Creation of Melanesian Property Rights – Building Bridges between Custom and Commerce


By:  A.P.Power, Wewak, PNG 07/2003

in www.pngbuai.com
PNG research level books articles and information


ABSTRACT   This paper examines the status of property rights in Papua New Guinea where 97% of the land is held under custom.  Insights by Hernando de Soto are employed to evaluate the potential of developing a formal property system that will enable the majority of citizens to participate in the modern economy while maintaining the integrity of their customary group and their land holdings.  Melanesian group ownership and customary tenure imposes certain limitations on individuation and alienability of land.  Be that as it may the paper concludes that there is ample scope and a fundamental imperative to act to develop formal property rights to fulfill the imperative of the Fifth Goal of the Constitution and find Papua New Guinean ways to involve our citizens in modern economic development.

Creation of Melanesian Property Rights – Building Bridges between Custom and Commerce

A.P.Power2


For the most of the last thirty years I have been trying to come to grips with the obvious need for customary landholders to find mechanisms that would empower them to become involved in the modern economy while at the same time maintaining the integrity of their land group and security over their land holdings. Clearly this is the imperative of the fifth goal of the Constitution that, sad to say, the powerful in the land have virtually ignored for 27 years.


In regard to customary land management, I have analysed the underlying mechanisms of what I have observed happening on the ground. From this I have made predictions for the future and recommendations for remedial action. Some of my recommendations over the years I will recall in this paper because, thanks to Hernando de Soto, I now understand more clearly the fundamental mechanisms insofar as they relate to capital. Capital is the surplus value that inheres in assets that can be mobilized for the benefit of the owners in a formal property system. Now that I understand the mechanisms I want to revisit the recommendations and try to make them clear for all to see.


Hernando de Soto’s basic thesis is that capitalism works in the West because of the creation of property rights by which assets are converted by a series of representations to bring out their surplus value as capital. My thesis is that we can also create a series of representations to bring out the value of our assets under custom to identify the surplus value that can become the capital needed for our development. Thus we can create Melanesian property rights and Melanesian capitalism. The details of this challenge constitute the greater part of this paper. There are some fundamental differences in Melanesian capitalism that do not apply in the West. These relate to the extent of alienation and the extent of individuation permissible in Melanesia if we are to retain the integrity of the land group and the land group land holdings.


Some of de Soto’s commentary and recommendations can be explicitly applied to PNG today and some of the ideas we need to adapt to find our own application. For example de Soto clearly demonstrates that the growth of squatter settlements and huge investment on untenured customary land is creating a handicap to capital expansion. With these two developments we are going backwards and creating problems that need not to occur.



De Soto’s basic thesis


De Soto has studied the economies of several developing and transitional (ex communist) countries’ economies to uncover why capitalism is not flourishing there as it is in the West. His conclusions are remarkable. He shows convincingly that the majority of the wealth of the developing economies lies outside a formal property system which effectively locks up the surplus value of such assets preventing such economies from expanding their capital base by realizing the surplus value of their assets. He calls this the “extra-legal” economy because


such wealth is not catered for by the laws of the country. De Soto did not consider a country like Papua New Guinea but it is obvious that the 97% of our land held under custom is immobilized and handicapped because from the point of view of commerce it is also extra legal.


Capital generation is understood as the process of building up and making use of the surplus value of assets by representing those assets in different ways that create value without impinging on the physical assets themselves. These ideas can best be explained by de Soto’s description of six effects of property.


Property Effect No.1: Fixing the economic potential of assets


“Capital is born by representing in writing – in a title, a security, a contract and other such records – the most economically and socially useful qualities about an asset as opposed to the visually more striking aspects of the asset”. P.48


“In the advanced nations this formal property representation functions as the means to secure the interests of other parties, and to create accountability by providing all the information, references, rules and enforcement mechanisms required to do so. … most formal property can be easily used as collateral for a loan; as equity exchanged for investment; as an address for collecting debts, rates and taxes; as a locus point for the identification of individuals for commercial, judicial or civic purposes; or as a liable terminal for receiving public utility services, such as energy, water sewerage, telephone or TV”. p. 49


Property Effect No.2: Integrating dispersed information into one system


“For knowledge to be functional, advanced nations had to integrate into one comprehensive system all their loose and isolated data about property. p 5.1”

As a result of integration, citizens in advanced nations can obtain descriptions of the economic and social qualities of any available asset without having to see the asset itself”. p. 53


Property Effect No.3: Making people accountable


“…, citizens of advanced nations can contract for practically anything that is reasonable, but the entry price is commitment. And commitment is better understood when backed up by a pledge of property, whether it be a mortgage, a lien or any other form of security that protects the other contracting party” p55.


Property effect No.4: Making assets fungible


“One of the most important things that a formal property system does is to transform assets from a less to a more accessible condition, so that they can do additional work. Unlike physical assets, representations can be easily combined, divided, mobilized and used to stimulate business deals. By uncoupling the economic features of an asset from its rigid, physical state, a representation makes an asset ‘fungible’ – able to be fashioned to suit practically any transaction” p55



Property Effect No.5: Networking People


“ By making assets fungible – capable of being divided, combined or mobilized to suit any transaction – by attaching owners to assets, assets to addresses, and ownership to enforcement, and by making information on the history of the assets and owners easily accessible, formal property systems converted the citizens of the West into a network of individually identifiable and accountable business agents” p. 58


Property Effect No. 6: Protecting Transactions


“One important reason why the Western formal property system works like a network is that all the property records (titles, deeds, securities and contracts that describe the economically significant aspects of assets) are continually tracked and protected through time and space” p.60


“These files will alert anyone that eager to use an asset about things that may restrict or enhance its realization, such as encumbrances, easements, leases, arrears, bankruptcies and mortgages” p. 60


Melanesian “Social Contract” underlying property rights for land under custom


As documented by de Soto, the West took hundreds of strife torn and bloody years to sort out the social contract between society and formal land holdings. Individuals and companies can hold land in a manner that is recognized by all under the law. Melanesia has an established social contract for land developed over thousands of years and still almost intact today. When I say that the social contract is almost intact it is giving recognition to the fact that these principles are under stress in some high population areas. In Melanesia the social contract is the relationship between the group and the ground. An analysis of customary land law reveals the social contract for landholding, guided by the following principles:

  1. The group owns and the individual uses

  2. Land is prior to people as the land “owns” the group members raised on the land.

  3. The land received today from the ancestors is borrowed from future generations.


Before examining the applicability of se Soto’s effects of property to Melanesian property it may be useful to examine the levels or layers of ownership that may be discerned for property. The levels of “ownership rights” are not straightforward. The dichotomy between full rights and use rights favoured by anthropologists and kiaps and by land groups today is simplistic and unhelpful in discovering layers of rights that may contribute to understanding a transition of customary rights to modern property rights. One analyst3 has uncovered eleven layers of property rights. Most of these can be discovered as land rights in Melanesia. The following table shows very clearly that the group enjoys all aspects of property and individuals enjoy most of the aspects under the group title.


Table no. 1 Eleven levels of ownership

Ownership characteristics

The land group

The group member

No.1

The right to possess

The group possesses the entire landholding

The member possesses that land individuated out of the commons

No.2

The right to use

The group uses only the remaining commons

The member has full rights to use that land allocated under any form of customary mandate

No.3

The right to manage

The group has the right to manage the entire landholdings. The “first families” or “title holders” have the most say and the last word.

The member manages the land allocated.

No.4

The right to income

The group has rights to income for customary activities designed to strengthen the group. These include: exchanges, bride payments, compensation and mortuary payments and bigman supported trading cycles. The income can be generated by individual hard work and by exploitation of products taken from the commons.

The individual has the right to income from hard work on land allocation as conditioned by group responsibilities and obligations.

No.5

The right to the capital: the power to alienate, consume, waste, modify or destroy land.

Only the group has this ownership characteristic.

Even in the Highlands where there has been privately owned parcels of land for centuries there is no unrestricted right to alienate land parcels. The impact on the group is paramount.

No.6

The right to security

The group assumes the right to defend its security to its land. The State is supposed to guarantee security of tenure to the customary group, the former “mini state” in exchange for the cessation of tribal warfare.

The individual enjoys security as part of the land group.

No.7

The power of transmissibility

Only the group can bequeath such rights to its future members. It is more like a duty than a right.

An individual can only bequeath improvements and where it exists, land that has been individuated for centuries

No.8

The absence of term

Enjoyed by the land group

Individuals have terms. Gardens recycle back into the commons. Females have lifetime terms to use rights in patrilineal societies. Everyone has a finite lifetime.

No.9

The prohibition of harmful use

Very much the right and responsibility of the group.

The same responsibility would be enjoined on the individual.

No.10

Liability to execution

The liability to execution by default under mortgage or lien. First clarify just what I being mortgaged or given as security against a lien.

The land group cannot provide securities that can threaten its title.

Individuals enjoying certain types of tenure executed under custom can mortgage that tenure.

No.11

The residual character

Enjoyed by the group

This could be the oft called ‘spiritual identity’ of the group to their ground.

The individual identifies with his/her natal land and always states that the land is the last place of refuge from the troubles of life in the modern sector.

Can we in Papua New Guinea create real property rights as exist in the West?


Western capital is buttressed by two conditionalities that with a superficial view don’t sit well with the Melanesia social contract for land management. In the West the advance of capitalism was dependent on the definition of property rights of individuals. These rights were fundamentally alienable.


In Melanesia we have to develop aspects of alienability and individuation of property rights to suit Melanesian custom. The situation is not cut and dry. We need to have it both ways. We need to examine the way land rights are created in the first place. We can then examine potential uses of these rights once they are converted to property and thus find ways to manage property in a Melanesian way. At the same time we need to examine the role of the individual in traditional Melanesia in order to be able to appreciate the role of the individual in modern Papua New Guinea.


The customary principle regarding land is that the group owns and the individual uses. Land is group owned and labour is individually owned. Traditionally, in a limited sense, an individual’s hard work created private property. What people produced by their own hard work was theirs. Even this ownership was limited by two conditions – group obligations and limited individual or independent exchange options outside the group.


Group ownership comes about by the simple fact that all land was held by force of arms. No individual or even no one clan could hold land. Land groups had to have allies to assist secure the land. Claims by some bigman today that they are THE landowner are by definition bogus. They may however be the chief representative of the land group that owns. Some groups have the sense that the land owns the people that have been nurtured on that land – “ol bigpela long dispela graun, graun i papa long ol”. In many ways land is prior to people. People often are shifted round, adopted in or out, to secure and enjoy rights to land belonging to the group. This is the principle “dilim man”. In this way during her lifetime a female enjoys identical use rights to clan land as her male siblings while she lives on her natal clan land. “The group owns and the individual uses” sums up the social contract between the people and the land in Melanesia. The individual acquires land rights by birth, adoption, grant and by virtue of contributions to the life of the group from a position of permissive occupancy such as for refugees or relatives of wives that have married into the group.


Alienability and individuation - How can these cornerstones of successful capitalism in the West be adapted to suit Melanesian customary tenure? Does it seem to be impossible? Not so! In order to envisage the opportunities for alienation and individuation we need to examine the status of the relationship between the group and the ground in particular circumstances. The following table illustrates many instances whereby group owned and titled land can enter into modern commerce to the benefit of the titleholders.

Table no.2 Classification of land types under custom


Classification of land assets

Varieties of land


Application to Papual New Guinea

Private clan land:

  1. Land that is intimately connected to the survival and identification of the land group

  2. Outsiders are admitted only by custom such as in-laws and refugees under the patronage of the land group.

  3. Commercial activities by group members are informal or by CLUA

  1. This land cannot be alienated

  2. Lender beware – lien is the only security

Public clan land:

  1. Surplus land that is not intimately connected to the daily survival or identification of the land group.

  2. Outsiders can be admitted on modern non-customary terms.

  3. Commercial activities permitted on a par with government land

  1. Head title remains with the ILG.

  2. Normal tenured lease can be issued for long term

  3. Mortgages

  4. Alienability of the lease is possible

Communally owned clan land:

  1. Clan commons

  2. All clan members have access and use rights

  3. Short term individuation for gardens etc

  1. Commercial activity such as forestry

  2. benefits must be shared to all members.

  3. Outright sale to government only

Individually owned clan land:

  1. Land taken out of the commons for hundreds or thousands of years as in Highlands

  2. The individual possesses high proportion of property right characteristics

  3. Clan retains residual rights or residual characteristics

  1. Limited alienability

  2. Covenants apply

  3. Informal “outright sale” becoming common

  4. Buyer beware


Let us try to apply de Soto’s six effects of property to Papua New Guinea today and predict how they can be extended to create a productive future that involves all citizens in development.

Table No. 3 Property effects in the Papua New Guinea context


This article continued at Part 2 and conclusion of "Creation of Melanesian Property Rights - Building Bridges between Custom and Commerce " by A.P. Power, Wewak, PNG

References


De Soto, H. 2000 The Mystery of Capital Black Swan Book


Honore. A.M. 1961 “Ownership” in A G Guest (Ed) Oxford Essays in Jurisprudence, London, Oxford University Press pp. 112-128


Lea, D. 1997 Melanesian Land Tenure in a Contemporary and Philosophical Context

University Press of America


Power, A. P. 1986 "The Future of Clans in Papua New Guinea in the 21st Century". In Ethics of Development: Choices in Development Planning, eds. C. Thirwall and P. Hughes, Port Moresby, UPNG Press 1988.


Power, A. P. 2001 “Land Mobilization Programme in Papua New Guinea”, Valuers Conference Lae 2001

1 A.P.Power Executive Director Ivin Enterprises Ltd PO Box 772 Wewak powerap@daltron.com.pg

2 A.P.Power Executive Director Ivin Enterprises Ltd PO Box 772 Wewak powerap@daltron.com.pg

3 Honore as quoted by David Lea

4 See Power

Please note:  other articles on Land Development [by A.P. Power and others] can be found at www.pngbuai.com Papua New Guinea's web site for research level PNG Books, Useful Articles & Information published by John Evans, PNG

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