Speech of Camille Nuamah, the World Bank Country Manager to the workshop on the OSCE Best-Practice Guide for a Positive Business and Investment Climate

Distinguished Ladies and Gentlemen,

Dear colleague,

I would like to take this opportunity to thank you for inviting the WB to this important workshop for Albania and countries of the Balkan region. The countries share common values, potentials and challenges in the area of improving the business climate and investment.  Most of the countries have achieved some level of macroeconomic stability, and all are taking key steps to strengthen their own market economies, integrate with the European economy and become competitive in the global economy.  As such, the OSCE Best Practice Guide for a Positive Business and Investment Climate stands to be a very useful tool to policy makers, government practitioners, local authorities, development partners as well as the private sector in these efforts. 

As intended, I will focus my remarks on the area of securing property rights and some of the lessons that the World Bank has learned here in this region and elsewhere on strengthening land titling and registration and the development of land markets.  

I would like to relate a story from a novel called Texaco written in Martinique.  With all the wonderful literature that I am being introduce to in this region, I know that you understand that sometimes fiction illuminates life.   Anyway, in this story, a bright young urban planner sets out to visit a slum next to the Texaco oil refinery in Port de France.  As he arrives someone throws a stone that knocks him unconscious.  Fearing that he is dead, the people take his body to the shack of the oldest resident who first put her roots down in this area.  As she nurses him back to health, she tells him the story of how she came to stay there.  But her story is the story of the history of the people of Martinique.  From the alienation and imprisonment of her African ancestors as slaves on the sugar plantations, their escape to the mountain villages after emancipation, the trauma of volcanic eruptions which reformed the landscape, her own life as a street child as Martinique’s towns and cities began to develop and finally her choice to put down roots and end her journey in that spot next to the Texaco refinery however dangerous but to her finally a home.   By the end, the young urban planner understands that all his ideas of moving these people into the neatly constructed houses in a new development across the water will fail because he has failed to take into account the often inalienable connection of people to the land on which they have planted their roots.   

For me as a newcomer to your region, issue of land ownership and property rights in the Balkans are similarly, if not more, emotive.  The drama of the past plays a profound role in the efforts to provide secure property rights..  And the boundless prospects of the future make it imperative that governments strengthen the means by which your land and properties can be used to create new wealth and improve social welfare. 

It is well recognized in the world that land and buildings accounts for between half to three-quarters of the national wealth in most economies.  In developing countries, a large share of the properties is/are not formally registered and therefore, property rights are not fully secured.  Hernando De Soto estimated that in the year 2000, the value of this “dead capital” he called it was 9.3 trillion US dollars.  So the mere act of registering these lands and properties with formal titles and accurate cadastres could release a huge source of wealth for investment, create an even bigger basis for financing through collateralized loans and credit, and broaden the tax base for local authorities. 

I say “mere” but this task is not a simple one.  It involves complex issues such as modernization of cadastres, restitution, legalization of informal settlements, and not least dealing with corruption which remains a major challenge across the region.  

Recognizing this challenge your Governments have already started extensive property titling programs and are focused on making property transfers cheaper and faster.  The World Bank has and is financing cadastre and land administration projects across South Eastern Europe, including in Romania, Bulgaria, Croatia, Macedonia, Slovenia, Serbia, and most recently Albania. The preparation of similar projects in Montenegro and Kosovo is underway.  These projects mainly focus on supporting (i) improving the legal framework for property registration, transfer, use as collateral; (ii) improving customer services of land agencies through computerization of land offices and digitalization of maps, as well as establishing clear and monitorable service standards; and (iii) financing the actual registration of large volumes of land and properties in an effort to breathe life into a backlog of “dead capital”  Newer projects also support policies for improving access of land for investors, development of land use planning and development control and better management of public lands, and in improving judicial and other dispute resolution services with respect to land issues.  In Albania IFC is also supporting the regulatory reform in the area of mortgage registration and collateral enforcement to facilitate the property market.

Some of the lessons that we have learned from these and other experiences follow.  I will divide them into the more general first, and technical after.

First and most obvious, solid government commitment to land and property reform is a must.   I don’t think I need to elaborate to this group why this is important.

Second, property titling programs need to be accompanied by efforts to address needs to address the wider land policy issues they are to achieve the critical goal of efficient land and property markets.  These include land use planning, the legal and administrative framework for collateral and judicial reform, among others.

Third, it is important to include an explicit focus on improving customer satisfaction/services alongside the one on reducing the time and cost to register property transactions.    Involving stakeholders and public education campaigns in ongoing titling programs, the legal basis of property rights, dispute resolution mechanisms including appeals etc is important to make sure the rights enshrined in documents and laws are accessible by the everyday public.

Fourth, land agencies have been and in many cases continue to be a major source of corruption.  This needs to be explicitly acknowledged in the design of any support.  While directly addressing the inefficiency of land registration is the main driver for minimizing corruption a few other measures can be helpful. In particular, efforts to accelerate titling and registration by accelerated clearance of backlogs as well as to computerize records should be accompanied by strict controls on the quality of the information being recorded.  Errors whether deliberate or inadvertent can be a major source of graft later on in the process.  Establishment and regular monitoring of clear service standards for registering transactions is also key as are the development of hotline and appeal mechanism for customer complaints.

Fifth, establishing clear business plans and accountability mechanisms of the Immovable Property Registration Agencies both to the public through service reports, to the government through reporting arrangements, and to the national oversight bodies is a key factor in sustaining the improvement of services.

In terms of the actual reforms themselves, experience in the region and from those countries that have successfully improved property registration and rights. There are a number of lessons as well. 

First, a single agency system (like in Albania, Armenia, Macedonia and Romania) has proved to be more effective in achieving more efficiency and effectiveness. In Romania, cadastre and land book services were combined under one-stop shop which significantly reduced processing time for standard sale transactions from between 30 to 60 days to 10 days in just two years.  Real estate transactions doubled from 185K to 400K annually. 

Second, simplifying and lowering fees is the simplest way to ease property registration. A number of countries (around 17) have found that introducing a fixed flat fee versus percentage based fees has helped to reduce corruption, in part by removing the incentive for fraudulent declarations of the property values.  In the past, many governments have increased regulation, making the process more complex with physical inspections or records checking at the cadastre.  Delays and bribes increase. A fixed fee avoids all this. 

Third, making the registry electronic helps to smooth and hasten the flow of information for all users, planners and market participants. In almost all countries of the region the records were kept on paper and the filling system broke down since long time ago. Scanning of documents helps to save the inheritance of the past, reduces time, and makes it easier to identify errors and overlapping titles.  Croatia digitalized its records and reduced the time of registration by from 399 days to 87.  In Slovenia, the Bank went further to support the creation of a data interface between agencies, ministries and the public that has helped the flow of information both on land transactions and land use.

Fourth, taking registration out of the courts and make it administrative. One lesson across the board is that courts do not provide the most suitable home for registration of titles, which should operate as a service to participants in the land markets.   In a number of countries, making registration an administrative function has served to speed up the process and clear backlogs.

There are a number of other reforms that introducing fast track procedures and making the use of notaries optional.

But I will stop here and hope that the discussion to follow can help to clarify some of these issues.

Let me finally say that land registration and use issues are always accompanied by controversy, conflict and contentions.  Much remains to be done.  Doing Business 2007 indicators show that the Balkan region still has some catching up to do.

Your programs will require representatives of all political persuasions, from central and local government, between private investors and public citizens to work together to implement those activities that will change an important part of the business climate. 

The World Bank is pleased to be able to join in such an effort and to further support the Balkan region on land issues.  Many thanks for your attention.