Easing land acquisition

Easing land acquisition

The government has moved firmly to remove a major hurdle to investment in basic infrastructure by simplifying procedures for land acquisition, while still upholding private property ownership rights.

It is a good balancing act between speeding up the construction of infrastructure and ensuring fair compensation for landowners. The government's ruling appears to take a harsh line against landowners with a stipulation that allows the government to revoke the property right of dissident landowners. However, this is a measure of last-resort, to be invoked only after all other avenues of negotiation and appeal have been exhausted.

Government Regulation No. 36/2005, which was signed by President Susilo Bambang Yudhoyono last week, will significantly ease the acquisition of land by clearly laying out the step-by- step procedures and the timetable for the process.

This is one of more than a dozen regulations the government has been preparing to stimulate private investment in and facilitate the smoother implementation of basic infrastructure projects, but is a very important one because infrastructure often requires large plots of land.

Land acquisition has been a major obstacle to the construction of public infrastructure, especially since the fall of Soeharto's authoritarian, centralized administration in 1998. Protracted negotiations over land prices have delayed the construction of badly needed public infrastructure such as toll roads and dams.

Worse, the price of land on the future sites of public infrastructure projects is often jacked up not by the original landowners, but by well-informed land speculators who buy up the land before the projects begin.

Poor infrastructure impairs the competitiveness of our economy by making production and distribution costs much higher than in other countries. Inadequate infrastructure also hinders access to public services such as health, education and market facilities, hampering poverty alleviation efforts.

These problems are addressed by the new regulation with clear- cut stipulations to prevent differing interpretations and to close any loopholes that could be exploited by private interests. Land speculators should now find it virtually impossible to buy up land that, according to an area's spatial plan, is designated for basic infrastructure.

The regulation outlines 21 categories of infrastructure for public interests, ranging from roads, dams and ports, to religious facilities, sports venues, parks and public health centers. This will prevent investors from abusing the regulation in order to acquire land for private interests, which is left entirely up to market mechanisms.

The government regulation requires the establishment of a land acquisition committee by the regent, mayor, governor or the minister of home affairs, depending on the location of the land to be acquired. This committee will negotiate with landowners about the price of their land.

Even though it will be acquiring land for the public's interest, the committee will not be allowed to set land prices arbitrarily. The regulation stipulates the amount of compensation offered landowners will be based on the taxable value of their land and property, as determined by a land appraisal team appointed by the committee. However, this stipulation will be less effective in securing fair prices for landowners if local administrations do not annually revise the taxable value of land and property in rapidly developing areas.

If no agreement on compensation is reached after a 90-day period, the committee will be allowed to move forward with the acquisition process by setting a compensation price and transferring the money to landowners, in the care of the nearest district court. However, landowners can file an appeal with the mayor, regent, governor or minister of home affairs, depending on who has jurisdiction over the land. These officials will then ratify or amend the decision taken by the land acquisition committee.

If landowners refuse to accept the ruling of the mayor, regent, governor or minister of home affairs, these regional chiefs can ask the head of the National Land Agency to revoke the property rights of the landowners. However, this is a last resort and the decision to revoke property rights can only be made by the president, based on a recommendation from the National Land Agency head.

As important as the new regulation is, it is just part of a package of about 14 policy instruments the government hopes to issue in order to strengthen legal certainty, simplify taxation procedures, improve the commercial viability of investment in infrastructure and set up a viable tariff system.

There is still much work to be done by the government before private investors will be willing to commit long-term capital to the development of basic infrastructure here.