[Kabar-indonesia] 'Free the poor to rebuild their lives'

[Joyo at aol.com]

The Guadian (UK) 
Thursday, August 31, 2006    

'Free the poor to rebuild their lives'

Giving property rights to the poor will be the key to
recovering from the next major natural disaster, says
Salil Tripathi

A survivor of the tsunami disaster sits in a shelter
he has built near the remains of his devastated house
in the coastal town of Hikaduwa.

Photograph: Elizabeth Dalziel/AP A tsunami survivor
sits in a shelter he has built near the remains of his
house in Hikaduwa, Sri Lanka. Photograph: Elizabeth
Dalziel/AP

 The colossal failure of the US machinery - at
federal, state, and local levels - in dealing with the
aftermath of the Katrina disaster makes for depressing
reading.

As economist Paul Krugman points out, only a small
amount of the funds allocated for relief and
rehabilitation has been spent; some people in the
Mississippi Delta are receiving their first cheques
only this week.

The US Congress approved nearly $110bn (£58bn) for the
area's recovery, but federal agencies have spent only
$44bn. According to a report in the Washington Post
over the weekend, nearly a third of the debris and
rubbish left by Katrina remains uncollected.

Article continues Reconstruction has begun, but at a
slow pace. The few examples of people who have been
able to start over again are often those who helped
themselves. In a striking account of the struggle of
one couple - Artie Folse and Tonja Osborne - a New
York Times reporter documents how the two rebuilt
their home.

Even as the surrounding homes remain neglected,
flowers grow in their garden, and their house is now
furnished. Tour coaches stop by, to show how the
recovery is under way in New Orleans. But for this,
the state gets no credit. "If you're waiting for
someone to tell you what to do, it'll never happen,"
Mr Folse told the reporter. Rather than wait for
advice, direction or help, the couple decided to take
matters into their own hands.

America loves self-help stories, and reading about
their experience may imply that the devastated city
will be rebuilt by such individual efforts. But that's
a fairytale; in the real world, many people have to
depend on the state or private organisations to assist
them.

One reason Mr Folse and Ms Osborne have been able to
move on is that they had access to finance. They owned
their home, and the home carried flood insurance,
which paid them $120,000. Mr Folse also ran a small
business - a trucking company - and they had access to
a family home where they could stay while they
rebuilt.

Not everyone is so fortunate; many don't own small
businesses, many more don't own their homes, and can't
afford to pay insurance premiums. When nature levels a
city, hurting the well-off and the poor alike, it is
the responsibility of the state to ensure that those
without the means are also looked after.

The problem, however, is that those looking after the
worse-off aren't necessarily effective. Consider the
Asian tsunami of 2004. There, global generosity sent
billions of dollars to Indonesia, Thailand, Sri Lanka
and other affected countries. Thousands of do-gooders,
from NGOs and government agencies, flew to the region,
bringing with them skills, resources, ideas,
technology, finance, and people, to revive the
shattered coastal regions.

And yet, as a report of the Tsunami Evaluation
Coalition published last month shows, the collective
global effort revealed many flaws.

Providing immediate succour - blankets and water
bottles - was easy; building durable homes proved
difficult. In Aceh, NGOs could build less than half of
the temporary shelters they had planned (8,900 of
20,000) and less than a quarter of the planned 120,000
homes.

Some homes were substandard and will have to be
scrapped and rebuilt.

Only a sixth of the $8.5bn pledged for Aceh's recovery
has been handed over. The evaluation report accused
some international NGOs of arrogance, ignorance, and -
in some areas - incompetence. To its credit, Oxfam
admitted some problems, including financial
irregularities, and took corrective action. In his
foreword, Bill Clinton criticised the agencies for
being more concerned about their brands than providing
relief.

In Aceh, nobody had tsunami insurance; in New Orleans,
only a few had flood insurance. Does that mean the
situation must stay dismal for the poor, who will
remain dependent on charity?

Not necessarily. The poor do own assets; what they
lack is a legal title and the means of offering those
assets as collateral to arrange liquidity. Ownership
of land title is one of the building blocks of
investment. Without title, people have little choice
but to remain dependent, not only for immediate
relief, but also for longer term assistance.

Access to finance can change that, and that need not
come only through microfinance lending, but also by
recognising people's right to own the land where they
have lived all their lives. In the absence of evidence
of such ownership, authorities are sometimes reluctant
to provide benefits which should be theirs by right or
entitlement.

For example, Indian authorities tried to establish -
laboriously - the authenticity of tsunami claims (to
prevent fraud), which delayed relief payments. It also
provided local bureaucrats with the opportunity to
make money.

During a catastrophic incident like the tsunami or a
hurricane, paper-based records will get lost. But if
such records are maintained in a central computerised
register, insurance companies, banks, and statutory
bodies find it easier to trace and track claimants and
provide the financial backing that is their right and
their entitlement, to jumpstart the economy.

Aid agencies recognise the importance of injecting
liquidity in an economy struck by devastation. They do
it by procuring local products, food and materials,
where available. That is an excellent idea, provided
it does not feed inflation. But another way of
providing liquidity is through finance. That becomes
available to those who can offer collateral.

But what about those who do not have the insurance and
land title? Give them the land title. Recognising
customary ownership rights of the poor can rebuild the
economy. If land titles are made more accessible,
insurance will follow. And it has another benefit.

Actuarial calculations will show that certain areas
are more likely to be flood-prone, making the premium
higher. This will spur people to move away from
low-lying areas, and make them less vulnerable the
next time the hurricane or tsunami strikes.

The Peruvian economist Hernando de Soto has been
arguing this in his two books, The Mystery of Capital
and The Other Path. He says that capitalism succeeds
in the rich world, but not in poor countries, because
the rich world recognises property rights. That sounds
like a red rag to the left, and de Soto is being
deliberately provocative.

It is true that poor regions are often thriving
informal economies such as the slums in Mumbai, Lagos,
or Jakarta, or in de Soto's case, Lima. The people
there do not lack assets. An intricate system has
evolved informally, acknowledging their rights to
particular plots of land or business.

But they lack papers. Without documents, these
individuals are kept away from the formal, legal
economy, because their homes don't have titles, their
fields lack deeds, and their businesses have no
protection from the law. Slumlords and feudal
authorities have no incentives in granting deeds; the
state must play that role and recognise the property
rights of the poor.

Such recognition will of course not prevent the next
tsunami or hurricane. But it will make reviving the
region easier, and provide incentives for people to
assert their rights, making everyone, including
financial institutions, more accountable.

Salil Tripathi, former economics correspondent at Far
Eastern Economic Review, is a London-based writer.

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