Cambodia Land Titling Urban Baseline Survey Report
December 2007

Executive Summary

1. Introduction

The Ministry of Land Management, Urban Construction and Planning (MLMUPC) is implementing a land management and administration project (LMAP) with support from international donors in order to strengthen land tenure security and land administration systems in Cambodia. Among other activities, LMAP is undertaking a systematic land-titling programme in which 1 million titles will be issued during the first phase (200207). During this phase, LMAP is issuing land titles in the urban and peri-urban areas of Phnom Penh municipality and Siem Reap district, as well as other urban areas in the country.

The Cambodia Development Resource Institute (CDRI), in collaboration with the MLMUPC, collected baseline survey data in and around Phnom Penh, Siem Reap and Serei Saophoan (i.e., Banteay Meanchey) from October to December 2005. CDRI conducted 2706 household interviews in areas representing a mix of property characteristics and land use patterns, as well as dynamics (e.g., transactions, documentation, conflicts). The primary objective of the urban baseline survey, as with an earlier rural survey (CDRI 2004), is to generate data that will provide a basis for a systematic comparative evaluation of the economic and social impact of the land-titling programme after three years.

The expected benefits of land titles in urban areas include increased investment in residential and commercial property, improved access to formal credit, more efficient markets that allocate land to more economically productive uses, fewer conflicts and better land administration services, including the use of the official registry to facilitate land transactions. Other expected benefits include increased government revenue from taxes on land transactions. Government planners and others also expect more secure land tenure through land titles to play an important role in reducing poverty in both rural and urban areas. Land titles are therefore expected to strengthen the institutional framework of urban development and thus contribute to sustainable macro-economic growth.

The economic impact[1] of land titles in the three urban areas must also be considered in the wider context of the rapid growth and longer term development plans of each, as outlined in the master plans for Phnom Penh and Siem Reap, because the areas vary in economic, social and geographic characteristics. However, the rapid growth of the real estate and housing markets, the expanding business sector, including small and medium enterprises (SMEs) and foreign direct investment (FDI), along with the expanding credit markets for consumer loans, home mortgages and commercial investments, suggest high consumer and business confidence in all three urban areas in the short-medium term. As a result, LMAP’s systematic land-titling may be very timely in strengthening the institutional framework that supports economic growth in these urban areas.

The potential social impact of land titles must also be considered in the context of the wide disparities in wealth between upper and lower income groups, primarily with respect to equity, gender and poverty reduction. For example, upper income households could benefit more than others from the titles because the higher value of their property may make them eligible for larger loans from institutional lenders, while lower income households may not be able to obtain credit because they may not meet other loan requirements. As for the distribution of benefits according to the sex of household head, female-headed households should be able to obtain more loans that can be used for housing improvements and business start-ups and expansion. Women’s security of tenure may also be strengthened in cases of divorce or the death of a husband, although tenure rights represented by land titles must be upheld by the local authorities and courts in cases of conflict. In terms of poverty reduction, the urban poor may benefit from secure tenure in cases where they are eligible for land titles. There are, however, concerns that the poor could end up losing land by selling it for short-term gain in response to rapidly increasing land values. In cases where the poor reside in areas for which they may not be eligible for land titles, alternative approaches need to be developed to regularise or otherwise provide secure land tenure for them.

The assumptions and predictions of government planners and donor advisers about the expected benefits from land titling are primarily based on property rights theories that link investment incentives to secure land tenure, as well as scattered empirical evidence from research in countries where such programmes have been implemented. The basic argument is that people are more likely to invest resources in productive activities when they are confident that they, or their heirs, will enjoy the benefits of such investments in the future. (Brandao and Feder 1996; Barzel 1997). Another set of arguments supporting improved tenure security in the form of land titles links property ownership to the creation of potential wealth and affluence. De Soto (2000), for example, has argued that the poor in developing countries actually possess substantial assets, albeit in forms of “dead capital” that cannot easily be used for investment. This argument suggests that governments should provide property ownership in the form of legal titles that the poor can use as collateral for credit for investments, leading to significant reductions in poverty and improved well-being.

Formal land titles, however, are not the only governance mechanism that provides security of land tenure. Researchers have identified a number of other land tenure mechanisms in urban areas around the world, including customary tenure and a wide range of non-formal tenure categories with different interlocking forms of legitimacy (Payne 2000; Mulamir and Payne 2001). As a result, there may be no absolute standard by which security of land tenure can be assessed. The use of formal titles to govern land tenure must be understood as part of a market approach to urban development that takes place within a broad arena of formal institutions, including credit institutions, regulated real estate markets and official land management and registry systems.

In addition to land titles, land use classification, long-term planning (e.g., master plans) and enforceable zoning regulations are also essential for promoting better urban land management and efficient development. Land classification that clarifies private and public lands[2] will help reduce conflicts and promote good governance. For example, private encroachments on public space, such as informal settlements, pose a variety of difficult governance issues, including opportunities for informal tax collection by public officials. Long-term planning by city officials and private investors is also facilitated by enforceable zoning regulations. For example, residential, commercial and industrial activities all require a variety of services involving different technologies, and certain private activities impose costs (i.e., externalities) on the public that can be minimised with better planning and zoning. Private investors must also be able to make accurate predictions about land use and values over time. The potential impact of land titles on investments may be reduced in the absence of publicly available master plans and enforceable zoning regulations.

The methodology used in the urban baseline survey employs a simple model to make predictions about likely impacts when location and household factors are combined. For example, high potential impact (HPI) householdsbased on annual per capita consumption quintiles in each urban area surveywill benefit most in high capacity areas (HCAs) situated along main roads and streets characterised by better access to utilities and services. Conversely, low potential impact (LPI) households will benefit least in low capacity areas (LCAs) situated off the main streets with less access to utilities and services. The degree to which HPI households in LCAs and LPI households in HCAs benefit from land titles will depend on where and at what rate urban infrastructure and access to utilities and services improve. This again suggests that overall land-titling impacts may be undermined by the absence of strategic development master plans and enforceable zoning regulations. It also suggests that land-titling effects can be enhanced by strong enforcement of property rights in the face of encroachment.

This model structures the research according to a series of testable hypotheses using quasi-experimental methods that compare household survey data from the current baseline survey (T0) with data that will be collected at a later point in time (T0 + x). The research focuses on several key indicators of land titling impacts, including housing improvements and business investments (e.g., start-ups, expansions, employment) access to and the use of formal credit, land use, land values and transactions, the use of the official registry to facilitate land transactions and conflict reduction and resolution. While potentially robust, this approach faces several constraints involving “tracing problems” (i.e., residents who leave a particular area after titles have been issued) and “time-lapse problems” (i.e., short-term impacts may vary from medium and longer terms impacts). “Measurement problems” may also arise when the gap between the time of the baseline survey and the issuance of titles becomes so large that intervening variables distort or cloud the impact of land titles on key indicators.

2. Findings and Observations

The direction and rate of growth in the three urban areas varies according to geographic, demographic, economic and institutional circumstances. Phnom Penh’s economy is structured by manufacturing (garments) and services (schools, financial institutions, tourism), as well as transportation as it positions itself strategically with regard to regional and sub-regional highway and rail transport corridors. The high rate of natural population growth and migration are driving the city to expand in all directions except eastward across the Mekong River.[3] Five planned satellite cities and new transport infrastructure will likely steer the direction and set the pace of land market development in impacted areas for the foreseeable future. Elsewhere, land use patterns and infrastructure development may unfold in a haphazard way according to private sector interests in the absence of a master plan with clear zoning regulations.

Siem Reap’s economy is largely driven by rapidly expanding tourism and, to a much lesser degree, transport. Siem Reap’s high rate of population growth from immigration will increase demand for residential housing, while increasing numbers of domestic and international tourists will place more demand on accommodation, services and infrastructure. Siem Reap is likely to expand primarily to the east and south-east, because growth possibilities west and north of the city are constrained by Apsara Authority polices governing land use in the Angkor Heritage Zones 1 and 2. For this reason, Siem Reap may currently have a stronger land use planning and enforceable zoning mechanisms than Phnom Penh.

Serei Saophoan is located in the north-west of the country at the convergence of National Route 5 connecting to Battambang and Phnom Penh and National Route 6 connecting to Siem Reap to the east and Poipet to the west on the Thailand-Cambodia border. This strategic location suggests that Serei Saophoan will likely develop into an important transportation and commercial hub in the medium- to long-term. The surrounding area is fertile farmland in which agriculture is becoming increasingly mechanised, and as a result, Serei Saophoan could eventually emerge as an important agro-processing zone. Its commercial and residential areas are structured according to a more or less rectangular grid with wide, albeit largely unpaved, roads and streets that should facilitate the development of urban infrastructure and services in the future. It is likely that the city’s commercial sector will initially expand in three directions along the major national routes, while residential areas will develop off the major highways.

Given such variations in the characteristics and dynamics of each urban area, it is likely that land-titling impacts will vary across the peri-urban and urban sectors of each as well as across different households. Generally speaking, the recent trends in the key indicators of such impacts suggest that land titles are likely to have multi-dimensional impacts, many of which may be indirect, and will therefore help strengthen the institutional framework of Cambodia’s current growth. The degree to which such benefits are equitably distributed, however, will depend on how LMAP prioritises potentially conflicting or competing objectives that may sidetrack poverty reduction objectives. For example, the distribution of benefits will depend on where the various provinces and municipalities decide to target and sequence land-titling efforts, and the degree to which the focus is on optimising either the economic or social impact of land titles. The economically and socially optimal impacts of land titles therefore may not be the same across all households.

2.1. Housing and Home Improvements

More secure tenure in the form of land titles is expected to stimulate investment in housing and home improvements and to facilitate more efficient markets that allocate land assets to their most economically productive use. Lower consumption quintile households may make modest housing improvements according to available resources, capacity to borrow and location relative to transport and services. Such activities can be measured according to the quality of building materials used and the extent of improvements. Upper consumption quintile households, on the other hand, may have already made home improvements, although they may add or improve other buildings on their plots. Rather than make such improvements, these households might purchase additional land for productive or speculative purposes. They may also invest in housing complexes that would increase the overall supply of housing. The actual distribution of such housing would depend on the price of individual units and rental markets. This is a matter of particular importance for the poor because access to good affordable housing represents a key component of poverty reduction efforts in urban areas. For this reason, it will also be important to monitor housing rental prices, particularly in Phnom Penh and Siem Reap.

2.2. Land Use

Land titles may have an indirect impact on land use patterns to the extent they facilitate more efficient transactions that provide greater returns on investments. As well, the nature and direction of land use changes in and around the three urban areas will be highly dependent on the long-term development strategies of each, which will in turn require transparent land use planning and enforceable zoning mechanisms. In Phnom Penh, it is possible that in the three surveyed urban districts, a shift in land use will occur as residential property is converted to commercial and/or rental property, while in the peri-urban areas changes in land use may involve a shift from residential and agricultural uses to commercial (including industrial) uses. In the urbanising areas of Siem Reap, land use impacts will be directed eastward along National Route 6 and, to a lesser extent, along the road connecting Siem Reap to the Tonle Sap Lake, as agricultural land is converted to commercial and residential uses, while land use change in other peri-urban areas will be constrained by Apsara Authority zoning regulations in cultural heritage sites. In Serei Saophoan, land use is likely to change rapidly in all directions, especially to the west, east and south of the city as transport infrastructure is improved and regional trade increases.

2.3. Land Transactions

Land transactions will be the primary mode of land acquisition, and hence land re-distribution, in all three urban areas. As a result, the share of land acquired through state allocation is likely to decline, perhaps sharply, unless social land concession mechanisms are established in one or all of the areas. Such shifts will not be the direct result of land titles per se, but rather the result of expanding land markets for productive and speculative investment. Land titling, however, will surely facilitate the process by reducing the transaction costs associated with transfers, thus making contractual exchange between buyer and seller more efficient. As a result, land titles will serve as a key institutional mechanism through which land assets are mobilised for medium- and large-scale development projects according to the each city’s long-term master plan. This is particularly the case in and around Phnom Penh, where several large commercial and transport projects are already under way or being planned, as well as in Siem Reap, where a hotel zone (Cite d’Angkor) is planned on the north side of National Route 6, across from Psar Leu.

The degree to which land transactions will be recorded in the official registry is another matter. The survey data show that people in all three urban areas continue to rely primarily on documents that may be officially endorsed but are not legal in terms of validating ownership. There is some evidence that people continue to use such methods to validate land transactions at the village or commune level even after the issuance of the LMAP titles. This is a matter of fundamental importance because one of the key reasons for undertaking systematic land-titling has been to facilitate land transfers through the official registry. It is also important to observe that transactions that take place outside the official registry will contribute to continued conflicts over land and represent a major source of lost revenue for the government.

The limited number of cases of conflict reported in the urban survey will not be useful for measuring the extent to which land titles help reduce conflicts. In the follow-up survey, interviewers will need to ask households specifically about their perceptions concerning the role land titles may or may not have played in reducing conflicts. It will be especially important to inquire about the role that land titles have played in resolving conflicts that subsequently arise after they have been issued. Another important line of inquiry will concern the role of local authorities and the courts in enforcing land titles in cases of conflict.

2.4. Access to Commercial Credit

With respect to increased access to commercial credit, the research hypotheses predict that the volume of commercial loans will increase as households use land titles as collateral for bank credit. Two of the most visible areas of potential impact are likely to be the housing and real estate sector, as discussed above, and the business sector. Although it appears that people continue to use own resources for business start-ups, there is some anecdotal evidence of a recent increase in the number of loans for business operations and expansion. The indirect employment impact of land titles may be significant if they help stimulate increased investment in business start-ups and expansions.

There is also evidence of increased borrowing for real estate, including speculation, and housing investments. The issuance of land titles is expected to sustain, if not accelerate, these trends in the near to medium term. As a result, the number of loans is expected to increase along with the average amount of each loan. The use of the loans is likely to shift as well, as more people increase borrowing from commercial banks. Although these trends may be fairly consistent across all quintile groups, upper consumption quintile households may benefit more than lower quintile households from land titles because the higher value of their land will make them eligible for larger loans.

2.5. Small and Medium Enterprises

The survey data suggest that SMEs are a potentially important source of employment in all three urban areas. The employment impact of land titles may be significant if titles help stimulate increased SME investment and business expansions by promoting a sense of more secure tenure and providing access to more affordable credit.

According to recent discussions with banking officials, the number of loan applications and approvals has increased significantly over the past year, especially for business expansions, including SMEs. Investors are still reluctant to borrow from commercial banks for business start-ups because they are not willing to take loans when they are unsure of the returns on the investment. As a result, business start-ups continue to rely primarily on own sources and savings plus family and friends. Once the business is up and running and owners see a steady and predictable flow of returns, they appear more willing to obtain a loan from commercial banks in order to expand.

Such shifts in attitudes concerning commercial banks appear to be a relatively recent phenomenon. As the business climate in Cambodia improves and investors develop more trust in the banking sector, it is likely that the trend toward increased demand for credit for a variety of purposes will continue. Because commercial banks require “hard” land titles to secure such loans, it is quite likely that land titles will contribute to increased consumer and business borrowing. Such an increase, however, could not be solely attributable to land titles; rather, it would represent the merging of several key variables to form a virtuous cycle of development and growth. These variables would include increased tenure security in the form of land titles, business experience and skill (i.e., entrepreneurship), political stability and security, banks that want to lend and know how to do so and people’s institutional trust in banks. The development of land and credit markets, as well as the business sector, all seem to rely on many of the same factors regarding trust in institutions. Once these factors are well in place, land and credit markets may function more efficiently, thus enabling entrepreneurs to predict returns on investments with greater accuracy and reliability.

2.6. Gender

The research hypotheses predict that land titles will have a wide range of impacts on gender-related concerns pertaining to land. Many indicators identified in the rural baseline survey, such as landholdings and access to affordable credit, are also applicable to assessing the impact of land titling on gender in urban and peri-urban areas. Other indicators include investments in housing and business start-ups and expansion. It is expected that female-headed households will obtain an increased number of loans that are invested in housing and business improvements. The rate at which female-headed households obtain loans may, however, depend on a variety of circumstances, including household assets such as land.

The research hypotheses also predict that women’s tenure security will be strengthened. One way to assess this will be to examine the outcome of cases involving the death of a husband or divorce and evaluate the extent to which the spouse’s or widow’s land rights have been upheld by the courts or other conflict resolution mechanisms. Another way to assess this is to examine cases involving female-headed households. While a household survey may enable researchers to count the number of such cases, qualitative approaches are also required to understand better the social and legal dynamics of such cases.

2.7. Observations on Methodology

The data collected in Phnom Penh municipality, Siem Reap and Serei Saophoan conform largely to expected trends and patterns and therefore appear reliable. Only in a few instances, such as the surprisingly low number of reported land-related conflicts and apparent inconsistencies concerning housing construction (e.g., roofing materials), did the data show questionable or puzzling results. More rigorous efforts concerning land and building valuation techniques and procedures should also be employed in the follow-up survey. MLMUPC personnel familiar with land valuation techniques should be more involved in helping to train field enumerators and to oversee quality control regarding valuation in the field. Most importantly, the follow-up survey should incorporate qualitative research tools into the overall methodology in order to provide more texture to the household survey data, because many of the important nuances concerning the social and economic impacts of land titles cannot be fully captured using quantitative research methods that rely solely on household surveys.

3. Policy Implications and Research

During the course of the baseline survey project, several issues emerged as important areas requiring more focused follow-up. These include issues associated with targeting land tenure interventions in support of the government’s poverty reduction objectives, land use planning and zoning and facilitating land transactions through the official registry. This discussion concludes with recommendations for further research in matters pertaining to the urban poor and gender equity in land tenure security.

3.1. Poverty Reduction

More secure tenure in the form of land titles is expected to stimulate more investments in housing and home improvements as well as to facilitate more efficient markets that allocate land assets to their most economically productive use. Because housing is one of the central issues associated with the urban poor, important questions arise concerning the degree to which land titles will stimulate improved housing for the poor. In cases where the poor reside on land that they rightfully occupy and for which they are eligible to receive title, the research hypothesis predicts that these households will over time begin either to invest own resources or to use titles to borrow to improve their housing. However, there are serious concerns that the poor could sell their land in response to rapidly increasing land values. If this is the case, then alternative modes of providing secure land tenure may need to be developed in accordance with the poverty reduction objectives of the land-titling programme. For example, informal communities could initially be granted communal land titles along with and in support of community upgrading efforts. Individual titles could be issued later, at which time households could sell land according to their ownership rights.

In cases where the poor do not have a rightful claim to the land they occupy, they are vulnerable to eviction as the state develops infrastructure and land values increase. Alternative modes of land occupancysuch as social land concessions—are, however, a more viable and sustainable solution than forced evictions. For example, in cases where the poor occupy state land, they could be granted temporary occupancy rights over a specific period while alternative arrangements are planned and developed. Although land titles may indeed play an important role for the poor who own land, for other poor more innovative interventions may be required in order to provide secure tenure leading to housing and home improvements as well as other benefits.

3.2. Land Use Planning and Zoning

The sequential relationship between land use planning, zoning and titling is important in terms of optimising the benefits from land titles in urban areas. The private and social benefits of land titling are optimised in urban areas where land use master plans and enforceable zoning regulations are in place prior to the titling exercises. The land-titling efforts in all three urban areas have begun before there has been clear boundary demarcation between state public, state private and private land. While the land-titling programme represents an important and integral step in this process, special efforts must be made in certain circumstances to avoid issuing titles in specific areas. For example, in some areas where land has been transacted in an unplanned and haphazard way, there may be insufficient space available for infrastructure or services.

In Phnom Penh, and to a lesser extent Siem Reap and Serei Saophoan, however, the private sector has been largely determining land use patterns in the absence of master plans and zoning regulations. This represents potential inefficiencies associated with distortions in the distribution of public utilities and services that serve private interests rather than the public interest. As a result, it is possible that the issuance of land titles may exacerbate problems associated with the current mix of land uses in any given area. Without government zoning regulations and enforcement, the uncertainties associated with uncontrolled mixed land uses could (1) drive up transaction costs associated with competition over public resources among private individuals, (2) impede incentives for productive investments, particularly for small investors, and (3) undermine the development of efficient land markets.

A master plan that outlines Phnom Penh municipality’s development objectives through 2020 as well as zoning and land use planning was drafted in 2003 but has yet to be approved. In the meantime, many public lands and buildings have been sold illegally, and there are few structures and little land remaining for developing infrastructure and utilities. Moreover, a great deal of land occupied for commercial purposes has not been productively used but is held for speculation. The environment and aesthetics of the city are being undermined by an excessive concentration of commercial activities in small areas, as well as illegal construction. It is important that the master plan for Phnom Penh be approved and made public as soon as possible.

Such haphazard growth and development contribute to poorly functioning land markets and undermine good governance because they encourage speculation by government staff or those with access to insider information. For example, if speculators acquire all the land in a given area, the result will be the need eventually to adjust land ownership and boundaries to accommodate necessary infrastructure. Such adjustments will be costly and time consuming, and will very likely generate conflict. Therefore, prior to titling, land use in underdeveloped areas should be demarcated in accordance with zoning regulations and urban development plans.

The major exception to this set of observations concerns the Apsara Authority in Siem Reap, which is mandated to preserve and maintain the Angkor Heritage Park. Land use within the Apsara jurisdiction, especially Zones 1 and 2, is strictly enforced. While Apsara is not always as transparent as it should be, its approach to strictly enforcing zoning regulations in the Siem Reap area should serve as a model of land use planning and zoning enforcement in other urban and peri-urban areas, especially in Phnom Penh. Given the rapid population growth and urban expansion, this is one of the most urgent priorities facing the government.

3.3. Land Transfers and the Official Registry

As in rural areas, in all three urban survey areas, there is a strong preference for using “official but not legal” means of facilitating land transactions. This suggests that ifas expectedland sales continue to increase in urban areas after the issuance of titles, people may still continue to document transactions locally in a manner that involves government officials but is not legal. There is some anecdotal evidence of this occurring already in areas where titles have been issued as well as documented evidence in areas such as Prey Nob in Sihanoukville (ADI, 2007). This is a matter of fundamental importance because one of the key reasons for undertaking systematic land titling has been to facilitate land transfers through the official registry. It is also important to observe that transactions that take place outside the official registry will contribute to continued conflicts over land and represent a major source of lost revenue for the government.

In terms of land transactions and land conflict resolution, the data show a clear preference for managing land matters at the village and commune levels. With particular respect to land transactions, this suggests that a long-term objective for land administration and local governance would be to locate cadastral authority and related functions (e.g., land sales tax collection) at the commune level. There would also need to be objective incentives to encourage people to handle land transactions through the official registry. For example, failure to pay tax should invalidate the legality of a land sale. The land sales tax could also be lowered to encourage better compliance. In cases involving land conflicts, clear jurisdiction and lines of appeal are required to empower local authorities and the courts to resolve cases objectively according to the law.

3.4. Research Priorities

Two areas of particular concern require specifically targeted research. One area is land tenure security in informal urban settlements throughout the country. This research would consider issues pertaining to tenure security and property ownership in so-called illegal settlements as well as slum communities where the poor rightfully occupy the land on which they reside. The first component of such research could include a comprehensive social assessment, including conflicts and their resolution, of slum communities that could be eligible for regularising tenure and upgrading prior to the eventual issuance of individual land titles. This research could help inform efforts to provide people with alternative modes of secure tenure in support of poverty reduction objectives. A second component of the research could include reference to issues pertaining to evictions and resettlement, including the potential impact of land titling in relocated settlements.

A second area of research is land tenure security for women. This research would look specifically at how land titles have improved or strengthened women’s land tenure security and the well-being of female-headed households. In both cases, qualitative research methods would need to be employed because many related issues may be sensitive and complex, and would therefore not be easily captured with a quantitative survey. Indeed, many of the issues pertaining to gender equity in land tenure rights and security are primarily social and cultural in nature and require innovative research methodologies.

[1]     The use of the term “impact” in this instance refers to the degree to which land titles may or may not affect measurable change in selected indicators. An “impact” can be either positive or negative in nature, although the sense of the word as used throughout this report is generally positive.

[2]     State land in Cambodia is classified as either Private State Land or Public State Land. Private state land can be converted to private use, such as an economic concession. Public state land is land that serves a public purpose, and generally cannot be converted to private use without a specific decree.

[3]     Phnom Penh is also expanding upward as more multi-floor buildings (residential and commercial) are being constructed in response to increasing land values and rental prices.