Valuing unregistered urban land in Indonesia

Abstract

According to new institutional economists, title registration is fundamental to estimate fair value of unregistered land. In turn, international organizations, such as the World Bank, the Asian Development Bank, and the German Development Bank, have funded expensive land title registration programmes in many poor nations. Ironically, such programmes have created much social disruption and economic marginalisation, prompting many to ask whether there is no alternative to neoliberal land title registration programmes. Based on interviews with registered valuers, officers of the land sector agencies responsible for registration, and academics who specialise in valuation and urban planning in Indonesia, we show that valuation practice in Indonesia provides an alternative path. Reflecting the application of J. R. Commons' concept of 'reasonable value', Indonesian valuers have adapted established valuation methods to value different types of land/tenure-whether registered or unregistered. In this process, the estimation of fair compensation is not hindered by the lack of registration. There are major challenges to compensation and compensation valuation in Indonesia, but such failings are hardly related to the information asymmetries that land registration is supposed to correct. Instead, they are addressed by the Indonesian courts in ways that further reflect Commons' concept of 'reasonable value'. With so many tensions and contradictions in land tenure systems, the structural limitations in the legal process, and the wider political economy of land reform, as an institution, the court (the key advocate of 'reasonable value' in J. R. Commons' institutional economics) is hardly a silver bullet, even though it is an important source of changing the working rules of society.

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