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have been mentioned; the leaders among these are detailed below. It will not be easy to resolve these
conflicting demands for the same funds.
1. Increasing the supply of serviced farmlands
When the fund first considers an area for development, it should "freeze" the area to prevent
the issuance or registry of any further state or customary consents awarding land to anyone.
Otherwise, insiders will grab all the land before the fund opens it up, creating at least the appearance
of corruption. This grabbing would also prevent the fund from helping either the best farm operators,
redundant state employees, or other disadvantaged persons needing assistance. Secondly, before
committing itself to develop a specific area, the fund should make a complete inventory of land rights
in the area and negotiate with existing holders of leaseholds, firewood or grazing rights, or any other
land rights. The fund then would buy out holders who are willing to sell, at the current market value
of their holdings (not at the value which those holdings will have after the fund develops the areaa ).''
The fund should also negotiate with holders who are not willing to sell, as to the amount of
money or land these holders will contribute as their fair share of the investment the fund will make
in developing the area. Whenever land is already privately owned or held on long-term leaseholds
before government provides improvements, it is entirely reasonable to expect those who profit thereby
to contribute most or all of the cost of the improvements. (Colombia, among other countries, makes
a formal determination of benefits and assigns a share to each beneficiary at the feasibility study stage
of a project [Rhodes 1990]). If the landowners argue that they cannot afford to contribute the amount
by which the project feasibility report says they will benefit, the government can then say that the
feasibility report is wrong and that the project is not justified, so it won't be built. If the landowners
respond that the project should be built anyway, without charging them for part of the increased value
it will give to their property, at least their greed is demonstrated.
Payment, of course, can wait until the project is actually built and benefits realized. The
amount due from each owner should be documented with promissory notes and a mortgage, properly
recorded, and subject to a price index clause to guard against inflation, as well as interest at a normal
rate for other investments. If there is no provision for inflation protection through indexing, the
interest rate should at least be that rate which the government itself pays when borrowing. In effect,
government is lending money to the property owners who benefit from a project, and they repay over
time.
In some countries, such as the Dominican Republic, existing holders are required by law to
turn over part of their land, without compensation, as their contribution to state-funded irrigation
projects. They still benefit, because the irrigation greatly increases the value of their remaining
holdings. But by turning over part of their land, they enable the government to share the benefits of
that investment with landless laborers or other disadvantaged persons.
15 Until a much more active market exists in land rights, these values will have to be estimated by capitalizing average
potential net incomes. Before construction of improvements actually begins, an independent authority—perhaps an elected
council, a traditional chief, or an independent auditing firm—would investigate and verify that fa ir compensation was actually
paid to families that lose land or rights, just as is required by the World Bank when families are forced to move for Bank-
financed dams and similar projects.