During May, forums were run in Port Moresby, Lae, Mt Hagen and Kokopo to solicit public responses to the Papua New Guinea government’s new land bill. The intent of the new bill is to protect the rights of customary landowners, by extinguishing any State leases, mortgages or sub-leases that are held by non-citizens. But the consequences for PNG industry and the economy could be dire, some observers are saying.
Land reform in Papua New Guinea is considered overdue. Source: Business Advantage PNG
The draft bill, called the Land (Amendment) Bill, applies to all companies with foreign shareholders, not just those defined as ‘foreign enterprises’, according to a report issued by lawyers, Allens.
‘This may include companies which are not considered to be ‘foreign enterprises’ but which may still be caught by the provisions of the Draft Bill because of their foreign shareholders.’
‘Titles to state leases held by non-citizens will be extinguished and the Minister for Lands will advertise them for tender.’
Under the proposed law, Allens advise that non-citizens would be prevented from acquiring freehold land and customary landowners would be barred from selling or leasing their customary land to non-citizens:
‘Non-citizens, whether individuals or corporations, will only be able take sub-leases of freehold or state land, in Papua New Guinea.’
Motivation behind reform
The review of the Land Act 1996, which began in 2005 when the PNG Government embarked on the National Land Development Program (NLDP), was sparked by concerns to protect the rights of customary landowners. In PNG, approximately 97% of land is still customarily owned.
‘Rapidly changing socio-economic forces are challenging the ability of customary systems of tenure to provide security for members of customary groups and its viability,’ noted a 2012 Constitutional and Law Reform Commission resource manual on land reform.
A major problem in recent years has also been the administration and insurance of Special Agricultural Business Leases (SABLs), which allow customary landowners to lease land to developers on a 99-year lease. A 2013 investigation commissioned by the PNG Government found widespread corruption and mismanagement regarding these leases.
‘We will repeal SABLs so that SABLs will no longer be in the Act,’ Minister for Lands and Physical Planning Benny Allan told broadcaster EMTV last month. The draft bill also proposes the repeal of Urban Development Lease provisions.
Compensation
According to Allens, the draft bill makes no reference to a proposed method of compensation for extinguishing title to state leases currently held by non-citizens. But there is a defined time limit of 30 years, the lawyers say, at which point titles to state leases held by non-citizens will be extinguished and the Minister for Lands will advertise them for tender.
‘It is a great concern—not having security on title any more, or access to secure title.’
Neither will foreign land owners be protected if they have companies domiciled in PNG. The Allens report says PNG-incorporated companies that are wholly or partially owned by a foreign national or entity, ‘will not be eligible to be granted state leases.’
Concerns
The Manufacturers Council’s Chey Scovell
Chey Scovell, Chief Executive of the Manufacturing Council of PNG says the proposed changes are one of ‘the biggest concerns for business going to the wall at the moment … With the Land Bill, foreigners and foreign companies will no longer be able to hold a state or head lease, effectively meaning they cannot hold a secure title. That will really frighten off new investors.
‘Anybody who has got an existing lease will only have 30 years left,’ he told Business Advantage PNG. ‘When you are talking about manufacturing, 30 years is far too small a timeframe for anybody to really make a serious capital investment. It will be quite a detraction.
‘It is a great concern—not having security on title any more, or access to secure title and then no longer being able to be foreign-owned or a joint venture.’
Property prices
LCCI President, Alan McLay. Credit: The Loop
Alan McLay, President of the Lae Chamber of Commerce, says the Chamber has put in a paper to the Lands Minister Benny Allan requesting that the proposed changes be reviewed, or revised.
‘The section to stop any foreign participation in land, and the loss of titles in 30 years—all that is a disincentive to the right kind investment,’ he says. ‘It probably won’t stop some of the doubtful investments that we are seeing today, which will be even harder to track down.’
‘On one hand the government is saying: “Yes, yes, we want to open up investment for the betterment of the economy” but at the same time they are saying we can’t have any land. So you won’t get any investors. We believe this will cause a drop in land prices and ultimately negatively affect the economy of the country.’
McLay says the private sector has compiled a combined paper, as well as the papers that have gone in from each individual group, outlining the general sentiments. He says the industry groups are against this.
‘We just hope that the government will take notice, both the Minister and the Prime Minister. It is a disincentive for investment and we feel that the bottom would drop out of the land prices. If land prices go down—it is the basis for your economy.’
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