I am one of those who believe that responsible ownership enhances economic performance. I believe that the assignment of property rights is an important step in promoting a higher standard of living for any country’s citizenry. I also believe that government has to do much more than a pure laissez faire approach would allow for expanding ownership in general.
Land policy in Ethiopia, for example, is one area that needs revisiting as current land laws fail to provide incentives for developing land and increasing production of agricultural commodities.
Ethiopians have a deep notion, rooted in their feelings and their minds, that land is everything. They are so attached to the little plot of land they own as a community member, they worry of any policy that would alter the current system, even if the latter works far better.
Here is one good challenge for the government – to work on reforms that will allow the ownership of hundred of thousands of farmland and urban land to Ethiopians.
Why?
Three reasons:
First, the current system has failed to provide incentives for developing land and increasing production of agricultural commodities. Caution however, is in order not to foster more corruption or entice new oligarchs.
Second, land reform if properly carried out, would widen the opportunities for social and occupational mobility, and facilitate efficiency gains by reallocating land to more efficient users via land markets.
Third, secure tenure rights can boost long-term land-related investment through assurances that returns on investment will not be appropriated.
There are of course other reasons.
Still, Ethiopia should not privatize everything, and it should not distribute property to everybody. The government should still reserve the right to regain the ownership to the land in the event of waste. This system allows the state to designate the use of land for specific purposes pursuant to public policy, while also giving the owners a broad system of powers to possess, use, manage and control the land. The government must maintain the discretion to choose which land to privatize and who will receive it, thereby limiting the scope of privatization.
Assuming the new government can muster the necessary political will for actual implementation of land reforms, such initiative works only if there is a much larger and comprehensive package of agrarian reforms, if there is renewed public investment in agriculture focusing on reviving sustainable technologies for smallholding rain-fed farming, income protection and support to farmers and rural credit, among other measures. Unfortunately there is no sign whatsoever of any such public priority with the current administration.
Privatization is an inherently controversial issue that will generate considerable public and political debate. And yes much thinking in reenergizing the economy is in order, Standing Committee reports and public debates are a must. The PM will need to take decisions on these.
Current economic changes, political instability, absence of clear legal doctrines and regulations, corruption and bureaucracy demand implementation of a clear and coherent policy.
As I pointed out government must control the land allocation process and designate the subsequent use of the land. It should play an administrative role in this process. Before any privatization can occur however, a complete legislative package must be introduced or overhauled, covering banking law, commercial law, bankruptcy law, real estate finance law, tax law, labor law, and administrative law. Furthermore, the law regarding ownership of property must be revised before privatization is launched.
In this day and age, economic governance demands flexible laws that cannot only guarantee an owner sufficient powers to effectively realize his interest in the property, but also give society the legal means to control the distribution of this power according to general principles of fairness, equity, and the public interest.
Dear Reader, this is the first out of the six reforms I believe should be considered by the new administration. Five to go!