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Is there a role for the private sector in managing land registry offices?

Wael Zakout's picture


 
The protection of real property rights and improving the efficiency of land and property markets are key pillars in a modern, well-functioning economy. Over the last 30 years, many countries have initiated programs to issue land titles for all properties, improve the performance of land administration services, automate land information systems, and integrate them with ongoing e-government and e-service programs.

The World Bank, often with other development partners, has provided more than $1.5 billion in grants, credit and loans to more than 50 countries to support the implementation of such programs. Other bilateral and multi-lateral development partners have also provided substantial funding and technical assistance to many countries.

Almost all these programs are being implemented by the public sector. The private sector engages by providing technical services such as field surveys, mapping, aerial photography, establishment of geodetic networks that enable accurate measurements, development of land information systems, and more.  

In May 2016, the state of New South Wales, Australia, awarded a 35-year, $2.6 billion Australian dollar (US$2.08 billion) concession to a consortium of private sector companies to run the land registration office. Awarding a contract to a private partner to manage land administration offices is uncommon, but not new. The first such arrangement took place as far back as 1996 in Ontario, Canada. There are other examples worldwide, but the number remains low.

The driving force for such an arrangement, as in the case of Canada, was the need to modernize property markets and improve service delivery to citizens. At that time, government officials debated whether to conduct this modernization program as part of public sector reform, or to be bold and do it through a partnership with the private sector. Successful modernization through public sector reform is not uncommon—many countries, such as the Netherlands, Norway, New Zealand, Dubai, and Russia have modernized their land registration systems  and achieved impressive results. So why consider the private sector?

In the case of Ontario, the decision to go with a private sector partnership was driven by the uncertainty of continuous political support, the significant resources required to implement the modernization program, and limited government budget. After a long debate, the government decided to partner with the private sector to modernize the provincial land administration system. Over the concession period, the government collected almost $2 billion Canadian dollars (US$1.65 billion) in payments, as well as about $300 million Canadian dollars (US$240 million) in annual royalty payments in 2017. Above all, the system was modernized, services improved, and customer satisfaction increased substantially.

The advancement of technology in the last two decades, including GPS technology, web-based services, mobile technology, and drone mapping, has made cadastral surveying and mapping much faster, cheaper, and more accurate. While this has created great opportunities to accelerate land titling programs and modernize existing land administration systems, it also created new challenges for many developing countries. For example:
  • Rigid government salary structures and low budget allocations for land administration agencies can severely limit funding for such programs.
  • Hiring and retaining highly-qualified staff to run these new technologies is difficult.
  • A digital land database is part of any country’s national security, and a government’s ability to protect these databases from potential cyber attacks is limited.
For example, budgeting for operations, maintenance, and continuous technology upgrades is a serious challenge for any modern land administration system. The private sector, with its ability to raise money, flexible salary structures, budgeting finesse, and management skills, can offer solutions to some of these challenges.

Since land administration agencies are revenue-generating (for example, they can collect fees for registration transactions such as sales and mortgages), the private sector could potentially be interested in Public-Private Partnerships (PPPs) if the conditions were right and the risks manageable. However, in most cases, governments are reluctant to let go of an agency that is a cash cow. Lack of transparency in the sector can also encourage rent-seeking which ultimately benefits certain elites.

Over the next few months, the World Bank’s Global Land and Geospatial Unit will undertake a global assessment of the viability of various models of PPP arrangements in land administration. The process will feature consultations with private sector firms with the relevant expertise, government officials from high-, middle-, and low-income countries, and leading professionals in the sector.

The overall goal of these consultations is to develop a guidance note for countries and private sector companies interested in pursuing this model. The note will address key questions such as:
  • What models of PPP in land administration should be considered?
  • What kind of risks are involved?
  • How can these risks be mitigated?
If you are interested in participating in these discussions, please fill out the application in this link. Feel free to comment or forward this message to people who may be interested.

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Comments

Submitted by FEMI OBIOMAH on

I don't think it will be productive. In the any PPP program, it would not be helpful to have limited involvement in public administration issues. The reason is that the would be a ripple effect in the sense that the Govt would become more inept.

Submitted by Ronald Twino on

Indeed land management is quite a big challenge on developing countries Uganda being among. If these associated challenges can a only be solved by private sector, this will also reduce the time taken during whole process normally due to limited funding by public sector

Submitted by Esther Obaikol on

It is interesting that you mention Uganda. It apparently seems to be one of the emerging success stories of public sector investments. Of course not without challenges.

Uganda Privatized Surveying and you can't imagine the current emerging challenges arising from this move.

I think it is important to understand under what conditions PPP can thrive and what components can be handed over to Private sector. Australia's example is interesting for learning as some of Africa's original land administration systems were modeled around Torrens.

i'm lookinf forward to the results of this study.

Submitted by Dr. Mohamed Taher Abdelrazik Hamada, Ph.D on

Yes, there is a role for the private sector in managing land registery offices
The World Bank has adopted this policy through avoiding the risks in the public
private partnership (PPPS) and including this system with the encouragement of local
governments in the developing world.
The World Bank has pursued remarkable advancement in this issue by supporting
the developing world with remarakable funding , technical assistance and consultations to many of these countries .
Yours Very Respectfully,
Dr. Mohamed Taher Abdelrazik Hamada, Ph.D
Senior American Citizen
Retired Professor At Strayer University, USA
Address
[redacted]

Submitted by Gabriel Adejoh - 1w5x31849bv on

Thanks a great deal prof.
it will be nice to have futher discursions with you with a view of advancing this curse.

Submitted by Tugba Gunes & Umit Yildiz on

Protection of real property rights is related with legislation and registration of ownership. During systematic registration process, demarcation, determination of ownership and land registration issues should be conducted, controlled and supervised by the public sector in a country no matter which is a developed or a developing country. Because, to protect a right, first of all this right has to be determined accurately and reliably.
Land administration system can support efficiency of land and property market by providing reliable data and improving service delivery. Personal data protection and in some special cases strategical sensitiveness of those records in land registries are required data security and high level of public confidence. Therefore, land registry is guaranteed by the states in many countries throughout the world. On the other hand, improving the efficiency of land and property market depends on a fast, cheap, technologically developed and monitorable land registry system.
Under this framework, private sector is the indispensable partner of the public sector in terms of its capability in using and adjusting high technologies, and recruiting and retaining high quality experts as well. Thus, a well-functioning and efficient land administration system can be achieved via partnership of public and private sectors under the condition of well-determined limits of both parts’ duties and responsibilities.

Tugba Gunes and Umit Yildiz
Turkey

gunestugba@gmail.com
umityildiz1981@gmail.com

Submitted by Murat Sungur Bursa on

There is certainly greater role for private sector in managing land registry offices.
Controversial views will be raised highlighting security and confidentiality of the related information.
Moreover , unethical use of information and making earnings, illegal transfer of rights and possible explotation of side benefits by the private sector are additional concerns.. These are all valid, understandable and annoying counter arguments.
However , the good news is they can be resolved.
If private sector is operating nuclear stations, designing missiles , manufacturing lethal weapons and owning google, facebook, ınstagram , biggest pools of private information then whay worry with land registry offices.
Key areas of study should be ; eligibility criteria for private sector to run business, tender documentation, security measures.....

Submitted by Richard Grover on

It is very difficult to discuss this question without specifying what would be involved in public-private partnership and the experience of PPPs in other sectors, such as the management of roads, railway rolling stock, schools, hospitals, air force fuel tankers, prisons, and security operations. The New South Wales and Ontario examples are rare but there are many examples of where the private sector is involved in a more limited capacity. This could be the supply of equipment such as the computers used in land registries or premises such as cadastre offices. The argument in favour of PPPs for equipment is that the contract requires the supplier to provide the equipment is a given state at all times. The risk of breakdowns etc is shifted on to the supplier, typically the producer of the equipment. The supplier assumes the responsibility for maintenance, obsolescence, back-ups, and service recovery. If the contracts are properly specified, they can work well. Typically the public is totally unaware that they exist. They can be problematic if land registries or cadastres are not established on a self-financing basis as the situation can arise in which the supplier has not been paid by a ministry of finance and the land registry/ cadastre has been obliged to hand over all its funds to the government. So implicit in this model is a business model for the land administration body.
For premises the situation is a little different. Historically the public's interaction with land registries and cadastres has been through offices. The current trend is for such services to be increasing offered on-line, perhaps with a mobile office back-up for small isolated communities lacking internet access. The issue here is what to do with premises that are likely to become redundant in the future. One solution is a sale and leaseback solution in which the land administration body sells the property to a private investor with a guaranteed leaseback. As a premium tenant with certainty of receiving rent, the maximum yield should be capable of being extracted and the highest sale price. Such a contract needs to ensure that the new landlord is obliged to provide premises in a defined condition (the risk passes to the landlord of maintenance, repairs, obsolescence). The land administration body needs to negotiate break clauses so that it can terminate the lease and also a share of the profits for the eventual redevelopment of the site. The factor which has limited this process in the past has been the need for secure storage of records. No tenant with storage of sensitive data can permit a landlord (or his representatives) access or to keep records of building plans for security reasons. However, with off-site electronic storage, this ceases to be an issue.
Many land administration bodies already have significant input from the private sector, including notaries transferring title and registered private surveyors for cadastral surveys. This is achieved through a licensing process so that only selective private business can access or amend data.
The classic PPP model involves the private sector investing in a new facility and renting it back to the government. This can be by the government paying a rent to the provider. It can also be through the provider taking over the operation of the facility for the period of the lease. No private consortium can borrow at as low an interest rate as the government. Therefore is is going to be a more costly option than the government borrowing the money and putting the construction of the facility out to contract. The principled argument in favour of PPPs is that they transfer the risk from the government to the private sector and that private contractors are motivated to operate the facility more efficiently than the government and so have lower costs. Both of these can be open to challenge. Governments can find themselves being left with residual risks under PPP. For instance a land registry may guarantee to compensate anyone who suffers loss as a result of its error or fraud. Will this risk be transferred to to private operator? If so, what will happen if the claim is so large as to cause the operator to go bankrupt? The consortium behind the operator will have set up a special purpose vehicle and so there will be no recourse against the members of the consortium. The operational economies have to be sufficient to offset the extra borrowing costs. The unprincipled reason why PPPs are attractive to governments is that they are a form of off-balance sheet borrowing and so do not appear in government accounts as an on-going obligation for the period of the lease. Borrowing to pay a contractor would. The costs of paying the annual fees to contractors have to be factored into budgets. With all PPP contracts one has to consider how the contractor will make a profit. Installing dispensing machines for unhealthy snacks in schools or cigarettes in hospitals? High costs for making changes to buildings eg replacing doors? Buying out such contractual rights can be very expensive and amateur public servants are negotiating with experienced commercial managers. In land administration how the contractor is able to exploit the data they gain access to will be a key aspect of how they expect to make a profit which is built into their bid price.
The history of privatisations since the 1980s is that what were once seen as monopoly utilities can be broken up into competing companies. This has happened to supposed natural monopolies in gas, electricity, water, railways, and telecommunications. So why not with PPP in land administrations allow operators of land registries etc to bid for operating licenses and compete for business? If this sounds far-fetched, is this not what title insurance companies do in USA and block chain technology makes possible.
So PPP might be a rather dated concept in land administration that was all very well in the era of Glam Rock but things have rather moved on since then.

Richard Grover

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