Title: Land redistribution in Albania, its impact and the challenges of a post-reform

Edvin Zhllima1, 2, 3, 5, Drini Imami1, 2, 3, 4, 5

1. Development Solutions Associates

2. Faculty of Economics and Agribusiness, AgricultureUniversity of Tirana

3. Department of Agricultural Economics and Engineering, University of Bologna

4. Institute of Advanced Studies, University of Bologna

5. Institute of Open Society (Grantee)

Abstract

In the early 1990s, Albania underwent the political, economic and social changes that took place also in the rest of Central Eastern Europe (CEE). Land reform was one of the main reforms affecting agriculture sector, economy and politics. Our paper is based on a study aiming to analyse the major institutional and structural results of the land reform in Albania. Our study found and re-identified the undesirable impact of the land reform of 1991, focusing on the ManezMunicipality. On the structural side, the division of land created high fragmentation. On the institutional side the study found and re-identified many types of insecurity toward property rights.

1Introduction

In the early 1990s, Albania underwent the political, economic and social changes that took place also in the rest of Central Eastern Europe (CEE). Land reform was one of the main reforms affecting agriculture sector, economy and politics (about 2/3 of the population was leaving inrural areas, engaged primarily with agriculture). Land was transferred to the private agents (farmers - new owners), free of charge, equally per capita within each village. Land was spited in different plots, according to quality and location; consequently the average size was 1.2 Ha in the early 1990, and each farm consisted of 3-4 plots, resulting in high fragmentation. However, 15 – 20 % of agricultural land was redistributed to the “old owners” (pre collectivization owners) in line with the will of local residents. In some cases a mixed approach was used, respecting pre-collectivization boundaries.

The land registration and titling in Albania was expectedto immediately reduce the property right uncertainty of the Albanian farmers, encouraging investments and land transactions, contributing to the process of consolidation.

Our paper is based on a study aiming to analyse the major institutional and structural results of the land reform in Albania. The study focused mostly on reflecting the influence of the land reform on the emerging structure of agriculture production as well as in the land tenure insecurity created after the land reform.

The main objectives of the paper are as follows:

  • To reflect the structural impact of the land reform in agriculture;
  • To find out the impact of the reform onthe property rights (perceptions);
  • To observe the agriculture land market performance in the context of tenure relations among farmers.

The paper builds on a descriptive analysis of property rights evolution in Albaniamaking use of literature review and an empirical conducted by the author in the Municipality of Manez.

The paper is organized into sixchapters. The next chapterprovides a literature review of land reforms and the last land reform impact in Albania. Chapterthreesummarises the theory and the conceptual framework. Chapterfourwill describe the case study area.The fifthchapterdescribes the methodology used for the field research. The sixthchapterfocuses on the land reform impact in the case study area. In the end are presented main conclusions and recommendations for further research.

2Historical background of the land reforms in Albania

After independence from Ottoman Empire, Albania had a highly unequal land structure dominated by Ciflig (large State ownership given temporarily to military and civil servants for merits). The remaining part was state and religious owned land and only a small share of land was designated as individual ownership.A market oriented land reform aiming at de-concentrating the agriculture land was initiatedin 1932 by King Zogu I which failed to achieve this purpose. Between 1932 and 1945 the land inequality reduced because of the inheritance division process as well as due to the emergingland market pressure (Wheeler et al, 2003).

After 1945, the Communist Party which came into power after WWII redistributed agriculture land to small owners and the landless. This redistribution was quickly followed by collectivization that was completed in 1976 with the establishment of large agricultural production cooperatives and state farms. Cooperatives was created by a forced collectivisation process of family farms and State Farms were mainly created on formerly religious land, nationalized foreign agricultural enterprises, former big landowners or land made productive after continuing improvements.

Different from other socialist countries in Central and Eastern Europe, the new constitution declared that the state or cooperatives were the sole owners of land except 3% of the land that remained privately owned, with a maximum surface of 1100 m2 per household (Wheeler et al, 2003).

With the collapseof the communist regime in 1991, 80% of the agricultureland was to be distributed free of charge, to new owners in per capita terms based on the land surfaces of each village, strictly respecting the quality of the land and other indicators of its value. The remaining agriculture land was distributed according to pre-1945 boundaries. The process was accompanied by a registration and titling procedure (Giovarelli et al, 2001; Kodderitzsch, 1999) and by the creation of a unified system of immovable property, the Immovable Property Registration System (IPRS). The new owners were provided with initial land title that certifies the property right to land of family farm in the name of the household head. Data from Ministry of Agriculture tell that in 2007 has been accomplished the registration 87.5% of certificates distributed (MoAFCP, 2007).

Table 1. Comparison among the land reforms in Albania

Terms of land reforms / 1930 / 1946 / 1991
Objective / Reduction of the number of landless people / Distributing land to all rural residents / Distributing equally in quantity and quality land for all
Surface affected
in % of agricultural land / 2.12 / 39.44 / 95.7
The rights given to new land owners / Full rights for transfer and alienation / Usufructs / Full rights for CooperativesLand
Usufructs for State Farms till 1995
Land structure emerged / Big, medium and small farms / Medium and small farms / Small farms

Source: Guri, 2007

Table 1 (above) summarises the main features of the land reforms carried in Albania since 1930. It is obvious that the last land reform is the most egalitarian, most inclusive and radical in its objectives, area of implementation and its structural impact.

The majority of scholars consider the distribution and privatization of land as a vital reform for the survival of the agricultural sector during the first transition years. National and international institutions assume that the individual ownership gave new incentives for farmers, boosting agricultural growth from which had collapsed in the early 1990 (WDR, 1997, MoAF, 2003).

Despite the redistribution effect which was the first objective of land reform, there were also indirect and undesirable effects which mainly the structural fragmentation and the fuzzy land rights emerging after the distribution of land.

  1. The structural impact: On the structural side, the division of land created high fragmentation, with respect to the quality and distribution of land by families (See Table 1). As a result, the family farms are small (1.2 Ha), composed bymany parcels (an average of 3-4 plots per farm), often allocated far from each other and from farm houses (from 1 to 10 km).Most studies in Albaniaconclude thatfragmentation isone of the most negative phenomena of the reform (Lemel, 2000; MoAFCP, 2007 (a); Civici, 2003; Lusho et al, 1998).
  2. The Institutional impact. Despite the distribution of official titles, since in the beginning of the reform, scholars identified property rights insecurity in different areas in Albania. Lemel (1995) found two types of tenure insecurity: formal and subjective insecurity. By “formal” insecurity Lemel (2002) defined the insecurity coming from low availability of documentation, the registration discrepancies, inaccurate mapping, etc. Even after more than a decade sincethe beginning of the reform surveys carried in different parts of Albania still observe strong signs of formal insecurity on land rights(Mathijs, E., 2001; Stahl, et al 2007; MoAFCP 2007, B).By subjective insecurity is understood the owner’s perception on the insecurity of his/her property. Subjective property insecurity in Albania is affected by the unresolved issue of pre-collectivization owners, creating conflict inside rural communities (Lemel, 2000). In Albania are identified different types of subjective insecurity:

1. A direct type coming from the disputes residents among those having the land titles of the land reform and those having inherited land before 1945 (pre-collectivization owners) in the villages(Lemel.H, 1998; Musabelliu et al, 2004;Wheeler et al, 2003)

2. An indirect type coming from

  • Type A-The perception of people toward the changing patterns of policies regarding property rights. Such perception has implications on the nationally unresolved issues of restitution and compensation of the landowners of the period before 1945. The reform of 1991 did not take into consideration pre 1945 land owners but the pressure of ex-owners and the intervention of OSCE forced the government to approve a law for restitution, where possible, and compensation in financial or equivalent land terms in other cases. The process is still unsolved, generating still (perceived) property insecurity (OSCE,2003: World Bank, 2006;IMF, 2006)
  • Type B-The perception toward the institutions that manage the property titles and their transfer procedures (i.e.Immovable Property Right Offices, civil courts and notaries). This is relevant in the context of high levels of corruption (WB, 2007, CRSSD, 2007).
  1. The malfunctioning of the rural land market in Albania. The land consolidation has been seen from policy makers as a panacea for the low agricultural competitiveness in Albania and the land market as the main instrument of land consolidation (MoAFCP, 2007). Data and surveys show in the first decade after the beginning of the reform (Wheeler et al,2003; Lemel,2000; Moor et al, 1997, Kodderitzsch, 1999) until recently (WB, 2006; ARD, 2004; WB, 2007), a formal rural immovable property market scarcely developed in Albania[1]. Scholars found in Albania that property rights insecurity have a negative impact in land sale/buy decision (Lemel. 2000, Civici, 2003, Mathijsm, 2001, Stahl, et al 2007; Musabelliu et al, 2004)and inwillingness to sell price levels (Guri, 2005:285)
  2. The environmental impact and the los of agricultural land.The legal and institutional failures in developing property laws after 1990 gave space to illegal occupation, abuse and irreversible alterations of agricultural land (USAID, 2004; Wheeler et al, 2003). The new Albanian farmers did not understand the legal obligationsrelated to land reform[2] (MoAFCP (c), 2007). Albanian farmers behaved similarly astheir mates from other post-socialist countries, seekingto benefit from theownership rights disregarding the associated obligations (Sikor, 2004).
  3. High number of land disputes and conflicts. There is a high incidence of land conflicts in rural Albania. Even recent surveys provides a large evidence of conflicts among villagers caused by overlapping land boundaries, clashes among the “post 1991” and “pre-1945” land titles, disputes on rights of passage, etc. (Stahl, et al, 2007, LSMS 2005, OSCE 2004).

3Theoretical and conceptual framework

Our research is based on New Institutional Economics (NIE) school which emphasis the role ofproperty rights in providing certainty and improving the economic performance and efficiency (North, D., 1990). This school of thought accepts that free markets have transaction costs and assumes that property rights are the main force moving resources toward their optimal use (Pejovich, 1990). To maintain an environment with well defined property rights, NIE envisions the involvement of more actors than the state itself in the establishment of these rights. NIE considers more important the (informal) recognition of individuals or firms than the (formal/official) recognition by law (O’Driscoll et al, 2003). However NIE states that the State is a central actor in enforcing property rights and facilitating the transfer of resources to higher value uses (Davis et al, 1999).

Barzel assumes that high transaction costs related todefinition and transfer of the property rights, create a situation of non-complete property rights and impede people from finding the gains from their assets and the optimal distribution of property rights (Barzel 1997). Demsetz (1967) and Alchian (1973) show importance oftransaction costs in situations of externalities created in the absence of rights, in shaping owner’s position in dealing with others by excluding and preventing them from interfering in his/her actions (Demsetz, 1967; Alchian et al, 1973).

These concepts are reflected in Figure1, in which the agricultural land market operates in the context of an efficient capital market as well as by an accessible market of agricultural inputs and outputs. It also shows the direction of the impact by strata of interventions.

Figure 1. Conceptual framework of the impact of property rights on agriculture development

Source: Own contribution based on (Conning et al, 2006)

The implication of institutions is very important. One of the basic arguments for scholars studying land property rights is that well defined property rights can reduce the risk perception future returnon land use, creating incentives for short and long term investment (i.e. land productivity enhancement), land transfer (i.e. sale and rental) and crediting (Johnsen,1986).As a result, market incentives may flourishon both the supply and demand sides.

The efficient functioning of both the capital and land markets, in the context of property security, is assumedto facilitate the investments and reduce land fragmentation. Such changes cancause an increase of wealthfor both buyers and sellers. Land buyers and userscan increase production efficiency and turnover[3]. Secure property rights increases the land value and consolidation, therefore those who sell land have more financial leverage to shift to off-farm activities, while those that buy may benefit from the economies of scale. Land rights lead to the redistribution of land to its “best” use (Deininger, 2003 ; Swinnen, et al, 2006). According to some growth theories of structural change (envisioned by Lewis, W.A., 1954) the rural-urban migration could be facilitated at the meso-level (if urban areas can afford the smooth rural migration or the shift to off-farm activities is stimulated), and sustainable economic development could be generated in macro level.

4. Case study area description

After reviewing carefully the literature on property rights security inAlbania, a case study area was selected to investigate onland reform institutional impact in rural population of Albania.The field research was carried out in May 2007, in the Municipality of Manez, located in between the most developed urban centers in Albania such as Durres and Tirana, roughly 23 km from both of them and near to the sea (See Figure.2).

Figure 2. Location of ManezMunicipality in Albania

Source: Albania Census Atlas, INSTAT 2004.

Manez was selected because its rural community accepted the distribution of land according to the per capita principle, in line with the legal base of the reform. Another reason for choosing this area is its cooperative agricultural land status during the time of communism. This former status gives us a better opportunity to interpret the relations between ownership changes during the 20th century as it is based in former land titles which were collectivised in the communist regime.

5. Methodology of the study

Most relevant studies onAlbania try to identify or assessinsecurity mostly through the assessment of title possession and the evaluation of the number of disputes. Since the survey made by Lemel (1998) on subjective insecurity, no research has dealt with insecurity perception of local agents. In this study we analyze the farmers’perception on property rights or what is considered subjective insecurity. The study focuses onthe same types of subjective insecurity provided in the literature reviewat Chapter 3. The levels of insecurity during the focus group procedure were rated through an interval from 1 to 5 where: 1-very strong, 2-strong, 3-not strong 4-weak and 5-very weak.

Differently from the previous studies on land rights security in Albania, this study has applied a focus group method. The focus group method is used to elicit people’s feelings, beliefs, concerns and attitudes toward the land rights. It is a suitable instrument for acquiring the meaning behind facts and for giving insights into tendencies (IWOA, 2004; Kitzinger, 1994, Morgan, 1988, Krueger, 1988).

The process of delineating the focus groups was based on different socio-economic indicators. The chosen focus groups represent different groups of interests regarding the land rights such as: (i) farmers that had land before 1946 (that potentially have land claims), (ii) farmers that became land owners with the reform of 1991, (iii) aldermen (official representatives and leaders of the localcommunity) (iv) villagers that had done transactions of agricultural land in the last 3 years and (v) immigrants that moved to the chosen villages before and after 1991[4].

There were fivefocus groups were composed bysix, seven or eightparticipants; a total of 38 people participated. . In addition, there we carried out 35 open interviews with other local residents, in order to better clarify, compare and verify issues that had comeup during the focus groups.

6. The impact of the land reform

6.1 The structural impact of the land reform in Manez

Manez inhabitants accepted the equal distribution and not other types of distribution, because the former owners were a minority, the biggest owners were not residing there, the land ownership perception was vague and the distribution of land gave higher surfaces in per capita terms compared with the land surface provided to the former owners if the land was distributed according to pre-1945 land boundaries.

Further details of the land distribution procedure are given in the box below: