Simplifying land allocation process proves complex in Papua New Guinea

 

The customary land ownership system in place since Papua New Guinea gained independence in 1975 could be about to undergo significant reform. Currently, most of PNG’s land belongs to its people, with the state owning the remaining 3%. Under customary tenure, ownership rights belong to an extended family group governed by traditional law. Very little customary land is registered or has a title recorded. All other land, known as alienated land and held by the state, is administered under the 1996 Land Act.

The Land Act

More than 85% of PNG’s rural population depends on customary tenure to provide their livelihood, and the sale of customary land can only be achieved via collective agreement of all members of the clan. If this agreement is achieved, potential buyers must then complete a complex set of procedures to register the property. The Land Act, which legislates and regulates land ownership in PNG, prevents customary landowners from selling or leasing customary land to non-citizens. The act stipulates that the state owns all PNG land except customary land, and that only the state may acquire customary land from customary owners. Furthermore, it defines government land as land that is not leased by customary owners to the state, among other stipulations. The act also provides for the mechanisms through which the state may acquire land (including customary land) and grant leases with respect to any land.

Increasing Access

The Medium Term Development Plan 2, covering 2016-17, identifies priority areas relating to real estate and the land title system. These include increasing access to state and traditional land for the construction of affordable and institutional housing; improving the land title system; building the capacity of the Department of Lands and Physical Planning (DLPP); piloting customary land development models using the Incorporated Land Groups (ILGs) and establishing a land development advisory service; implementing the Land Group Incorporation Amendment Act and the Land Registration Customary Amendment Act; and producing a land use planning scheme that is consistent with the Strategy for Responsible Sustainable Development.

Leaseholds

Because the Land Act bars non-citizens from owning freehold land in PNG, most dealings in land by foreign investors take the form of leaseholds from the state, which are granted via state leases, according to property consultancy JLL. These leasehold titles are generally awarded for 50-99 years, with the 50-year leasing term common for land leased by the state or land that has been recently acquired. The leasehold titles may be renewed upon expiry, but if they are not the state must pay compensation for any improvements that the leaseholder made to the land during the leasehold period.

An area of special, if controversial, interest regarding land titles are Special Agricultural and Business Leases (SABLs). Under these 99-year leases, land titles are transferred to the state from local customary ownership. They are then leased to corporate entities, which may develop the land. The leases cover more than 5m ha – or about 11% – of PNG’s total land and around half of its accessible forest. This includes pristine forested areas identified as potential pilot preservation investments by developed nations to offset carbon emissions, according to Greenpeace.

In 2009 the PNG parliament passed amendments to the Land Registration Customary Act and the Land Group Incorporation Act. The two pieces of legislation – intended to improve transparency and accountability in the management of ILGs, as well as to ensure that benefits derived from customary land through leases such as SABLs are used only for landowners’ benefit – came into effect in March 2012. The amendments formed part of the National Land Development Programme (NLDP), which included a variety of legislative changes to facilitate the registration and commercial use of customary land.

About a year later, in 2013, a Commission of Inquiry report into the SABL system uncovered widespread corruption and irregularities in the allocation of SABLs. The commission found that landowners had consented to only four of 42 of the leases and that the majority of the leases were obtained corruptly, mostly for the benefit of logging companies.

In 2014 Peter O’Neill, the prime minister of PNG, ordered the cancellation of the SABL system, but a national court ruling subsequently halted the order. A final decision on the how to deal with the lease system was still in process as of mid-2016.

Polarising Reform

As the issues surrounding SABLs continue to endure, PNG society is becoming increasingly polarised by land reform. While government officials, developers and private sector investors back changes to the property law system to spur development, attract foreign investment and facilitate commercial projects, local communities and customary landowners face having their land locked away. At present, efforts to enact reforms to the Land Act have sought to simplify and streamline the land allocation process, while at the same time protecting customary land rights – a complex undertaking.

Taking Action

The government began to explore how to enact land reform in earnest back in 2005 during a National Land Summit. The summit led to the creation, in 2006, of the NLDP to issuance of the “National Land Development Task Force Report”, which contained recommendations for the DLPP.

One of the report’s recommendations was for the DLPP to amend and review the legislation it administered. Following this, in 2009 the DLPP introduced legislation for voluntary customary land registration in the form of amendments to the Land Registration Act and the Land Groups Incorporation Act.

The DLPP also prepared an amendment to the Land Act 1996 that was designed to try to protect the rights of customary landowners by nullifying state land leases – such as SABLs – as well as mortgages and subleases held by non-citizens.

Real estate sector stakeholder are concerned that the draft bill proposes introducing restrictions on foreign ownership for companies incorporated in PNG, according to an analysis by international law firm Allens. In addition, non-citizens and companies wholly or partially owned by a foreign national or entity would be eligible only for subleases of freehold or state land. Furthermore, at the end of 30 years from the date of commencement of the draft bill, all existing titles to state leases held by non-citizens would be nullified, introducing uncertainty regarding what would happen to the leased land after the 30-year expiry. Meanwhile, existing SABLs would not be affected by the repeal of the SABL system and would be maintained until their terms expire. The bill also tables the creation of 99-year “underwater” leases.

In May 2016 a public consultation was carried out in Port Moresby, Lae, Mt Hagen and Kokopo in order for citizens to review the proposed amendments to the Land Act and to solicit public responses to the draft bill. As of the middle of 2016, no decision had been taken on the draft bill.

Business & Community Concerns

Chey Scovell, CEO of PNG’s Manufacturing Council, told local media that the changes proposed in the draft bill were a source of major concern for domestic businesses. “With the Land Bill, foreigners and foreign companies will no longer be able to hold a state or head lease, effectively meaning they cannot hold a secure title,” Scovell said. “That will really frighten off new investors.” Furthermore, the Chamber of Commerce has given a warning that the bill, if approved, could lead to a drop in land prices and, ultimately, negatively affect the economy.

PNG community advocacy group Act Now! also claims there is a strong case for why the draft bill should be rejected – but for much different reasons. The group argues that rather than trying to endorse the SABL system, the government should follow the recommendations of the Commission of Inquiry by revoking the leases and returning the leased land to its customary owners. Effrey Dademo, programme manager of Act Now!, told local media in April 2016 that the draft bill would cause customary landowners to lose control of their land, a vital resource for them, while illegal logging would be allowed to continue.

The differing opinions on how PNG’s lands should be managed are not easy to resolve. Supporters of land reform argue PNG’s development potential cannot be achieved without it, while detractors see reform as a way to remove obstacles to using customary land for commercial purposes. With so many facets of the issue influenced by politics and custom, uniting the opposing sides with a decision acceptable to all has, at times, seemed an impossible task. However, until a decision on land reform is reached, one way or another, both potential land developers and those living in informal settlements will have to contend for custody of the same 3% of state-owned land.

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The Report: Papua New Guinea 2016

Construction & Real Estate chapter from The Report: Papua New Guinea 2016

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