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The Effect of Land Policy on Foreign Direct Investment in the Solomon Islands (Working Paper) [2001] JSPL 18; (2001) 5 Journal of South Pacific Law

Working Paper 3 of Volume 5 2001

The Effect of Land policy on Foreign Direct Investments in the Solomon Islands

by Phillip Tagini, LLM Candidate, USP Law School

1. Introduction

Land policy is a factor, which greatly affects the flow of foreign direct investment (FDI) in the South Pacific. Foreign direct investment occurs where an enterprise from one country (home) engages in economic activities in the economy of another country (host).(1) Where land policy is transparent and security of tenure is guaranteed, FDI flows in at a higher rate. The opposite seems to hold true for countries where land policy is clouded and where there is uncertainty about the security of tenure.(2) This general rule applies to the Solomon Islands just as it does to any other South Pacific Island country. The land tenure and policy in the Solomon Islands has hindered the flow of FDI to a great extent. This paper attempts to highlight some of the ways land tenure and policy are working against FDI. It then proceeds to briefly describe the land policy implemented in the Solomon Islands since the Protectorate was established in 1893 and highlight the obstacles these policies created to FDI and other economic developments. In the end, some reform suggestions are supplied with the aim of enhancing land policy and hence improving the climate for FDI.

2. Two major obstacles to FDI establishment

As regards land tenure and policy in the Solomon Islands, the foreign investor faces two major obstacles when attempting to establish an enterprise.(3) These are (i) identifying the rightful people to deal with concerning land and (ii) security of title to land. These two problems are particularly true for customary land. Where the landowner is the Crown, the first problem of ascertaining the land owner may be eliminated, but the second problem still bedevils foreign investors with the same force.

(i) Difficulty of ascertaining land holding entity

To the foreign investor, the process of identifying landowners is fraught with difficulties. Even where landowners are identified, the task of finding the right person to deal with is still an onerous one. Most foreign investors are used to dealing with individuals as land holding entities and a central land department where most records are kept. When such foreign investors arrive in the Pacific, they discover (often to their detriment) first that the lands department has scant information about the land holding groups in the country. Second, they also find out that they have to take upon themselves the task of identifying the appropriate landowners and negotiate a commercial agreement. (4)

Most often, the foreign investor is told that land in communally owned. In Fiji for instance, land is held by the ‘mataqali’ or in the Solomon Islands by the ‘tribe.’ However, this is not simple, as it might seem. In the Solomon Islands, while land might be owned by tribes, it is also well known that families as well as individuals hold parcels of land. The Allan Commission established to record customary land during the 1960s testified to this fact. In particular they found the "line (descent group) as the primary unit of landholding in most parts of Solomon Islands, but found a progressive breakdown to individual tenure in almost all coastal areas." (5) This fact only adds another level of difficulty of identifying land-holding groups. (6) In the process of identifying the landowners, the foreign investor might need to travel to the island where they intend to establish operation. (7) In a country like the Solomon Islands, where most of the natural resources is located on customary land, (8) trips to outer islands is not out of the ordinary. This further adds to difficulty and cost of establishment. A classical example of the difficulty in identifying landowners or the right landowners to deal with land is the case of the North New Georgia Timber Corporation (Western Province). The aim of setting up the corporation was "to promote the utilisation of the timber resources of North New Georgia for the public benefit." (9) Proposals for setting up the corporation was first launched in 1972, but for six years legal proceedings failed to establish the customary land owners and those who would be entitled to speak on behalf of the corporation. The corporation was finally set up in 1979. This delay meant operations of Levers Pacific Timber on New Georgia (10) had to be put off. (11)

(ii) Security of land title

The second problem has to do with the security of land title. Even where a representative is identified and a land transaction sealed, and title transferred, security of that land title cannot be guaranteed. First of all, since it was a customary transfer, secondary rights (12) and usufructory rights (13) would normally still apply. If the land was conveyed by the male line representative, the members from the female lineage would still claim secondary rights over the land notwithstanding the complete sale made by the representative from the male lineage. Additionally, members might still claim usufructory rights such as right to fetch water or fruits. This creates a fertile environment for disputes to grow.

Another issue that undermines the security of title is the possibility of disputes. There are usually two types of disputes. Boundary disputes and disputes regarding the locus standi (14) of land representatives. There are other kinds of disputes involving substantive rights. (15)

In the Solomon Islands, as far as boundaries are concerned, only 13% of land is registered, the rest is regulated by custom.(16) The remaining 87% held under customary law is not surveyed, recorded or registered. The boundaries of those lands are only recorded by oral tradition and marked by natural features such as rivers, mountains, rocks, trees or shrines. Though customary owners may claim to know their boundaries well, in practice it is difficult to be certain about the boundaries because these landmarks often change as a result of natural elements. Examples of boundary disputes abound in the Solomon Islands – in and out of court. Brown interestingly notes that "a browse through both the Solomon Islands Law Reports and judgements available on USP’s Web Site drives home the dominance of land as a central motif of litigation." (17) Perhaps it might be added that the majority of the land cases found on the USP Web Site concern boundaries.