Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition

M05: What Have We Learned?

Overview

After we have discussed the urbanization problems that land readjustment may be able to solve in some specific
contexts, the evolution of the idea, the myths and realities of the preconditions for its implementations, and the
stylized procedures for this approach, we would like to summarize some key takeaways in this final Module.

Adopting Land Readjustment

First, as discussed in the previous Modules and case study examples, land readjustment can be adopted to solve
multiple urbanization problems at different scales. Let’s summarize them here.

Page 1 of 9
 Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition
M05: What Have We Learned?

Mediating Multiple Urbanization Issues

As stated in Module 1, land readjustment can facilitate: (a) peri-urbanization; (b) infill redevelopment; and (c) post-
conflict and post-disaster reconstruction. The approach is useful for increasing the development densities of land, so
as to make land space available to accommodate the increasing demand for land during rapid urbanization.
Expanding land space vertically for different types of urban development can avoid the “zero-sum” scenario, under
which the gain of land space for commercial development will have to be at the expense of residential use, thereby
making existing landowners or users worse off. By upholding the majority rule principle with inclusive participation,
affected formal and informal households will be able to protect their well-being by being involved in all major
decisions. Because governance-based land readjustment focuses on bringing all stakeholders to the bargaining table
to discuss the way in which land readjustment should be conducted and how related benefits should be allocated
among all affected parties, the outcomes will be relatively more balanced than in the case of government
expropriation and market exchange. Public compulsory acquisition may sometimes benefit the government or
urban communities at the expense of small rural neighborhoods. Private land transfers through the market in
contexts where information is asymmetrical could benefit a minority of land developers at the expense of farmers or
the urban poor, as these groups may not be as well-informed due to limitations in access to information. Thus, land
readjustment can be fairer and less contentious than the other conventional approaches of solving the bottleneck of
land supply for urban development.

Page 2 of 9
 Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition
M05: What Have We Learned?

Land Readjustment is Not a “Silver-Bullet”

That said, land readjustment is not a “silver bullet” that can solve all our urban problems. It cannot replace master
planning. In fact, land readjustment, if implemented at a neighborhood or site level, will need a well-designed
master plan to ensure that the separate interventions in different areas of the city will later be able to add up to a
coherent whole. This is a critical point that many countries have overlooked in adopting land readjustment. Again
land readjustment and master (or strategic) planning must go hand-in-hand to facilitate orderly urban development.

Land readjustment also cannot replace the need for a well-designed economic development strategy for
urbanization. Indeed the financial viability of land readjustment projects depend on the future economic
development of the city. Land will have low value in a city that does not attract capital and labor. With a low
potential in the increase in land value, land readjustment will lose its appeal to landowners. The implementing
agency will also be unable to sell the land reserved to help recover the project costs.

Although one of the advantages of land readjustment is its possibility of a partial cost recovery, this does not mean
that the municipality can ignore its public finances. Even in a best case scenario, where a land readjustment project
could be self-financing, it is the capital costs of infrastructure investment that the project is able to recover. We do
not know of any land readjustment projects that could cover the long-term maintenance costs of local infrastructure.
Thus municipalities that have adopted land readjustment still need to establish some local taxes and/or fees for
financing the up-keep of local roads, the water and sewerage system, schools, and other public facilities.

Last, but not least, land readjustment definitely cannot replace the provisions of transportation, social housing and
other local services. What land readjustment can do is merely create land space for the construction of these public
goods. This instrument is not designed to handle any institutional and fiscal difficulties associated with the provision
of such services. In other words, we need other governmental agencies to take the leadership in creating social
housing for the urban poor; without that contribution, land reserved for social housing would not be able to be
utilized as intended. All in all, what we are arguing here is that land readjustment is not an instruments that can
solve all of our urban problems. Setting realistic expectations of the functions of land readjustment can avoid any
possible policy retraction triggered by policymakers’ disappointments in its performance.

Page 3 of 9
 Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition
M05: What Have We Learned?

No Single Model

Second, another important aspect of land readjustment is that there is no single model for conducting this process.
This is an often-ignored point that all the examples and detailed case studies cited in this e-learning course have
repeatedly shown.

Different Scales of Application

There are at least three reasons for not having a single model of land readjustment.

First, not only can land readjustment projects be adopted to solve different urbanization issues, but they can also be
applied to handle problems at three different scales, namely: city-wide, neighborhood-wide, and site- (or block-)
level. This point has been illustrated through our selected detailed case studies, each of which represents the
application of land readjustment at a different scale. The South Korean case illustrated how their land readjustment
projects could be adopted at a large scale that involved hundreds and thousands of landowners and tens of square
kilometers of land. Implementing this kind of project will require the leadership of a strong regional agency along
with financial and logistical support from many local and central government authorities. The cases of Bhutan and
Addis Ababa are of a smaller scale, illustrating intervention at the neighborhood level. In these two cases, these
municipalities were the key implementers of the project. The Bhutan project also received financial support from
the World Bank and the Asian Development Bank and technical support from the central government and various
key ministries. Because the key actors in these cases were different, their organizing approaches also varied. The
South Korean case represents a top-down approach with the public sector playing the dominant role, whereas the
Page 4 of 9
 Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition
M05: What Have We Learned?

Bhutan and Addis Ababa cases portray a city initiative with local residents playing active roles in designing and
managing the project.

Inherent Tradeoffs of Land Readjustment Goals

Second, as we discussed in Module 2, there are inherent tradeoffs regarding land readjustment goals. For instance,
if the primary goal of a land readjustment initiative is to make land space available for social housing development,
there will be less land available for sale to raise funds for covering the project costs, thus rendering the aim of self-
financing the project non-viable. A similar tradeoff may exist between the aim of modernizing land use and
preserving the way of life for existing residents. While it may be more efficient to build high-rise structures to re-
house existing residents instead of single, detached, low-density homes, the latter housing style may be preferred by
local residents. Hence, the objectives of implementing the updated master plan and empowering the local residents
to decide on the redevelopment of their neighborhood may become incompatible. A balance will have to be
maintained through continuous discussions between the local community and public officials and other involved
stakeholders. Because negotiating a balance for these tradeoffs is a very fluid process, it is hard to come up with an
all-inclusive model to predetermine the negotiating modalities between involved stakeholders.

Page 5 of 9
 Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition
M05: What Have We Learned?

Different Political, Social, and Economic Contexts

Third, because each locality has its own unique political, social, and economic context, it is impossible to have a
single model for land readjustment. In fact, a project implementer may run the risk of following a wrong procedure
if he or she adopts other countries’ steps or sequences without any adjustment to the local context. Perhaps the key
strategy is to review what procedures other cases have followed and then come up with tailor-made steps, adjusted
in accordance with local situations. Much creativity and sensitivity along with trials and errors will be needed to
design, indigenously, a workable plan for conducting land readjustment.

Page 6 of 9
 Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition
M05: What Have We Learned?

Preconditions through Land Readjustment Processes

Beyond the need for diverse and flexible approaches to conducting land readjustment, certain preconditions need to
be in place. The good news is that achieving some of the preconditions highlighted by previous studies may not
always be as constraining as was initially expected. We suggest that some preconditions can be built through the
land readjustment processes, and this new thinking could open the door for more experiments in developing
countries where land readjustment was previously believed to be unsuitable.

How to Build Preconditions

The question is then: how do you build the needed preconditions for land readjustment?

The first important step is to reconsider the primary goal of conducting land readjustment. We can only change the
conditions within which the project is implemented if we desire to do so. Thus, we need to think of land
readjustment as more than a land tool. Instead, it is a project-based mechanism for altering institutions -- including
formal and informal rules for guiding land development. Put differently, land readjustment will not only increase
land supply for urban expansion but can also be a rule-changing intervention that creates new processes and
incentives to guide involved parties’ behaviors and decisions related to future urbanization.

Page 7 of 9
 Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition
M05: What Have We Learned?

The second step is to treat land readjustment as a mechanism for building governance, as most preconditions cited
by scholars and practitioners are related to governance issues. As explained in Module 3, the issues of trust, level of
community organization, and the legal rules are all key components of any governance structure. They affect what
redevelopment decisions will be made, who can make these decisions, and how and by whom the decisions will be
enforced. More importantly, they are in constant flux because local conditions change incessantly. Hence, it is
crucial to design land readjustment projects with the intent to shape and reshape these preconditions, so as to
ensure a smooth implementation of the project throughout the entire process. In other words, practitioners should
not just emphasize the technical and financial aspects of land readjustment and treat the implementation
preconditions as “given.” Instead, they should lay the path for conducting land readjustment by giving due attention
to governance building.

Page 8 of 9
 Land Pooling/Land Readjustment An Alternative to Compulsory Acquisition
M05: What Have We Learned?

The third, and final, step is to institutionalize the emerging informal rules into formal legislations to make the
practice of land readjustment more stable and predictable. When policymakers and practitioners have gained
experience in conducting land readjustment according to their local contexts, the indigenously-generated rules and
good practices must be documented and institutionalized. This will facilitate the easier and faster achievement of
design and implementation of subsequent land readjustment projects, because learned lessons can be applied and
past mistakes can be avoided.

Page 9 of 9