4. Economic and social implications of weak land governance in the Middle East and North Africa

(Teti et al., 2018). Unreliable, nontransparent land services; complex formalization procedures; lack of incentives to maintain formal property rights; and lack of perception of benefits arising from formal tenure all contribute to a high prevalence of informal land transactions. Lack of capacity of local governments to plan formal urban development and lack of clear processes to integrate customary rights into the statutory system exacerbate this. In addition, the restricted supply of formal land in cities and the high costs of registration make formal land and housing unaffordable for a large fraction of the population, as Figure 3 below, which plots the share of urban slums in Middle Eastern and North African countries against the cost of property registration (measured as a percentage of property value) illustrates.3 The positive association suggests that financial barriers to registration are an important driver of urban informal housing.4

4. Economic and social implications of weak land governance in the Middle East and

North Africa

Weak land governance in the Middle East and North Africa results in inefficient, unsustainable, inequitable access to and use of land, which has severe implications for the economy.

Inefficient Allocation and Use of Land (Misallocation)

In the Middle East and North Africa, governance constraints and mistargeted land policies introduce distortions to the economy that may lead to suboptimal use of land, which in turn can have economic, environmental, and social costs. Such distortions may stem from nonmarket pricing of land, high land transaction costs, land tenure insecurity, or credit constraints, which are all important characteristics of the land sector in the region. For example, when land is held informally, it reduces access to credit, which in turn can lead to underinvestment in land, low agricultural production, and limited job creation. Incentives for investment in agriculture that do not account for environmental impacts can lead to water pollution and depletion, land degradation, and less capacity to respond to the challenges of climate change. The policies and social processes that lead to land fragmentation can also result in lower productivity by preventing economies of scale from land consolidation.

For firms, difficult or biased access to land can result in misallocation of land as a factor of production if nonproductive firms and sectors disproportionately use land at the expense of more productive firms and sectors. If this is the case, the aggregate output is lower than would have been possible if land had been more efficiently allocated within the economy.

The economy can also organize spatially in ways that are inefficient and unsustainable. This is likely to occur when land is poorly managed, mechanisms governing land allocation do not follow market principles, access to land is constrained, or there are perverse institutional or regulatory constraints. Examples of such practices include laws and regulations that produce adverse outcomes (e.g., floor area ratio ceilings or minimum lot size requirements that produce sprawl in cities). Several cities in the Middle East and North Africa have vacant land and vacant residential units, which reflects suboptimal use of urban space. This may have various explanations ranging from practices of speculative landholding to obstacles that hinder construction or exemptions of vacant residential units from property taxation that give owners an incentive to maintain their properties empty.

3 The ratio of property registration costs to property value is from the Doing Business database, which the World Bank recently discontinued because of irregularities that do not affect the data used in this chapter. 4 It is estimated that more than 24 percent of the urban population in the region lives in slums and that the proportion of the urban population residing informally—a larger category than slums—is significantly greater.

Unsustainable Land Use

Urban and agricultural land use in the region lead to sustainability problems that weak land governance can exacerbate. Global figures on urban population and built-up growth show that Middle Eastern and North African cities tend to grow in ways that are less dense than the world average, which makes service delivery more difficult and strains transport systems, giving rise to harmful environmental impacts. Likewise, agriculture in the Middle East and North Africa tends to be highly subsidized—including indirectly through water subsidies—with harmful environmental consequences such as water depletion in a context of already diminishing water reserves.

One of the most important consequences of the misuse of land in the region—residential, industrial, or agricultural—is the impact on water. A major dilemma for the region is how best to use land for housing, industry, commercial activities, or agricultural production while preserving water and pursuing food self-sufficiency and food security goals. This implies that governments must make strategic trade-offs regarding how land should be used. An interesting example of such a trade-off is the concern of several governments in the Middle East and North Africa that cities expand into prime agricultural land surrounding cities—often after informal land conversion processes outside urban plans. Satellite imagery analysis shows that an average of 24 percent of urban growth in the region occurs on cropped land. Although this is not that different from the world average, the figure is much higher in some Middle Eastern and North African countries, with 47 percent of urban expansion in Egypt occurring on cropped land.5 Although planned urban expansion leapfrogging into the desert can help preserve scarce peri-urban agricultural land, it also has economic, social, and environmental costs. Whether conversion of agricultural land to urban land should be discouraged or left to markets is thus an important policy question that requires a comprehensive cost–benefit analysis.

Social Imbalances in Land Access

Inequitable access to land is also a root cause of social imbalances and poverty. Informal housing not only removes significant portions of cities from the formal land market and the fiscal base, but also increases insecurity and disputes over land, costs of service provision, and harmful housing environments with negative health and socioeconomic externalities.

Limited access to land harms vulnerable groups and women in particular, constraining their economic opportunities. In the Middle East and North Africa, formal and informal institutions and gender-imbalanced social norms and practices (especially in rural areas and in matters of inheritance and asset management) are detrimental to women’s rights. Because women primarily access land through marriage and inheritance, they are highly vulnerable in the case of divorce or death of a spouse. Under such scenarios, women may not be entitled to keep the land they owned or worked on, or they may be denied the right to reside on their marital property. Analysis of Jordanian shari'a court data over a decade shows that up to one-third of heirs fully relinquished their inheritance rights every year. Social norms may further prevent women from asserting their rights in court. If women refuse to waive their inheritance rights, they can be threatened with abandonment; ostracism; and in extreme cases, verbal abuse and physical violence. Different access to land and discriminatory practices lead to stark differences in land and housing ownership rates between men and women. In rural areas, gender gaps are often magnified, which results in the region having the lowest rate of women’s

5 Because Egyptian cities are located in the fertile Nile valley and on the banks of the Nile.