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Lack of land rights for local communities could scare away investment

  • Analysts find that most conflicts that occur between development projects and local communities involve situations in which the communities lack rights to their land.
  • These disputes could damage the financial bottom line of an operation, which may scare off future investment in a region.
  • The report’s authors say that this could serve as a wakeup call to governments, and provide further incentive to grant communities tenure to the land on which they have been living and depending for generations.

Research has shown that land held by indigenous and local communities tends to be more effectively protected from human-driven changes like deforestation than land managed by governments or private entities. However, these communities lack rights to nearly 75 percent of their global lands. Not only is this deficit putting wildlife habitat at risk, researchers say, it also is stymying the fight against poverty, hunger, and climate change.

Now, a new analysis adds another beneficiary of securing land tenure for local communities: corporate investment.

A report released today discusses how conflicts between industry and local communities in contested areas can be harmful not just for the communities that live in and depend on them, but for the private sector players, as well. The authors write that these conflicts may dissuade investors from backing development projects.

Analysts from Rights and Resources Initiative (RRI), an NGO, and TMP Systems, a U.S. and Philippines-based consultancy, looked at 360 conflicts centered in development projects such as mining, agriculture, and infrastructure in key countries around the world. They found that more than 60 percent involved insecure land tenure. When it came to the forestry sector, that number rose to 90 percent.

While the amount of forestland officially recognized as belonging to indigenous groups and local communities has been rising in recent years, so has “designated” land, over which local people have limited control.

“Our analysis shows that a significant number of governments have begun to designate forest lands that impose limits on local people’s ability to manage the land, or control how it is used,” said RRI’s Andy White in a press release. “This is a half-measure that poses a significant risk to the lives and livelihoods of forest peoples and the health of our planet. It undermines commitments made by governments at the UN climate summit in Paris, and by companies that signed on to the New York Declaration on Forests. The rights of local peoples must come first if we hope to achieve any of these global development goals.”

A Kwamala village in Suriname. Photo by Rhett A. Butler.

Commercial natural resource development doesn’t just occasionally happen on land occupied by local people. A previous analysis by RRI and TMP systems released last year found that of the nearly 73,000 such projects taking place in eight emerging market countries, nearly all were occurring in areas inhabited by local communities and indigenous groups.

The analysts were surprised to learn that money wasn’t usually the deciding factor when conflicts arose. Rather than disputes over compensation paid to communities, other issues such as damage to the environment and restricted access to resources took precedence 93 percent of the time.

“These results were really unexpected. Investors and companies typically assume that disagreements can be resolved with money, because that’s often how business issues over things like intellectual property or employment disputes are resolved. But when you see that only one mining conflict out of fifty is driven by money, it makes you think differently about managing the risk,” said TMP Systems founder Lou Munden. “It means the primary goal is not for an operator to figure out what the local population needs to be paid, but instead, how to determine what factors drive their opposition to the project, and make a calculated assessment about whether those issues can be addressed.”

These conflicts can also damage the financial outcomes of development projects – so much so, that operations may need to shut down, according to Munden, adding that “these risks are significant enough to change the calculus of investing in emerging markets. And they suggest investors are confronting a substantial problem.”

This “substantial problem” could serve as a wakeup call to governments, the analysts suggest, and provide further incentive to grant communities tenure to the land on which they have been living and depending for generations.

“We’re now in a moment where private investors have to decide how to invest their money to best achieve their commitments to stop deforestation and respect rights,” White said. “Governments that want to attract these investors have to ensure that local peoples’ rights are legally defined and respected in order to ensure that companies do not incur financially painful and reputation-damaging tenure related risks. It benefits governments too.

“Efforts to mitigate risk and meet deforestation commitments can only succeed if customary land rights are taken into account.”



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