Weakening of Rural Institutions: Causes and Remedies

Weakening of Rural Institutions: Causes and Remedies
Strong institutions are critical for economic and social growth. It is generally established that greater security of land rights would be related to higher efficiency and profitability. In developing countries, where poverty is widespread, populations are on the rise, access to land is limited and agrarian economy contributes significant proportions of both national and household income, establishment of secure land rights institutions can have far reaching effects on poverty, equality and social mobility.

A growing body of microeconomic literature shows that strong property rights translate into higher investments in land quality. This impact comes through three important channels. First, value of land is tied to its productive capacity. The right to willfully sell land or to bequeath it to ones ancestors would increase the incentive to invest in land quality, in turn raising the potential gains from such a transaction. Second, the right to operate on land or to accrue the benefits from it would increase the amount of investments which raise crop production over the long run (Goldstein and Udry) . Third, clearly defined rights would allow farmers a higher access to credit, especially when land is the only collateral available (Besley). However, the weakness of rights would deter investments in land quality, leading to lower crop productivity on farms and decreasing profitability for households.

In Pakistan, where agriculture sector contributes 22% of GDP and employs 60% of labor, highly unequal land owning patterns (median land holding below 25000 yards) and declining crop yields escalate the problem of land rights insecurity(Ministry of Finance). The geographically varying land institutions in Pakistan have evolved through fusion of Islamic inheritance law, colonial preferences of revenue collection and regional practices. In the Sargodha district of Punjab province alone, three dominant practices can be traced –single ownership systems as in zamindari, pattidari based tenure of equal communal ownership and private entitlements as in bhaichara have historically existed (Nelson). This multilayered pattern of property tenures coupled with poor land record maintenance has led to overlapping claims on farmlands where land holding was communal and division into very small plots where private ownership is prevalent – both causing lower investments in land. Moreover, the existence of parallel bureaucratic authorities exacerbates the problem, as the civil court and the land revenue department can, practically, independently establish title on a given plot. Prolonged cases in both the departments have increased the incident of land disputes while raising the threat of eviction for socially marginal farmers arising from land-grabber and rural elite.

Nationwide land reform is necessary to counter this issue; sweeping land redistribution might not be a comprehensive solution. At first stage, extent of joint ownership and existence of weak property rights needs to be established. The exercise is not simplistic because of the wide variation de jure and de facto measures of tenure security. Patterns of family ownership practices and intra-household bargaining power complicate the analysis of de facto measures while overlapping documental evidence hinder establishing an official land holding record. Second, the impact of land insecurity on key variables like investments, productivity, access to land, credit availability and poverty needs to be estimated broadly. Additionally, promoting private ownership on communal lands could increase intra-generational poverty. As ancestral land gets divided into smaller plots of land, commercial viability of farming decreases as productivity falls – pushing farmers to the brink of sustainability and even below. Further, social mobility into non-farm professions might decrease as weaker land markets make it hard to sell the land and hinder diversifying to other vocations.

Reforms at governance level are essential for making bureaucratic procedures understandable and executable for the public. The land revenue system needs to be streamlined countrywide by use of modern geo­-mapping technologies. Segregating the scope of agricultural departments, simultaneously ensuring synchronization of their operations, is a vital step for raising the transparency and accountability of public works. Increasing the measures to make land markets more effective and efficient by lowering of transactions costs, both actual and imputed, through condensing the number of procedures required to sell/transfer land is also significant. Further, creating a transparent dispute resolution mechanism is indispensable. Slow judicial procedures, higher incidence of appeals on decision combined with increased costs of trials impede the process conflict resolution. A survey of land dispute record in Sargodha revealed that most cases have lasted more than decades, before settling out of court (Jahangir, Mazhar and Rehman). Moreover, efforts to grow and secure land tenancy contracts could also serve as a complement to enhancing land institutions in Pakistan (Budhani and Mallah).