploeg emphasizes the continuing importance of ceremonial activities, which pre-empt not only labour time but also any cash derived from crops (p.179). This militates against accumulation of savings for the purposes of investment in lieu of consumption.

Clearly Ploeg (p.181) and Holzknecht (above, p.bb) are right that it is far from certain that changing land tenure would be enough to create the conditions for increasing output and productivity in PNG’s rural sector. Yet experience elsewhere, starting with Europe, but including African countries like Egypt (since 1952) and Kenya (since1955), suggests that their pessimism may be unwarranted.
 
 

Impact of Land Reform

Holzknecht recognizes (1999, p.153) that PNG’s forests are like “the commons”, i.e. the land that in Europe was not enclosed and transferred to private ownership until the second half of the last millennium, and so was in principle available to all for grazing and other purposes, leading to degradation and far lower productivity than was achieved after enclosure and alienation. The phenomenon known as ‘the tragedy of the commons’ arises when the users of common land for grazing (or in PNG’s case, for logging) have every incentive to maximize their own utilisation of the resource since they need contribute nothing to the costs of maintaining it, the end result being its ruination (Jones and McGavin, 2000, p.28).

Holzknecht discounts the role of the enclosures in raising agricultural productivity in Europe, claiming that in England it resulted only “in a flood of landless people into urban areas, thus providing cheap labour to fuel the industrial revolution” (p.154). This stereotype of the enclosure movement is far removed from reality, and ignores the huge increase in agricultural productivity, whilst “the flood of landless people” arose from the reductions in infant mortality in families settled on enclosed land, which in conjunction with primogeniture inheritance that meant younger sons had not much to hope for if they stayed at home (Armstrong 1989, p.657). 

Kenya’s land registration and titling programme was the inspiration behind the Australian government’s belated and unavailing attempts to promote land tenure reform in PNG in the years shortly before independence was granted in 1975 (Rowton Simpson et al., 1971). Prior to 1955 land tenure in Kenya had much in common with customary systems in PNG. Thereafter the colonial government combined a programme of land registration and consolidation in the customary land areas with resettlement of African farmers on former white-owned farms, and this was continued at an accelerated rate by Jomo Kenyatta’s government (1964-1977) (Hazlewood, 1979; see below). 

The outcome was an explosion of production of both old and new crops by Kenya’s formerly purely PNG-type subsistence farmers. Particularly striking was the emergence of small-scale dairy farming in the newly tenured areas, with enough milk produced to support the government’s free school milk programme in the country’s cities by the late 1970s, but this has received less attention than the large increases in Kenya’s smallholders’ production of coffee and tea. A key factor was the large provision of credit that became possible with the establishment of title (Okoth-Ogendo, 1980, 333-337). The data in Table 2 on production of coffee and tea in Kenya in the 1970s shows how smallholders accounted for a rising share of the rapid growth of coffee production in Kenya between 1964 and 1976.Smallholders dominated PNG’s coffee production by 1975, when they accounted for two-thirds of total production, but expansion since then has been slow, as implied by Fig1.A (Fleming and Anthony, 1993, p.52).

Table 2 Production of coffee and tea, Kenya and Papua New Guinea
 
 
 

‘000 tonnes	KENYA				PNG
	COFFEE		TEA		COFFEE	TEA
	S/HOLDERS	TOTAL	S/HOLDERS	TOTAL	TOTAL	TOTAL
1964	16.6	41.5
1970	30.4	58.5
1972	27.8	61.8	11.2	53.3
1974	39.3	70.2	14.4	53.4
1976	37.7	80.2	19.2	62.0	48.1	5.6
1978	N/A	95.0	N/A	87.0	45.8	7.0
1980					51.0	7.9
1985					40.6	6.6
1990					63.3	5.4
1995					55.1	4.2
2000					66.6	8.5

Sources: Hazlewood 1979; BPNG 1998, 2001

It would be wrong to imply that changing land tenure changed everything in Kenya, least of all the propensity to governmental corruption, as endemic there as in PNG. One of the emerging problems from the 1980s onwards was that unreformed inheritance laws led in practice to breaking up of the titled smallholdings to accommodate burgeoning numbers of inheritors. 

Nevertheless Kenya’s agricultural production contrasts vividly with PNG’s. In 1980 its food imports were 8 per cent of total imports, while PNG ‘s were 21 per cent. Kenya’s food and beverage exports were 44 per cent of its total exports in 1980, and 59 per cent in 1998 (latest available year); PNG’s were 23 per cent in 1980 and 23 per cent in 1999 (dropping back from 27 per cent in 1998 after the recovery in oil prices in 1999) (World Bank 1987, 2000; BPNG 2001).

Egypt’s land reform from 1952 involved breaking up large estates and providing hitherto landless peasants (“fellah”), who had previously in the main been tenant farmers, with title to their new holdings (Mabro, 1974, pp.56-63). In fact Egypt’s land reforms in the sense of moving to individual tenure had begun in the previous century, and the 1952 land redistribution was firmly based on individual title. It was accompanied by a large increase in the provision of rural credit and the development of a cooperative movement, essential when ninety per cent of holdings consisted of one hectare or less. The outcome was dramatic increases in agricultural productivity, despite the fall that might have been expected from the additional annual cropping permitted by the Aswan High Dam, with yields per hectare of most crops rising by at least 50 per cent between 1951 and 1971 (Mabro, p.81). Above all Egypt demonstrates that individual land tenure is compatible with maintaining equity, by the use of legislation limiting the maximum size of holdings, contrary to Holzknecht’s equations that customary tenure equals equity and that individual tenure equals monopolization of all land by a few (draft chapter, p.7).

Establishing a fully juridical system of land tenure in PNG, with enforcement of repossessions in case of mortgage defaults, would in all likelihood greatly increase banks’ willingness to lend, and development of cooperatives would also be helpful (they played a leading role in Kenya’s smallholder coffee sector - and in Tanzania’s until abolished by Juliuus Nyerere in the 1970s). By contrast, PNG’s commodity boards have in some cases served only to expropriate growers’ surpluses in times of high prices, and have at best been more concerned with price stabilization than with expanding their clients’ production (Fleming 2001).

Agricultural Credit in Papua New Guinea

PNG’s banks in September 2001 had liquid assets equal to 37 per cent of their lending, well above PNG’s very high legal minimum of 30 per cent – the norm in developed countries is around 8 per cent (BPNG, 2001). Were collateral available, the banks would no doubt lend more for agriculture – and the BPNG might well then be able to lower the liquidity ratio, since unlike most of the banks’ lending, loans to the rural sector would relieve the country’s balance of payment restraint, by reducing food imports and raising exports.

Mortgage Lending in Papua New Guinea

The German development agency GTZ has acted on de Soto’s ideas (2000) by sponsoring large-scale registration of illegally built homes in the largest slum in the world’s most crowded city, Egypt’s Cairo, as a first step towards upgrading both housing and infrastructure. The residents of Ezbet Bakhit will be able to buy the land they occupy, and thereby gain access to credit, as well as start paying taxes (Drummond, 2001).

David Lea (2001, p.39) has discussed the structure of the 1974 Land Groups Incorporation Act, the enabling legislation for the ILGs advocated by Holzknecht (1997a) as an alternative to individual land tenure for purposes of raising capital. Lea quotes James’ description of the Act as “lineage clothed with legal personality” and retaining key elements of the customary land system, such as “collective ownership, mass participation in the decision making processes, traditional disputes settlement philosophy, and a distribution system based on one’s interest in the land” (1985, p.50). That description almost fits a modern company or corporation, with its collective ownership by shareholders, their enfranchisement at annual meetings that appoint directors and determine profits distribution in proportion with one’s interest in the company. What the ILG lacks is the company’s liability to be bankrupted and lose its corporate assets (but not those of its shareholders) if it fails to manage them effectively. That penalty for failure provides the element of accountability that de Soto (2000, p.47) has emphasized as crucial to the development process – and that was so signally lacking in the lending operations of the Rural Development Bank as also in PNG’s rural sector as a whole. 

The unwillingness of much of rural society to contemplate the possibility of mortgage sales of estates and farms that have failed to service their debts largely explains the decision of PNG’s banks to walk away from rural lending even to formerly colonial enterprises working alienated land that are now in national hands. The Waghi Mek coffee estate was a rare success story of a landowner company able to raise large bank loans because it had title – but that success excited the envy of adjacent communal “landowners” lacking title to their own holdings who claimed possession of Wahgi Mek by force in 2000. Such actions both explain the reduction in lending to agriculture evident in Table 3 – and indicate the need for comprehensive rather than piecemeal land reform (see below). But clearly the ILG model could if adapted to accommodate the principle of limited liability of its members as primarily owners of ground rents, whilst encompassing the possibility of losing its leaseholder rights over their land, approximates to modern corporations. This was indeed broadly the concept behind the tentative proposals for land reform, put forward on behalf of the Minister for Lands by Henao (2001), which led to the student riots on the streets of Port Moresby in July 2001.
 

Table 3 Commercial Banks’ Outstanding Advances by Sector 1994-2001

	Agriculture, Forestry, Fishing	Manu- facturing	Commerce	Cons- truction	Housing	Other	Total
1994 A$M	519.1	90.5	317.7	59.8	65.2	667.0	2545.9
1994	350.5	61.1	214.5	40.4	44.0	450.4	1160.9
1995	321.4	68.5	217.7	44.2	49.8	539.8	1241.4
1996	286.8	73.5	226.9	31.1	46.7	517.1	1182.1
1997	294.3	70.5	245.1	32.2	49.3	599.8	1291.2
1998	248.0	95.4	285.4	51.7	78.0	932.7	1691.2
1999	180.5	67.5	363.8	62.8	83.6	961.2	1719.4
2000	141.0	71.9	386.2	58.2	96.2	1059.8	1813.3
2001	164.8	91.8	409.1	61.5	95.5	930.2	1752.9
2001 A$M	102.14	56.9	253.6	38.12	59.2	576.5	1086.5

Source: BPNG (Quarterly Economic Bulletin).

Notes: Data is for March, usually the month when seasonal loans to agriculture are at their peak. “Other” mostly comprises loans to other businesses, the government, and non-housing loans to individuals.

A guide to implementing land reform in Papua New Guinea

It may therefore be helpful to describe how individual land tenure was achieved elsewhere, despite all the above problems, first in 1778 in the present writer’s ancestral village of Wedmore, in Somerset, England, and secondly around 1960, in Kenya, where almost identical problems were successfully dealt with. The most important point is that contrary to the apparent belief of some of PNG’s opponents of land reform, in neither case was any person dispossessed of any part of his customary land, even if subsequently as a matter of choice the land awarded was sold or otherwise disposed of.
 

Thus in Wedmore in 1778, a large majority of the village’s customary landowners themselves applied to the Parliament in London for an Act enclosing Wedmore Moor, being the common land to the east of the village (its other surrounding moors were dealt with later).[2]The Act made a total of 258 awards of customary tenements within the Moor to some 168 individuals (some obtained more than one allotment, in accordance with their acquired customary rights) (Rose 1982, 20-26). This writer’s distant relative William Stone was one of those “allotted and awarded” full title to his “tenement” (i.e. parcel of land to which he had customary rights), as defined by survey and measuring two acres (about 0.8 hectares). The Act also allotted several tenements of two acres each to William’s brother Benjamin, his cousin Gabriel, and his aunt Mary Stone. In return for granting them title, the Act required the Stones and the other recipients of awards to maintain and keep in repair “all gates, styles, hedges, mounds, bridges, fences and watercourses” on their land (Rose, 1982, 72-74). No persons who had customary rights to any part of the Moor lost their entitlement, but they did gain the right to sell their – or buy other – allotments. The population of Wedmore at the 1801 Census, by when the enclosure process had been completed, was 2,083; but contrary to Holzknecht’s assertion noted above that the enclosures led to a decrease in rural population, the village’s population had increased by the 1851 census to 3,865 (Page et al., 1911, p.341).

The creation of individual title in Kenya was similar. Again, not only were traditional rights recognized, but in addition opportunity was taken to consolidate scattered fragments of land holdings into larger single units, and this was widely welcomed (Sorrenson, 1967, p.223). Unlike England, where the enclosures took place gradually over centuries, the process in Kenya’s highlands was completed within two decades. By 1977 92 per cent of 30 million hectares (equal to about 66 per cent of PNG’s total area) of total registrable customary land (i.e. excluding the north-eastern nomadic areas) had been registered and title granted, amounting to some 1.7 million farms, of which about half were less than one hectare (Hazlewood 1979, 34-42). As noted above, the 2000 Census indicated that PNG has about one million households, so that providing each of them with registered title would not be more difficult than in Kenya – and as in Kenya, aid donors could be asked to support the process with expertise and funding. 

A key feature of Kenya’s land reform, unlike England’s, is that it adopted South Australia’s Torrens system of 1858, whereby registration was compulsory and title was guaranteed by the State (Sorrenson, 1967, 182-183). This was done to avoid the complexities of land conveyancing in England and use of the “corrupt” local courts in Kenya.

Table 2 above provided data on the Kenyan smallholder’s contribution to production of coffee and tea. In the case of tea, the area planted increased from 5,100 hectares in 1964 to 43,600 hectares in 1976 (Hazlewood, p.45). In addition to tea and coffee, smallholders made a notable contribution to sugar production, accounting for a third of total production of 1.9 million tonnes of sugar cane in 1977 (Hazlewood, p.45). By contrast, although sugar cane is native to the country, smallholders scarcely contribute at all to PNG’s commercial sugar-cane production, which is confined to a single estate that produces less than a quarter of Kenya’s output.

SUMMARY AND CONCLUSIONS

Holzknecht and Ploeg amongst others argue that there is no economic necessity for PNG to change its traditional forms of land tenure to modern forms based on alienation, “and making land a commodity to be bought and sold” (Holzknecht, 1999, p.141), “because a high percentage of coffee, cocoa, copra exported from PNG comes from smallholders working on their customary land” (Holzknecht 2002: p.x). The failure shown above of those smallholders to expand output in line with the growth of population is nevertheless prima facie evidence of a case for land reform, evidence that is supported by Holzknecht’s assessment that“some 93% of the poor live in rural areas, where over 41% of the population live below the poverty line” (p. y). Holzknecht’s further comments that “large [sic] tonnages of garden greens and other vegetables - and certainly not all traditional crops – are sold in markets around the country”, and that “the betel-nut market around PNG is likely the highest value annual crop for which there has been developed a most sophisticated marketing network across PNG all without any assistance from the state or from international donors” (p.z), were shown above to be based on inadequate interpretation of the data, as well as being inconsistent with his recognition of the depth of poverty in PNG’s rural areas.

The experiences noted above of land reform in countries as diverse as England, Egypt, and Kenya suggest the potential benefits available in PNG. In particular, the expansion of Kenya’s smallholder production of coffee and tea if replicated in PNG could well have more than doubled the cash incomes of the latter’s smallholders in its highlands. The similar apparent inability of PNG’s customary landowners to respond to the opportunities for cash production of sugar cane and red and white meats also suggests that the problem may lie in land tenure.

Land reform of itself cannot solve all the problems of development, but it has been part and parcel of success in so many countries in the rest of the world that it deserves a chance in Papua New Guinea.
 

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