Proposal for additional Bank/Trust Fund Budget for Poverty and Social Impact Analysis FY06

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1 Proposal for additional Bank/Trust Fund Budget for Poverty and Social Impact Analysis FY06 Name of Proposal: Impact of Land Tenure Reforms in Urban Ethiopia Task Manager s Name: Caterina Ruggeri Laderchi and Rumana Huque Dept/Div: AFTP2, AFTU1 Total Amount Requested: $50,000 Fund center (OUI #): A. Description of the policy reform for PSIA and rationale for selecting this reform (for instance, expected size and direction of the poverty and social impacts. prominence of the issue in the government s policy agenda, timing and urgency of the underlying policy or reform, and level of national debate surrounding the reform). Land tenure is one of the most politically-charged policy issues in Ethiopia, where the government still owns all land, and formal land markets are essentially nonexistent. Despite consensus in the development field about the importance of tenure security, for example for encouraging investment in land (and thereby increasing farm productivity) and allowing access to financing (by using land as collateral), there has been a reluctance on the part of the current government to discuss options for land policy reform. The government s hesitancy to allow markets to determine land ownership and use stems from its concern about the potentially regressive distributional impact and accompanying risk of social instability. There is evidence to suggest that lack of secure access to land has been a constraint to private sector growth in Ethiopia. For example, the 2002 fielding of an Investment Climate Assessment in Ethiopia, which sampled large businesses in selected urban areas, revealed that nearly a third of the sampled firms considered inadequate access to land among the three biggest problems they faced. In a 2003 survey of the urban informal sector, about 24 percent of establishments reported that the assistance they most needed from the government was either help with access to a plot of land, or access to a rented building. Another 16 percent indicated that this was their second most important need from the government. Also, lack of secure tenure appears to be a significant problem in terms of access to decent housing, with urban slums rapidly growing. The recent UN Habitat Urban Inequities Survey (2003) found that 43 percent of Addis Ababa residents did not feel that they had secure tenure. According to the prevailing view in the international literature, this is likely creating strong disincentives to making improvements to land/housing structures, thus constraining progress toward MDG7 (improving the lives of slum dwellers). In recognition of the importance of tenure security for its growth and poverty reduction agenda, the government has recently made several moves to introduce market-based mechanisms in determining land usage. In rural areas, with a view toward the urgent priority of boosting agricultural productivity, there is an initiative underway to expand a 1

2 pilot rural land certification program that started in 2003 to farmers across the country. 1 In urban areas, a proclamation in May officially established a leasehold system. In a related follow-up measure, a program was started in February 2004 to regularize about 200,000 units in informal settlements and provide the residents with lease certificates, which should be completed by July While the move toward land liberalization is welcomed, there are critical questions about its impact at the household level. A recent Bank paper, for example, concluded that the government s proposed low cost condominiums designed to replace urban slum housing slated for demolition would be unaffordable for a majority of the population. 3 Moreover, the government has indicated its intention to move further in the direction of liberalization, and is reassessing the structure of land development and management institutions, suggesting that distributional analysis of the incremental reforms to date would be very useful to enrich the policy dialogue. The PSIA would focus on urban areas (and primarily on Addis Ababa) in light of recent rural work on security of tenure, 4 and to complement preparations for the upcoming PRSCIII. Urban development has been emerging as a priority item on the policy agenda (and may become more so depending on the results of the national elections that just took place), and the government is increasingly under pressure to confront land use problems. In order to focus on the impact at the household level, and particularly on the poor, it is proposed that the PSIA would look at two aspects: i) housing and ii) informal sector activities, where the poor are disproportionately employed. 5 The research and analysis would attempt to discover whether the May 2002 reform has had any impact on access to land, investments in land, and/or perceived security of tenure for the poor, which should help inform the discussion of next steps for liberalization. B. Operational instrument to which PSIA would be linked (CAS, CEM, PRSC, PA, PER, etc.) and its TTL The PSIA would be linked to several pieces of work, but primarily to the urbanization ESW planned for FY06. Rumana Huque is the TTL on that work and would be a co-ttl for the proposed PSIA. Second, the PSIA would provide inputs for the ESW underway on urban labor markets in Ethiopia. The informal sector and rural-urban migration together comprise an area of focus for the study, which would benefit from the PSIA analysis on both housing and 1 Ethiopia: Farmers to Receive Certificates Giving the Right to Use Land. Irin News, 11 Jan Government of Ethiopia s Proclamation for the Reenactment of Holding Urban Land by Lease (272/ ). 3 Improving the delivery of Housing and Land in Addis Ababa: An Analytical Overview and Recommendations. Draft, Sept Ayalew, Daniel, Stefan Dercon, and Madhur Gautam. Land Tenure Insecurity and Investment in Ethiopian Agriculture: Evidence from Panel Data. World Bank Draft, March Data from the Oct wave of the Ethiopia Urban Employment Unemployment Survey show that the informal sector accounts for about 46 percent of total employment, but for more than 60 percent of the employment of those with the lowest skill level. 2

3 SME issues. Caterina Ruggeri Laderchi, co-ttl for the proposed PSIA, is taking the lead on this part of the labor market study. Third, the The analysis would be relevant to assess the impact of the prior action from PRSCII, which was for a revised urban land lease provision [to be] adopted in Addis Ababa, including adoption of a directive for the management and regularization of informal settlements, and regularization under implementation, and to consider future developments in the upcoming PRSCs. C. Description of proposed analytical work: a. data, methodology, tools The proposed PSIA would examine the impact of the May 2002 proclamation and subsequent developments in land policy reform using a mix of qualitative and quantitative sources. The potential of the former methods have been described in the recent methodological note on PSIAs of land reforms, which argued that in ongoing interventions, a PSIA evaluation conducted in a participatory manner can be used to assess the effect of pilot policy applications, make the case for the expansion of a particular model, fine-tune sequencing, make adjustments in implementation [and] identify winners and losers to determine fresh options for dialogue and application. 6 The analysis will focus on two different angles, SME operations and housing. Although the economic activity and housing components of the study will require different survey instruments, it will be important to recognize the linkages between the two in terms of the government s overall urban development strategy. For example, one of the explicit objectives of the Integrated Housing Development Program in Addis Ababa is to develop SMEs in the construction industry. Also, since 43 percent of informal sector enterprises operate from the home or a structure attached to the home, 7 there is significant overlap between land used for residential and commercial purposes. SME operations. The work would exploit the rich data available on the urban private sector in Ethiopia (which includes a survey of the Informal Sector, and several manufacturing surveys) to establish a pre-reform baseline on land use issues, and then conduct new quantitative research to determine the extent to which the reform has impacted informal/small businesses. Limited qualitative research would also be done to gain further insight into implications of reform for business development. This should advance the debate on appropriate implementation and sequencing of liberalization, as well as highlight possible interventions to protect the livelihoods of the poor. It will be important to bear in mind that there are many other issues that could constrain the impact of the land lease proclamation (e.g. there could be other constraints to informal sector growth unrelated to land availability). Therefore the survey work will also aim at identifying other potential constraints that may be preventing the benefits of reforms in the urban land policy from materializing in improved livelihoods for the poor. 6 Deininger, Klaus. Land Policy Reforms. Chapter 5 of PSIA Reform Notes, forthcoming. 7 Report on Urban Informal Sector Sample Survey, Ethiopia Central Statistical Authority, Oct

4 Housing. A variety of data sources can provide baseline information on housing,. We are currently exploring the possibility of using the June 2002 Urban livelihood assessment carried out by CARE on behalf of the World Food Program in Addis Ababa. Again quantitative and qualitative research would be done to attempt to isolate the impact of the May 2002 reform. While it will still be too early to fully assess the impact of the more recent informal settlement regularization, the study could look into implementation issues and what households plan to do after they have lease certificates. Equally importantly, it would assess the appetite for further reforms/type of reforms desired among different segments of the population. b. timeframe Consultations with government and other stakeholders could begin immediately, along with background research. Identification of local consultants/partners to work on survey design/qualitative research design could also begin at the outset of FY06. The primary research would be undertaken in the fall/winter, in order to feed into the urban strategy and labor market work. A draft report would be produced by February 2006, and after consultations with local stakeholders and internal review, the report would be finalized by April D. Plans, if any, to involve local agencies Close collaboration with city authorities will be essential to ensuring the PSIA s policy relevance and that the PSIA has access to the most up-to-date information on reform implementation and plans for the future. Consultations with counterparts would be an integral part of the planning process for the PSIA, and for the design of dissemination activities (including a workshop for local and regional authorities). We would partner with local agencies to carry out the survey work, and are looking into working with the Ethiopia Development Research Institute (EDRI). Having worked with the Bank on fielding the Investment Climate Assessment, they would be excellent partners for this study, which considers some of the same issues. There may also be scope for collaboration with Addis Ababa University, for example by hiring graduate students to help conduct the qualitative research. Local consultants working on the labor market ESW might also be available to work on the proposed PSIA. E. Planned activities to engage with national authorities and other national stakeholders (on selection of reform, choice of approach, dissemination of results, etc.) The second SDPRP, slated for finalization in the fall of 2006, provides the overarching framework for dialogue on the urban development strategy. As such the proposed PSIA would feed into policy discussions on poverty and growth in general, and more specifically on plans for urban land reform. On surveying issues in particular the team proposes to collaborate with the government s Central Statistical Agency. 4

5 Dissemination activities would include a half-day workshop with policymakers and other interested parties from the academic, donor, and NGO communities. F. Deliverables of PSIA by end-fy06 (clarify whether these deliverables are additional, or inputs to other VPU outputs) Specific outputs will include:a. Survey data of households and firms on including details on land tenure and its impact on SMEs development and household livelihoods b. Report synthesizing the findings of quantitative and qualitative research, and informed by consultations with government partners c. Workshop to discuss preliminary findings with Addis Ababa authorities and the federal government; authorities from other urban authorities (Dire Dawa and Harari) will be invited These are stand-alone outputs additional to what is currently in the workplan. However they are intended to feed into several key pieces of ESW/operational instruments, as described above, including the urbanization ESW, labor market study, and PRSCIII. Key findings will also be integrated into the ongoing growth dialogue and follow up work to the CEM. G. Detailed Budget Table for PSIA Activity Cost (in USD) of which: Requested supplementary BB/TF Primary Research $30,000* $30,000 Travel $10,000 $10,000 Data analysis $15,000 $15,000 Project management, writing report $15,000 $15,000 Matching BB funds (including staff time if applicable) Dissemination $5,000 $5,000 Grand Total $75,000 $50,000 $25,000 *Survey implementation--$15 per household/firm, with sample size of per survey; data entry, local travel, translation, etc.; qualitative research Other matching resources 5