What the 2016 budget means for land rights
Budget speeches are politically significant not only for the specific proposals and policies they spell out but also for what they reveal about their authors. Finance Minister Ravi Karunanayake’s mega-speech is rich in both respects, especially given an elaborate first part that is quite revealing of the ruling dispensation’s ideological orientation. Perhaps what is most significant is that the speech begins by effectively demonising the welfare state.
The period 1948 to 1977 is reconstructed in the Budget Speech as a time when the “continued focus on welfare measures” was among the three reasons (exposure to international trade and low level of exports being the other two) that rendered the free-market economy “vulnerable”. Welfare measures are insinuated as having being “politically motivated” and undermining “the achievement of economic prosperity”. This account is a far cry from the celebrated commitment of the post-colonial Sri Lankan state to universal public provisioning, especially of public health, family planning services, food subsidies, primary education, etc.
One way to look at Minister Karunanayake’s speech is that it is the first clear indication of the mask of ‘social market’ economy, whatever that meant, slipping to reveal the face of an aggressive neoliberalism yahapalanaya-style. His declaration that the government will “follow more transparent market oriented policies” and “remove various barriers in the economy which disrupt the smooth operation of free markets” is bolstered by the commitment to undertake the required “drastic reforms to all sectors of the economy”. And therefore: more labour market flexibility, reduced corporate taxes, more incentives for foreign investors, new investment law, and most prominently the deepening financialisation of land.
One area where the ideological continuities with the Rajapakse regime and somewhat more obviously the pre-Rajapakse UNP era is most clearly manifest is in the focus on urbanisation and more specifically land—the focus of this article. There are a raft of proposals and announcements regarding land in the Budget that not only need to be considered together but also in the context of the broader commitment to market oriented policies the budget valorises. This essay is but a preliminary provocation in this regard.
Market-friendly land rights
One of the key highlights in the budget proposals is granting of ownership to those who have held land permits under the Land Development Ordinance and those who have occupied government and estate-sector houses for over 10 years. Beginning the late 1970s and the early 1980s, under the first wave of neo-liberal reforms, Sri Lanka witnessed an extraordinarily ambitious state-driven mass housing policy with levels of community mobilisation and participation that remain unmatched.
The one crucial element missing from this policy, which spanned more than a decade, was its failure to bestow full and absolute title. It was precisely this omission that enabled the Rajapakse regime to evict and forcibly relocate thousands in Colombo by simply terming them ‘illegal’. So isn’t this reason then to support the proposal in the latest Budget Speech to grant titles to those in possession of state land for more than 10 years?
That question though has to be considered in the light of the current neoliberal context and motivations. And the answer lies in fact in the first budget presented by the UNP-led government at the turn of this millennium. The 2002 budget speech, presented not long after the 2001 general elections, not only contains a similar proposal but actually spells out the reasoning: “Vesting of absolute title (subject to constraints against fragmentation) in those presently in occupation of state land under permits, will be completed so that such land also becomes commercially transactable.”
In other words, far from a rights-friendly approach what we have is a market-friendly approach in which housing and land rights are in danger of being instrumentalised and commoditised. Seen alongside the overall thrust of the budget and the raft of other proposals, the emphasis is on realising the exchange value of the land rather than enhancing its use value, especially for the poor and marginalised occupying or possessing state land. This is not an argument against granting title and security of tenure—crucial to protect people from forced evictions and other risks—and nor is it an argument against limiting market access. But experience the world over has shown that title without other safeguards (not paternalistic restrictions) will see the poor and lower middle class being priced-out, bought-out or otherwise dispossessed.
Accelerated financialisation of land
The setting up of a ‘land bank’—an electronic database of all state-owned lands, tax incentives to private sector companies “who wish to invest in mixed development projects that will have a significant impact on the landscape of the country”, removing the tax imposed on the leasing of land to foreigners and possible removal of restrictions on foreign ownership of land are all measures targeted at enhancing the exchange value of land.
The Budget proposals call for significant revisions to the Land (Restriction on Alienation) Act No 38 of 2014. This Act imposed several restrictions on foreign ownership, corporate or personal, of land and despite its broader laudable aim to maintain control over a ‘scarce resource’ does indeed suffer from some shortcomings.
But rather than address them the Budget proposals go even further than what the industry demanded by way of concessions. For instance, at the time the act was being discussed the Ceylon Chamber of Commerce had proposed reducing the Land Lease Tax from 15 per cent to 5 per cent of the total rent payable on the duration of lease if the desire is to collect the tax upfront or levy a 15 per cent rate annually. But the Budget proposes scrapping this tax altogether. It also proposes removing restrictions on ownership and transfer of lands for certain identified investments.
All these proposals are intended to enhance the inflow of foreign capital, especially in land and real estate development and assume added significance in the light of the proposed western region megapolis—the flagship project of the Ranil Wickremesinghe government. At the same time, the introduction of listed Real Estate Investment Trusts (REITs) will enable domestic investors, including individuals, to channel their money into the real estate market. While REITs can harness capital they can also be a major source of financial instability, especially when they invest in mortgage debts, inevitable as the real estate market expands.
In fact, in 2013, the Financial Stability Oversight Council, a panel comprising the top US financial regulators, cited mortgage REITs as among the major sources of market vulnerability.Recent financial crises, from Thailand in the late 1990s to the US in late 2000s, have been underpinned by the extreme financialisation of land in the form of real estate industry. But the current Budget proposals will most likely further deepen financiaisation by valorising the exchange value of land, a process that was already accelerated under the Rajapakse regime with its emphasis on making Colombo a major destination for real estate investment.
In fact other proposals in the Budget also have a bearing on this discussion. For example, the Budget proposes the development of monorail projects along the Negombo- Katunayake-Colombo and Colombo-Kaduwela corridors through private-public partnerships. Apart from the fact that this is not reflective of the priority given to bus rapid transport systems in the transport master plan recently revised by experts at the University of Moratuwa, such highly capital intensive transport solutions often rely on the monetising of land along these corridors, especially stations, as way to recoup investment. The spiralling land values will in turn have significant social and economic implications—already visible in the case of the Delhi metro for example.
Land—the new frontline
Indeed, it is not merely urban land that is in the crosshairs. So-called unutilised or underutilised government land is to be made available to the private sector for a range of purposes—agriculture, seed production, dairy farming, spices plantations, and setting up pharmaceutical industries and even universities. The budget also proposes relaxing restrictions on the usage of land of regional plantation companies allowing them to cultivate different crops. Even schools that have unutilized land are encouraged to “utilize such lands for cultivation partnering with the private sector”.
The rhetoric of unutilised or underutilized lands is dangerous. For example, the previous regime termed all lands occupied by Colombo’s poor as underutilised. In reality, the charge of underutilisation is used to exploit the exchange value of the land by monetising it and suppressing its use value for less powerful sections of society or more socially productive uses of land.What is clear from the 2016 Budget proposals is that we have entered another phase of accelerated neoliberalism, one in which land will be the new frontline. The western region megapolis, the development of secondary cities, and a slew of other proposals and projects will radically alter land use. Historically, land rights has been an important locus for mobilization, the first step now is linking the struggles of the urban and rural poor and working classes for the right to land.
(The writer is a member of the Collective for Economic Democratisation and works at the Centre for Poverty Analysis)