Making the Law W ork for Everyone - AL BACHARIA

Makingthe LawWork forEveryoneCopyright © 2008by the Commission on Legal Empowerment of the Poorand United Nations Development Programme1 UN Plaza, New York, New York, 10017Cert no. SW-COC-1530Printed in the U.S.A. by Consolidated Graphics, A Forest Stewardship Council (FSC) certified company.Paper used is elemental chlorine free, acid free and Forest Stewardship Council certified. All inks arelow VOC and vegetable-based.

Preface *Success in endeavours of this kind draws from the contribution of a very large numberIn November 2006, a delegation from the Commission on Legal Empowerment of thePoor visited a teeming open air market (known as the ‘Toi market’) in an impoverishedneighborhood in Nairobi, Kenya. To picture the market, imagine a mall without walls–or, for that matter, a roof or a floor – where each business is represented by a smalltable or a blanket laid on the ground. Imagine, as well, a surrounding area that is notoriousfor poor sanitation, pollution and crime. Floods are frequent. About one personin five has HIV/AIDS. Most of the residents lack legal title to the ramshackle dwellingsthey call home or to the tiny businesses upon which they depend for a living. Theseare men and women who are vulnerable and disadvantaged in every way – except forone – they are determined not to be victims.About a decade ago, the sellers in the market created a communal savings plan towhich each contributed fifteen cents a day. The money was used for small businessloans and to make civic improvements, such as a public bath. Fifteen cents a day mayseem a trifling sum, but in that place and for those people the payment often meantforgoing the purchase of new clothes for a child, food for the family, or a used bicyclefor transportation. This was democracy at its purest – the willing surrender of a privatebenefit to build a ladder out of poverty for the community as a whole. Proposals forloans and projects were approved openly and collectively, with consent signified by thewiggling of fingers and the clapping of hands. Over time, the fund grew by tiny incrementsto more than $200,000.This was still not much in a market with 5000 stalls crammed together, sellingeverything from toys and cabbage and to spark plugs and flip-flops. Still, the savingsplan was a source of hope and pride to people who had put their faith in cooperativeaction, understood the importance of abiding by shared rules, and were doing everythingpossible to help themselves. Their courage underlined our conviction that thosewho consider poverty to be just another part of the human condition are ignorant, forthe poor do not accept it, and when given the chance, will seize the opportunity totransform their lives. Because of what we saw and the people we met, the Commissionleft Nairobi encouraged.Then, in December 2007, Kenya held a presidential election. The voting was flawedand fights broke out. Hundreds of people died and the market we visited was completelydestroyed. There is literally nothing left.*reprinted from Volume I

In reply to its expression of sorrow and concern, the Commission received a letterfrom Joseph Muturi, one of the market leaders. He wrote that the social fabric builtup over decades had been torn, and that people had been forced into exile in theirown country, simply because of their ethnicity. ‘We have gone back in time,’ he wrote,and ‘it will take us many years to come back to the level where we were both sociallyand economically.’ He observed that it had taken Kenyans to make Kenya; and nowKenyans had broken Kenya; but they would – he was sure – recover it again, althoughat an expense of time and resources that could never fully be regained.The lesson is clear. When democratic rules are ignored and there is no law capable ofproviding shelter, the people who suffer most are those who can least afford to lose.Creating an infrastructure of laws, rights, enforcement, and adjudication is not anacademic project, of interest to political scientists and social engineers. The establishmentof such institutions can spell the difference between vulnerability and security,desperation and dignity for hundreds of millions of our fellow human beings.In his letter from the ruins of the Toi market, Joseph Muturi said that ‘the big taskthat has occupied me is to try to bring the people together in order to salvage oursense of community.’ Creating a sense of mutual responsibility and community on aglobal basis is a key to fighting poverty and a challenge to us all. It is our hope thatthis Commission report, with its recommendations, will help point the way to that goaland to a better and more equitable future for us all.Respectfully,Madeleine K. AlbrightHernando de SotoCo-chairsCommission on Legal Empowerment of the Poor

AcknowledgmentsSuccess in endeavours of this kind draws from the contribution of a very large number ofpeople. We name several of them below and apologise in advance to those whose namesare not mentioned.We acknowledge with thanks the valuable contributions of the working group chairs, rapporteurs,members of the working groups and associated experts.Chapter 1, Access to Justice and the Rule of Law, is the outcome of the working groupchaired by Commission member Lloyd Axworthy, former Minister of Foreign Affairs ofCanada and currently President and Vice Chancellor of the University of Winnipeg.Members and associated experts of the group included Maurits Barendrecht, Nina Berg,Christina Biebesheimer, James Goldston, Robert Kapp, Vivek Maru, Sam Mueller,Clotilde Medegan Nougbode, Richard E. Messick, Kathurima M’Inoti, Wendy Patten,Sonia Picado Robin Sully and Matthew C. Stephenson, who also served as its rapporteuruntil June 2007 after which the group was supported by Maurits Barendrecht and NinaBerg.Chapter 2, Property Rights, is the outcome of the working group chaired by Commissionmember Ashraf Ghani, Dean of Kabul University and former Minister of Finance ofAfghanistan. Members and associated experts of the group included Liz Alden Wily, BanashreeBanerjee, Karol Boudreaux, Wolfgang Bruelhart, Anis Dani, Maleye Diop, SusanaLastarria-Cornhiel, Jon Lindsay, Sylvia Martínez, Paul Monro-Faure, Edgardo MosqueiraMedina, Rehman Sobhan, Gerardo Solis, and Belinda Yuen. Francis Cheneval, whoserved as the rapporteur, succeeding Robert Mitchell, presented the group’s findings andrecommendations.Chapter 3, Labour Rights, is the outcome of the working group chaired by Commissionmember Allan Larsson, former Swedish Finance Minister and currently Chairman of theBoard, University of Lund, Sweden. Members and associated experts of the group includedAzita Berar-Awad, Haroon Bhorat, Steven Miller, Jamele Rigolini, Victor Tokman,and Rosanna Wong. Sandra Yu served as rapporteur until June 2007, after which MarthaChen and other members supported the group.Chapter 4, Business Rights, is the outcome of the working group chaired by Commissionmember Medhat Hassanein, formerly the Egyptian Minister of Finance. Members andassociated experts of the group include Martha Chen, Gabriel Daly, Claire More Dickerson,S Taher Helmy, Sunita Kapila, Arun Kashyap, Michael Henriques, Tanwir H Naqvi,Enrique Pasquel, Lucas Robinson, David Roll, Rehman Sobhan, Gerardo Solis, A JohnWatson. Asif Chida served as rapporteur.Chapter 5, Road Maps for Implementation of Reforms, is the outcome of the workingi

group chaired by Commission members Hilde Frafjord Johnson, former Norwegian Ministerof International Development, and Milinda Moragoda, Sri Lanka’s former Ministerof Economic Reforms, Science and Technology. Members and associated experts of thegroup included Maria Gonzalez de Asis, Christina Biebesheimer, Michael Bratton, DerickBrinkerhoff, Getachew Demeke, Lalanath de Silva, Philip Dobie, Szilard Fricska, TerenceJones, Daniel Kaufmann, Lily La Torre Lopez, Bruce Moore, Esther Mwaura-Muiru, SheelaPatel, Arjun Sengupta, and Anne Trebilcock. Bibek Debroy served as rapporteur until August2007 and was succeeded by Arthur Goldsmith.Several members of the Secretariat supported the work of the working groups. Specialthanks go to Cate Ambrose and Parastoo Mesri who assisted in the establishment andearly guidance of the groups and also to Veronique Verbruggen who supervised the workof the working groups from November 2006 to November 2007. We are thankful to themembers of the Secretariat for their tireless efforts, particularly to Timothy Dolan forthe production of this publication and Jill Hannon for Secreteriat management. Specialthanks also go to Kristin Cullison for her support of our work. A long list of interns, includingSabiha Ahmed, Shailly Barnes, Wanning Chu, Francesco Di Stefano, Patricia de Haan,Ruth Guevara, Alena Herklotz, Brian Honermann, Emily Key, Rajju Malla-Dhakal, FarzanaRamzan, Erica Salerno, Alec Schierenbeck, Asrat Tesfayesus, Tara Zapp, and Luis Villanueva,supported the Commission.Apart from participating as members in our Commission, several multilateral institutions supportedthe activities of the working groups. ILO hosted meetings of working group three onlabour and one meeting of working group four on business rights, UN-Habitat and the WorldBank provided technical expertise in several areas of the work of the working groups.We are grateful for the pro bono work carried out by Baker and McKenzie, and Lex Mundi.We extend special thanks to our donors Canada, Denmark, Finland, Iceland, Norway,Sweden, Switzerland, Ireland, Spain, the United Kingdom, the African Development Bankand the European Commission whose generous contributions helped to make this Commissiona reality and to the in-kind support provided by USAID.We are also grateful to UNDP and its Administrator, Kemal Dervis, , for hosting the Commission.We are especially grateful the role played by Olav Kjørven and Maaike de Langen.Last, but not least, thanks go to Tevia Abrams for his editorial work and Cynthia Spencefor the design and layout of this publication.Co-chair Executive Director Co-chairii

IntroductionCo-chaired by former US Secretary of State, Madeleine Albright and Peruvian economistHernando de Soto, the Commission on Legal Empowerment of the Poor is the firstglobal initiative to focus specifically on the link between exclusion, poverty and law.Poverty manifests itself in multiple ways. One of the staggering facts about povertyis that the vast majority of the world’s economy lives their daily lives in what is oftenreferred to as the informal or extralegal sector. At all levels (individual, family, communityand national) the lack of access to effective legal protection and formal policy andwelfare systems, as well as a lack of recognition of economic assets/activities, worsensexisting vulnerabilities and further constrains the economic and social developmentopportunities of the poor. When the majority of the world’s populations live their livesin the informal sector, and the formal economy is dwarfed by the informal, the resultis lower growth, less revenue and less room for investment in health, education andinfrastructure. In addition, corruption and the resulting governance problems mayaffect the informal sector even more than the formal sector; this is significant due tothe known negative impact on economic development, poverty reduction and effectivesocial service provision.The Commission’s unique mission is built on the conviction that poverty can only bereduced if governments give all citizens, especially the poor, a legitimate stake in theprotections provided by the legal system, which should not be the privilege of the fewbut the right of everyone. Thus the Commission sets out to explore how nations canreduce poverty through reforms that expand access to legal protection and opportunitiesfor all. The Commission, which is composed of policymakers from all over theworld with long experience leading reform initiatives, is unique in that it seeks to solveproblems as opposed to deliberating them.There are both similarities and differences in the way countries around the world, andover time, have approached the challenge of legal empowerment. These experiencesare only partly understood, both in terms of their key attributes and their outcomes.Furthermore, there has been no systematic effort to compare or synthesise lessonslearned across global experience in this area. One of the essential tasks of the Commissionis to examine a representative selection of such experiences in order to identifypromising reform paths and tools. Ultimately the Commission seeks to use theseexperiences to influence real outcomes on the ground. In order to succeed, the Commissionmust achieve fundamental change in relation to how international developmentinstitutions approach development and poverty reduction, as well as capture the publicinterest around the world and stimulate demand for such changes at all levels.One of the objectives of the Commission is to legally empower informal sector actorsiii

so that their informal contracts have the protection of the law, and that a safe, secureand equitable way is found for their integration within the mainstream economy. Thisis considered necessary for empowering them to derive due benefits from the growingnational and global economy.The key elements of the strategy to achieve the desired outcomes are as follows:• Create political climate for change.• Synthesize global knowledge relevant to the legal empowerment agenda. To this end,four areas of focus have been identified: Access to Justice and Rule of Law, PropertyRights, Labour Rights, and Legal Mechanisms to Empower Informal Businesses.Working groups have been established around each of these themes. A rapporteur ortechnical team-leader, who works closely with the working group Chair (a member ofthe Commission), to coordinate its work, manages each working group.• Promote the legal empowerment agenda at national and regional level and capturelocal experiences.• Develop policy recommendations and tools that will guide policymakers in the implementationof reforms at the country level.Gender equality and the rights of indigenous communities are central to the legalempowerment agenda. These issues have been mainstreamed across the work of theCommission, and specific strategies and recommendations have been generated in allits areas of work.This is the second of two volumes of the report of the Commission on Legal Empowermentof the Poor and consists mainly of the outcomes of five working groups establishedto inform the Commission’s deliberations through substantive work in thethematic areas of Access to Justice and Rule of Law, Property Rights, Labour Rights,Business Rights and with respect to overall implementation strategies. The workinggroups consisted of a core of between five and seven experts and stakeholders in theirindividual capacities from around the world, with leading edge expertise and experiencein the theme to be studied.Each chapter is devoted to the findings of one of the working groups and numberedaccordingly.Chapter 1, Access to Justice and Rule of Law, focuses on how the poor can be legallyempowered and poverty reduced by improving access to justice and expanding therule of law, as defined by national views and structures. The working group consideredthe top-down and bottom-up processes necessary for generating effective reforms andpractical recommendations, and examined the legal tools accessible to all citizens soiv

that they can protect their assets and use them to create trust, obtain credit, captureinvestment, access markets, raise productivity and protect their rights.Chapter 2, Property Rights, examines how the poor can be legally empowered andpoverty reduced when they have fungible rights over property and other assets in atransparent and functional manner. Because capital has a tendency to concentrate,contributing to the economic exclusion of marginalized groups, legal systems, whichgive the poor access to structured businesses, expanded markets and labour rights arerequired for their legal empowerment.Chapter 3, Labour Rights, looks into how the poor can be legally empowered andpoverty reduced when the gap between the formal and informal economy is bridgedand labour rights are respected. The working group studied the factors that constrainparticipation in the formal economy and the challenges to enforcing labour rights. Thegroup made practical recommendations on how to facilitate convergence between formaland informal systems and the enforcement of labour standards.Chapter 4, Business Rights, studies the factors that preclude the poor from benefitingfrom full participation in the formal economy, with a specific focus on the regulatoryenvironment for micro, small and medium sized businesses. It also examined localfinancial capacity and incentives for lenders to expand access to credit for individualsand enterprises owned or operated by the poor.Chapter 5, Road Maps for Implementation of Reforms, synthesises the key practicaloutputs of the work of the other chapters / working groups into a tool kit for useby policymakers around the world. Work in this chapter draws on existing guidelines,frameworks, manuals, indices, indicators and other related aids, which can help thekey audiences of the Commission and facilitate the implementation of its policy recommendations.The aim of the tool kit is to support policymakers in proposing reformsand, once implemented, in measuring their results.The chapters contained in this volume reflect the views of the respective working groupmembers, though not necessarily the view of the Commission.Naresh C. Singh,Executive Director of the Commissionv

Table of contentsChapter 1 Access to Justice and the Rule of Law......................................... 1Introduction ...................................................................................................... 1An Access to Justice Cornerstone: Legal Identity...................................................... 4The Nature of the Problem .............................................................................. 4Addressing the Causes of the Legal Identity Crisis: Incapacity,Exclusion, and Avoidance ............................................................................... 5Strengthening the Capacity of the Registration System ................................... 6Reducing Political Opposition to Full Registration .......................................... 9Providing Information and Creating Incentives to Register ............................. 10Strategies to Create Affordable, Inclusive and Fair Justice ....................................... 12The Nature of the Problem ............................................................................ 12The Social Realities of Access to Justice ..................................................... 12Increasing Quality and Reducing Transaction Costs ...................................... 15Enabling Self Help with Information and Community Organising ....................... 18Information about Norms: Legal Education .................................................. 19Self Help Interventions: Forming of Peer Groups .......................................... 22Broadening the Scope of Legal Services for the Poor ....................................... 23Lower Cost Delivery Models: Paralegals ....................................................... 24Legal Services that Empower the Clients ..................................................... 25Alternative Dispute Resolution ................................................................... 25Bundling with Other Services ..................................................................... 27Removing Constrictions of the Supply of Legal Services to the Poor ............... 28Financing of Claims: Legal Insurance and Targeted Legal Aid ........................ 31Reducing Transaction Costs: Wholesale Reforms ............................................. 36Standard Routes for the Most Urgent Legal Needs ....................................... 37Bundling Claims: Class Actions .................................................................. 39Other Ways to Reduce Costs of Access Wholesale ......................................... 40Improving Informal and Customary Dispute Resolution .................................... 42Education and Awareness Campaigns ......................................................... 43Tailored Legal Aid Services ........................................................................ 44Targeted Constraints on Informal Justice ..................................................... 44Structuring Institutional Relationships ........................................................ 45Improving Access to Justice in the Government Bureaucracy .................................... 47The Nature of the Problem ............................................................................ 49Public Administration Reform ....................................................................... 49

External Monitoring ................................................................................... 49Structural Reforms .................................................................................... 50Administrative Law Reform ........................................................................... 53Legal Mechanisms to Facilitate Participation and Monitoring ........................ 53Judicial Review of Administrative Decisions................................................. 54Conclusions and Recommendations ............................................................ 56Chapter 1 Endnotes ..................................................................................... 58Chapter 1 Bibliography ................................................................................. 58Boxes1 Rule of Law and Justice ........................................................................... 32 Coping with Legal Pluralism in Relations to Women’s Rights in Ethiopia ...... 46Tables1 Needs for Norms and Interventions .......................................................... 15Chapter 2 Empowering the Poor Through Property Rights ......................... 63Introduction .................................................................................................... 73Faltering Property Rights: The Nature And Scale Of The Problem.............................. 76Growing Slums and Legal Voids ..................................................................... 76Dire Consequences and Missed Development Opportunities .......................... 76Rural Poverty and Property Rights ................................................................. 77Rural Land Relations and Extreme Poverty .................................................. 77Rural Land Relations and Armed Conflict .................................................... 77Natural Resources ........................................................................................ 77Women Especially Affected ........................................................................... 77Indigenous Peoples ...................................................................................... 78Focus on Indigenous Tenure Systems .......................................................... 79Important Numbers of Customary Land Holders ........................................... 79Refugees, Internally Displaced Persons .......................................................... 80Barriers Versus Facilitators of Change ................................................................. 80Resistance of Powerful Social Actors ............................................................. 80Structural Obstacles and Facilitators of Change .............................................. 80Realising Turnaround .................................................................................. 81Learning From The Past ..................................................................................... 82Problematic Practices and Omissions ............................................................ 82Six General Lessons from Past Mistakes are Presented as Follows: ................ 82Lessons From Mistakes Related to Land and Real Property ........................... 83Experienced Consequences........................................................................ 85Recommendations For Reform And Improved Action................................................ 86

Reforming Rules Regarding Bearers and Bundles of Property Rights ................. 86Individual and Common Private Property ..................................................... 87Recognising Customary Tenure and Communities as Bearers ofProperty Rights to Land and Natural Resources ........................................... 88Critical Issues in the Recognition of Customary and Indigenous Tenure Systems ...90Measures to Make Property Systems More Gender Equitable ......................... 91Intellectual Property Rights and the Rights of Indigenous Peoples:The Task Ahead ........................................................................................ 92Reforming Property Governance in View of the Least Advantaged Customer ....... 94Changing Legislation ................................................................................. 94Reform Priorities in Land and Real Property Administration .......................... 95Increasing Transparency in Public Land Use and Planning ............................ 96Zoning and City Planning ........................................................................... 97Implementation and Dispute Settlement ..................................................... 99Reforming the Property System as a Market of Assets for the Poor .................. 100Market Development ............................................................................... 100Moveable and Intangible Property: A Missing Piece of the Development Puzzle ...102Equity Based Asset-Building for the Poor ..................................................... 103Creating Property Value for the Poor by Shareholder Systems ...................... 103Enhancing Access to Land and Real Property ............................................ 105The Beneficial Effects of Property Related Education and Relevant Information ..106Promoting Access to Housing ................................................................... 106Public Private Partnerships ...................................................................... 108Fostering Citizenship and Legal Empowerment through Consultation,Information and Participatory Property ReformRecommendations for Policy Design and Sequencing ................................. 110What can Donor Countries and Multilateralism do for the Promotion ofProperty Rights and the Global Poor ......................................................... 112Concluding Message .................................................................................. 114Chapter 2 Endnotes ................................................................................... 115Chapter 2 Bibliography ............................................................................... 121Boxes 1 The world’s poor: a demographic note ............................................... 62 Acquiring property rights for the poor ............................................. 883 Namibian land reform .................................................................... 894 Focus Africa ................................................................................. 915 Sale of land: examples of legal issues ........................................... 1016 The Grameen Bank ...................................................................... 1047 Mexico: The Poor Rely on Pawnshops Instead of Banks ................... 1058 Example of Singapore: Public Housing as Economic Stimulant ........ 1079 Singapore: Importance of Workers’ Central Provident Fund .............. 108

10 Slum Upgrading Initiative in Dalifort, Senegal.............................. 10911 Peru Regularizes the Process of Titling Property Within Settlements . 110Tables 1 Mapping the Dynamics of Legal Status ........................................... 692 The Rural Poor in the Poorest Regions of the World .......................... 783 Main Regions Where Customary Land Tenure Operates ..................... 79Chapter 3 Towards a Global Social Contract:Labour Rights for Legal Empowerment of the Poor ................................... 129Purpose of this Chapter ................................................................................... 131Introduction: Purpose of our Focus on Labour Rights............................................. 136Labour Rights, Informal Economy, Empowerment and Decent Work:What do we Mean? ......................................................................................... 137Labour Rights ............................................................................................ 137Informal Economy ...................................................................................... 137Legal Empowerment ................................................................................... 137Decent Work .............................................................................................. 138Informality and Poverty: Whom are we talking about? What is their identity?............. 138Size and Significance in Developing Countries .............................................. 138Composition of the Informal Economy .......................................................... 139Segmentation in the Informal Labour Market ................................................ 140Informalization of Labour Markets ............................................................... 142Gendered patterns ..................................................................................... 143Informalisation of Labour Markets by Sex .................................................. 143Informal Employment in Developing Countries ........................................... 144Non-Standard Employment in Developed Countries .................................... 144Indigenous and Tribal Peoples .................................................................. 145Conclusions............................................................................................ 146Poverty and Labour Rights: a new departure........................................................ 147Poverty: A Market Failure and a Public Policy Failure .................................... 147A New Departure: Fundamental Principles and Rights at Work, theDecent Work Agenda, and Legal Empowerment of the Working Poor ............. 149Towards a Global Social Contract ................................................................. 151Labour Rights for Informal Workers: What is an Achievable Minimum Floor? . 152Business and Labour Rights at Work ......................................................... 154Social Protection for Informal Workers ...................................................... 154The Role and Limitations of Voluntary Codes of Conduct ............................. 155Labour Rights, Social Protection, Employment Creation:trade-offs or complementarities? .............................................................. 156Conclusions............................................................................................... 157

The Economics of Informality and the Debate on Labour Regulations ...................... 157The Economic Impact of Labour Regulation: An Overview of Key Results......... 158The Consequences of Labour Market Regulation ........................................ 159The Impact of Labour Market Regulation: Country Studies .......................... 161Towards a More Nuanced Understanding of Labour Regulations ...................... 162Interpretation of Regulations .................................................................... 163The Institutional Environment .................................................................. 164Heterogeneity in the Regulatory Architecture ............................................. 164Conclusions............................................................................................... 165Principles and Practices of Labour Rights and Legal Empowerment ................................The Basis Principles for Inclusive ReformBoth Promotion of Change — and Management of Change .......................... 166Both Property Rights — and Labour Rights ............................................... 166Lessons from National Reform Practice ........................................................ 167Legal Identity ......................................................................................... 167Voice and Representation ........................................................................ 167Social Protection Reform ......................................................................... 168Improvement of the Quality of Labour Market Institutions ........................... 168Legal Empowerment Through Alternative Dispute Resolution ....................... 169Improved Business Environment ............................................................... 169Simplification of Contracting Procedures ................................................... 169Conclusions for National Strategies for Legal Empowerment ........................... 170Towards a new social contract: Policies and Processes for Legal Empowerment........ 170Policy Recommendations ............................................................................ 170Process Recommendations ......................................................................... 173Towards a New Social Contract .................................................................... 175Annex 1........................................................................................................ 176Recent and Current Initiatives to Improve Statistics on the Informal ............... 176Annex 2........................................................................................................ 177Case 1 Extending Thailand’s Labour Law Through the MinisterialRegulation for Home Workers ...................................................................... 177Case 2 Judicial Ruling in the Philippines on Employment Relationship ........... 177Case 3 Welfare Fund in India ...................................................................... 178Case 4 Collective Identity, Collective Bargaining and Global Impact ................ 179Case 5 Federation of Urban Poor Participating in Governance ........................ 180Case 6 Legislative Initiatives for Unorganised Workers ................................... 182Case 7 Social Security for all in the Philippines ............................................ 183Case 8 Minimum Living Standard Security System in China ........................... 184Case 9 Labour protection for subcontracts in Chile ........................................ 184

Case 10 Spain: Flexibility at the Margin ....................................................... 185Case 11 China’s Positive Responses to Growing Market Economy ................... 186Case 12 Out-of-court Dispute Resolution as a Practical Tool for LegalEmpowerment ........................................................................................... 187Case 13 Revising bidding and procurement practices in Senegal .................... 187Chapter 3 Endnotes ................................................................................... 189Chapter 3 Bibliography ............................................................................... 191Boxes 1 Different Categories of Informal Workers and Corresponding Challenges ..1412 Relationships Between Informality and Growth: Cross-country Evidence .1423 ILO’s Convention on Indigenous and Tribal Peoples 1989 (No. 169) 1454 Social case for Labour Regulation ................................................. 1485 ILO Conventions and Recommendations Pertinent to theInformal Economy .......................................................................... 150Figures 1 Segmentation in the Informal Labour Market .................................. 140Tables 1 Mean Measures of Regulation, by Income Level.............................. 158Chapter 4 Business Rights ........................................................................ 195The Informal Entrepreneur .......................................................................... 197Legal Empowerment and Legal Identity ........................................................ 198An Integrated Economy Approach ................................................................ 199The Reform Agenda ................................................................................... 200Introduction and Framework ............................................................................. 202Why Business Rights? And Why Now? .......................................................... 203Informal Economy and Informal Businesses .................................................. 204Legal Empowerment and Business Rights..................................................... 205Balancing Human Rights and Market-Based Approach ................................... 205Voice, Representation and Effective Economic Governance ............................ 206Greater Access to Markets, Goods and Services, and Infrastructure ................. 207Inclusive Financial Services ........................................................................ 207Institutional Changes ................................................................................. 208Pursuing the Agenda for Change .................................................................. 209To Sum Up ................................................................................................ 210Informal Economy and Informal Businesses .................................................. 210Informal-Formal Continuum ........................................................................ 210Poverty and Informal Economy .................................................................... 211Informal Enterprises ................................................................................... 211Informal Enterprises and Productivity .......................................................... 212Mapping of Informal Economies .................................................................. 214Women in the Informal Economy ................................................................. 215

Indigenous Peoples and Informal Businesses ................................................ 216Empowering Informal Businesses ................................................................ 217To Sum Up ................................................................................................ 219Business Rights: Unlocking Barriers/Constraints to Empower Informal Enterprises ............220Barriers and Constraints to Business Rights .................................................. 222Legal, Regulatory and Administrative Barriers ............................................... 223Costs of Informality .................................................................................... 227Rights-based Legal Empowerment ............................................................... 229To sum up ................................................................................................. 230Empowering Informal Enterprises Through Access to Markets, Goods and Services,and Infrastructure .......................................................................................... 230Improving the Functioning of Markets .......................................................... 230Increasing Access to Goods and Services...................................................... 232Inclusive Financial Services ........................................................................ 234Microfinance ............................................................................................. 235Savings ..................................................................................................... 236Micro-insurance ......................................................................................... 236Remittances .............................................................................................. 237Public Private Partnerships ......................................................................... 239To Sum Up ................................................................................................ 241Institutional Changes and Legal Tools Making a Difference for InformalEnterprises — an Evidence-based Approach ..................................................... 242Innovations which Demonstrate Business Rights and Legal Empowerment ....... 244Starting a Business ................................................................................. 244Operating a Business .............................................................................. 247Expansion .............................................................................................. 248Enforcing Contracts ................................................................................ 250Exit ....................................................................................................... 251Successful Initiatives taken by Businesses ................................................ 251An Integrated Economy Approach ................................................................ 253To Sum Up ................................................................................................ 255Pursuing the Agenda for Change ....................................................................... 256Changes have to be Context Specific ............................................................ 257Reform Processes Must Be Participatory and Gender Responsive .................... 257Legal Empowerment of Informal Business Should be Prioritized as aGgovernance Issue ..................................................................................... 257Strategies and Institutions to Support Informal Businesses ............................ 258Market Based Institutions for the poor ......................................................... 259Adding Value and Supply Chain to the Labour of the Poor and InformalBusinesses ................................................................................................ 259

Taking Microcredit Out of the Ghetto ........................................................... 259Mutual Funds for the Poor .......................................................................... 260Institutionalising the Collective Identity of Poor and Informal Businesses ........ 261Business Rights - Provides Value Based Change Process ................................ 262Pillars of Change ....................................................................................... 263Conclusions............................................................................................... 265Recommendations and Key Messages .......................................................... 266Objectives of Empowerment Process ......................................................... 266Means to Meet Objectives ........................................................................ 266The Formalisation Debate ........................................................................ 266Chapter 4 Endnotes ................................................................................... 267Chapter 4 Bibliography ............................................................................... 271Boxes 1 Empowering Indigenous People through Entrepreneurship ............... 2172 Unlocking Barriers: Legal Mechanisms to Empower InformalBusinesses .................................................................................... 2213 Most Difficult Places to Do Business (by specific category) .............. 2244 Largest Multi-National Company has 2.3 Million Rural Poor Womenas Shareholders ............................................................................. 260Case StudiesUkraine and Private Business Development ............................................... 226New Markets Lead to New Opportunities for Rural Informal Businesses—VegCARE, Kenya ..................................................................................... 232Linking Markets: Promoting Sustainable Tourism Development withIndigenous and Rural Communitiesin Latin America ................................... 234Alternate Model of Informal Credit: SMEs Helping Informal Enterprises in Peru ..235Construmex (Mexico) — Helping Migrants with Remittances ....................... 238Durban: A Heterogeneous Solution Through Public Private Partnership ........ 240Buy-back Centres for Waste Collectors: A Public-Private-CommunityPartnership Model .................................................................................. 240“Tell us How to Make Legal Mechanisms and Tools Work for InformalBusinesses.” President Benjamin Mkapa, Tanzania .................................... 243Business Registration Reform in Uganda ................................................... 245Identity, Voice And Association In The Informal Economy —A Long Journey Of Self-employed Women’s Association (Sewa), India .......... 254Technology and the Informal Sector: Fishing with Mobile Phones ................ 258Figures 1 GDP Per Capita and the Size of the Shadow Economy ..................... 2132 Indigenous Private Sector Development and Regulation in Africa andCentral Europe: A 10-country Study ................................................. 2133 Regulatory Burdens Impacting on Informal Enterprises ................... 2234 Regulatory Environment and Informality ........................................ 2255 Legal Empowerment of Informal Enterprises .................................. 263

Chapter 5 Road Maps for Implementation of Reforms:Implementation Strategies, Including Toolkits and Indices ..................... 275Road Maps to Implementation .................................................................... 278Mapping Legal Empowerment beyond the Nation State .................................. 279Toolkits and Indices ................................................................................... 279Strategy and Tactics ................................................................................... 281Introduction: Attributes of Legal Empowerment .................................................... 283Implementation: Challenges and Opportunities .................................................... 285Policy Initiation ......................................................................................... 287Policy Champions ...................................................................................... 288Forces Affecting Implementation ................................................................. 289Policy Stakeholders .................................................................................... 290Beneficiaries ............................................................................................. 291Allies ........................................................................................................ 294Practitioners.............................................................................................. 295Challengers ............................................................................................... 295Policy Environment and Contextual Analysis ................................................. 296Social Structure ......................................................................................... 296Economic Context ...................................................................................... 297Political System ......................................................................................... 298Administrative State ................................................................................... 300Informality ................................................................................................ 302Policy Characteristics ................................................................................. 308Complexity ................................................................................................ 308Ambiguity ................................................................................................. 309Discord ..................................................................................................... 310Diagnosing the Influence on Policy Implementation ....................................... 312An Approach to Implementation for Country ‘X’............................................. 312Road Maps to Implementation .......................................................................... 315Mapping the Empowerment Domains ........................................................... 316Mapping the LEP Agenda at Different Political/Administrative Levels .............. 322Activities at Global Level ............................................................................ 323Activities at the Regional and Sub-regional Levels ......................................... 324Activities at National Level ......................................................................... 325Activities at the Local Level ........................................................................ 325Country Level Approaches, Toolkits and Indices................................................... 325Countries Piloting Legal Empowerment Reform ............................................. 325Choosing the Appropriate Country Level Process ........................................... 326Tools to Support Legal Empowerment Reforms .............................................. 328

Explanation of the Tools ............................................................................. 328Ready-made Indicators of Legal Empowerment ............................................. 328Monitoring and Evaluation ............................................................................... 329Strategy and Tactics ................................................................................... 332Strategic Findings ................................................................................... 333Tactical Ideas ......................................................................................... 334Annex 1: Policy Implementation Tools................................................................ 337Annex 2: Existing Toolkits: An Inventory ............................................................. 342Access to jJstice ........................................................................................ 342Property Rights .......................................................................................... 342Labour Rights ............................................................................................ 343Business ................................................................................................... 344Annex 3: Existing Indicators and Indices — An Inventory ...................................... 345Access to Justice ....................................................................................... 345Property Rights .......................................................................................... 346Labour Rights ............................................................................................ 347Business ................................................................................................... 348Chapter 5 Endnotes ........................................................................................ 350Chapter 5 Bibliography ................................................................................... 352Boxes 5.1 Removing Barriers to Public Works Contracts .............................. 2865.2 Ancestral Domain Sustainable Development and ProtectionPlan of the Bago and Bugkalot Tribes ............................................... 2935.3 Empowering Workers Through Community Contracting ................. 3015.4 Organising out of Poverty: Taxis in Rwanda ................................. 3065.5 Authority Systems: Land Rights ................................................. 3075.6 Gold Rush in Mongolia: from Herders to “Ninjas”........................ 3205.7 Land Sector Harmonisation, Alignment and Coordinationfor Poverty Reduction in Kenya ........................................................ 319Figures 5.1 Legal Empowerment of the Poor ................................................. 2385.2 Influences on Policy Implementation: Empowering the Poor ......... 2895.3 Conflict Implications of Public Policy ......................................... 3115.4 Road Map to the Implementation Cycle ...................................... 315Tables 5.1 Sample LEP Reforms ............................................................... 2855.2 Illustrative Stakeholder Matrix ................................................... 2915.3 Political Administrative Syndromes ............................................ 3035.4 Skeleton Diagnostic Tool:Analyzing Influences on Policy Implementation ................................. 3135.5 Country Specific Implementation Road Map:Representative Summary Checklist .................................................. 317

5.6 Empowerment Domain 1: Access to Justice ................................ 3185.7 Empowerment Domain 2: Property Rights ................................... 3195.8 Empowerment Domain 3: Labour Rights ..................................... 3215.9 Empowerment Domain 4: Business Rights .................................. 3215.10 LEP Implementation Strategies and Indicative Activities ............ 3235.11 Pro-poor Policy Implementation Tools ....................................... 3305.12 A Framework for a Demand-led Assessment of Implementation ... 331

ChapterONEAccess to Justice andthe Rule of Law1

1. IntroductionThe Commission on Legal Empowerment of thePoor (CLEP) emphasises reforms to the law andjustice sector that will provide poor people withthe institutional environment, protections, andincentives that they need to realise their full capabilitiesand reap the maximum potential returnon their existing assets. This in turn requires legalprotection for physical assets (property rights),human capital (labour rights), and the ability toengage in profitable market transactions (entrepreneurialrights). Poor communities also requirebasic services that cannot be supplied efficientlyin the private market, such as essential utilities,a healthy environment, public security, and asocial safety net. The legal system must protectaccess to both private rights and public goods ifpoor people are to be able to escape poverty.Poor people tend to live in communities withscarce resources. The challenge for the justicesystem, those who govern and their internationalpartners is formidable: How to turn the law intoan effective tool for those living in absolute poverty— people living with less than a dollar a day?The optimistic goal of our working group forChapter 1 was to identify promising strategies forlegally empowering poor people to have accessto justice. In the process, we investigated bestavailable practices and solicited suggestions duringa series of national consultations organised bythe Commission (CLEP), and we reviewed evaluationstudies of access to justice programmesconducted by various NGOs. It was apparent thatacademic research had delivered many case studiesabout informal justice systems in developingcountries.In addition to the focus on practice, experienceand the variety of outcomes, we propose toconsider theory. Although law and developmentis a recognised research topic (since the 1960s),there is as yet no generally accepted frameworkour working group could use for analysing accessto justice issues. Many strands of research, however,from institutional economics to negotiationtheory and from legal anthropology to the analysisof market failure, can yield information about themost promising strategies for providing access tojustice. Law and development, operating underthe name of legal empowerment, is one particularstrand the Commission could usefully buildon (Golub and McQuay 2001; Golub 2003), andthere are others using bottom-up perspectives (VanRooij 2007). More generally, bottom-up and empowermentapproaches have been part of the developmentagenda since the late 1990s (Narayan2005), and they have now become building blocksof programmes such as the World Bank’s work inCommunity Driven Development and, more recently,its Justice for the Poor programme.In addition to issues of practice and theory, wewill consider legal principles. It may be difficult2

to achieve access to justice for the poor througha formal justice system, but the ideals of the ruleof law are an indispensable part of the vision ofthe legal empowerment agenda. Legal Empowermentof the Poor requires a society governed bythe rule of law. While the ‘rule of law’ has differentmeanings in different contexts, US Justice AnthonyKennedy (a Commissioner of the CLEP) hasdefined the rule of law as requiring fidelity to principlesregarding law being superior and binding,non-discriminating, respectful of people, givingpeople voice and their human rights, and effective(see Textbox 1 for his and other definitions).Rather than attempting a comprehensive surveyor a tailor-made theoretical framework, this chapterfocuses on varying aspects of the access tojustice issue. Section 2 addresses a widespreadand so far underappreciated problem: many poorpeople lack any sort of legal identity or formallegal recognition, and as a result they are completelyexcluded from the formal protections ofthe state legal system and as beneficiaries ofpublic goods and services. Section 3 turns to thebasic challenge for our working group: How canthe justness and fairness of what is delivered beimproved? How can the costs be reduced? Fourstrategies to improve access to justice are discussed.We start at the client end of the supplychain with facilitating self-help and education.Then we move on to the provision of legal services,the development of procedures that are bettersuited to legal needs and resources of the poor,and the potential of informal justice.Box 1 Rule of Law and JusticeThe rule of law (….) refers to a principle of governancein which all persons, institutions and entities,public and private, including the state itself, areaccountable to laws that are publicly promulgated,equally enforced and independently adjudicated, andwhich are consistent with international human rightsnorms and standards. It requires, as well, measures toensure adherence to the principles of supremacy of law,equality before the law, accountability to the law, fairnessin the application of the law, separation of powers,participation in decision-making, legal certainty,avoidance of arbitrariness, and procedural and legaltransparency.(…)“justice” is an ideal of accountability and fairnessin the protection and vindication of rights and theprevention and punishment of wrongs. Justice impliesregard for the rights of the accused, for the interests ofvictims and for the well-being of society at large. It isa concept rooted in all national cultures and traditionsand, while its administration usually implies formaljudicial mechanisms, traditional dispute resolutionmechanisms are equally relevant. The internationalcommunity has worked to articulate collectively thesubstantive and procedural requirements for the administrationof justice for more than half a century(Rule of Law and Transitional Justice in Conflict andPost-Conflict Societies Report of the Secretary-General;S/2004/616 of 23 August 2004).The Law is superior to, and thus binds, the governmentand all its officials.The Law affirms and protects the equality of all persons.By way of example only, the law may not dis-criminateagainst persons by reason of race, color, religion,or gender.The law must respect the dignity and preserve thehuman rights of all persons.The Law must establish and respect the constitutionalstructures necessary to secure a free and decent societyand to give all citizens a meaningful voice in formulatingand enacting the rules that govern them.The Law must devise and maintain systems to adviseall persons of their rights and just expectations, andto empower them to seek redress for grievances andfulfilment of just expectations without fear of penalty orretaliation. (Kennedy 2007).3

Theoretical perspectives that inform this analysisare reducing transaction costs, as well as remedyingmarket failure like imperfect information.Section 4 addresses the related but distinct issueof access to justice in relation to the bureaucracyof public administration. It considers how thepoor can get access to the complaint structuresof the state and the public administration. Conclusionsare drawn in a final fifth section.2. An Access to JusticeCornerstone: Legal Identity 1The Nature of the ProblemOne important basis of legal empowerment is ‘legalidentity’: the formal, legal recognition by thestate that a person exists. In developed countries,citizens take this for granted. Whether through abirth certificate, national ID card, or other means,they are empowered to own property, legally work,contract to buy and sell goods, receive governmentbenefits, vote, initiate a complaint throughthe channels of public administration, bring suitin a court of law, or avail themselves of other legalprotections.But the situation in many developing countriesis much different. Weaknesses in the managementof birth registries, costly and time-consumingprocedures needed to register, and otherobstacles can make securing a legal identity achallenge. And a person without legal identityis denied a whole range of benefits essential forovercoming poverty. She may be unable to attendschool, obtain medical services, vote inelections, get a driver’s license, or open a bankaccount. Moreover, those who lack a formal legalidentity are often unable to take advantage ofanti-poverty programmes specifically designed forthem. Those who lack a formal identity may alsobe especially vulnerable to exploitative practices,including child labour and human trafficking.The importance of providing all people with formallegal recognition has long been recognised.Indeed, the Universal Declaration of HumanRights announced over 50 years ago that, “Everyonehas the right to recognition everywhere asa person before the law” (Art. 6). The UniversalDeclaration also affirmed the right of all people to‘nationality,’ meaning the right to be considered a4

citizen of some state (Art. 15). Subsequent globaland regional human rights treaties have reaffirmedand refined the basic human right to legalrecognition and nationality. 2 (It should be notedthat legal registration and citizenship, thoughrelated, are distinct issues. One can have uncertaincitizenship even in the presence of a validbirth registration. The primary focus of the currentdiscussion is the issue of registration, thoughthe issue of citizenship is necessarily also part ofthe discussion, given the close linkages betweenthe issues.)Despite this formal recognition of a fundamentalindividual right to a formally recognisedlegal identity, however, the lack of legalidentity remains a widespread problem. Althoughreliable systematic data is limited, the availableevidence suggests that the number of peoplewho lack a legal identity number in the tens ofmillions (UNICEF 2005). Those without legalidentity are disproportionately poor, and are oftenmembers of disadvantaged indigenous peoples orother ethnic minorities.In Latin America, for example, some estimatesput the number of “functionally undocumented”Bolivian citizens as high as two million or closeto one-third of the total population; in some partsof the country, over 90 percent of the populationlacks a valid form of identification (Ardaya andSierra 2002). In Peru, approximately one millionPeruvian highlanders have no legal identity andno legal rights (Axworthy 2007). In several Argentinemunicipalities, some 15 percent of potentialbeneficiaries of an anti-poverty programme wereunable to participate due to the lack of a validnational ID card (IADB 2006). According toUNICEF (2005), roughly 23 million South Asianchildren — over 60 percent of all children bornin the region — are born but not registered eachyear. In Nepal, about four-fifths of all births areunregistered, which means that upwards of fourfifthsof Nepalese citizens may be denied lawfulaccess to education, employment opportunities,and the political process (Laczo 2003). Thingsare not much better in sub-Saharan Africa: overhalf of all children in this part of the world arenot registered, meaning that each year approximately15 million children are born without themeans to access either the formal economy orgovernment-provided social services. Worldwide,approximately 40 percent of children in developingcountries are not registered by their fifthbirthday, and in the least-developed countries,this number climbs to a shocking 71 percent(UNICEF 2005).It is therefore no exaggeration to describe thecurrent situation as a worldwide governance crisis.Effective remediation of this crisis requiresboth a diagnosis of its causes and an assessmentof different strategies for reform.Addressing the Causes of the LegalIdentity Crisis: Incapacity, Exclusion,and AvoidanceAlthough no two countries are exactly alike, thelegal identity crisis appears to have three primarycauses:• First, many countries lack an effective bureaucraticsystem for providing accessible,reliable, and low-cost registration services forall people who would like to formally registerthemselves with the state.• Second, in far too many countries the denialof legal identity is the result of a deliberateinterest in excluding certain groups from fullparticipation in the economy, polity, and publicsphere. Sometimes this exclusivity arisesbecause of reprehensible discriminatory animus.In other cases, such as those involving5

long-term migrant or refugee populations, theproblem is more complex and delicate, and itmay implicate the policies of more than onestate. Despite these differences, in all thesecases people are deprived of their fundamentalentitlement to formal legal recognition becauseof a political decision to exclude them.• Third, some poor individuals may lack formallegal registration because they choosenot to take the steps necessary to acquireit. This avoidance may seem irrational giventhe adverse consequences of lacking a legalidentity. Sometimes this avoidance behaviourmay arise because of an ingrained distrust ofstate authorities. But often avoidance of stateauthority, and formal registration in particular,may be entirely rational. Formal legal registrationmay also make one more vulnerable totaxation, conscription, or various forms of undesirablestate monitoring. Thus, governmentpolicy may lead to the legal exclusion of poordisadvantaged communities not only becauseof a lack of capacity or a deliberate policy ofexclusion, but also because other governmentpolicies create excessive disincentives to registration.These three categories are not mutually exclusive,nor are the boundaries between them alwayssharp. For instance, the capacity of the bureaucracyto register births may remain weak becausepowerful political interests have an incentive notto fix the problems. This “passive” discriminationis partly an issue of bureaucratic incapacity andpartly an issue of deliberate exclusion. Nonetheless,this crude tripartite scheme is usefulbecause it underscores the fact that the legalidentity problem has a diverse set of possiblecauses, and proposed solutions must thereforebe tailored to the particular situation. Proposedreforms to the registration system may be of limiteduse when exclusion results from deliberatepolicy choices. Likewise, high-level political pressureand the entrenchment of non-discriminationnorms do not guarantee success when the problemis low bureaucratic capacity. Let us considerthe three primary sources of the legal identitycrisis and what might be done about them.Strengthening the Capacity of the RegistrationSystemMany government-run civil registration systemsimpose particularly onerous burdens on poorpeople. Registration systems often require registrantsto pay a fee; many will not waive this feeeven for the indigent. Some registration systemsalso require that the registrant appear in personat a registration office that may be located a significantdistance from a prospective registrant’sresidence. Both travel costs and the opportunitycosts of the prospective registrant’s time mayweigh heavily against registration, especially forpoor people in remote areas with limited disposableincome. And, of course, petty corruption maysubstantially raise the costs of formal registration,as the prospective registrant may have to paybribes as well as official registration fees. Furthermore,the bureaucratic registration processitself is often complicated and time-consuming,presenting applicants with a labyrinthine array offorms and procedural requirements, and the bureaucraticpersonnel who run many national registrationsystems are often insufficient and poorlytrained (Barendrecht and van Nispen 2007).Registration offices may also lack the most basicresources. For example, surveys of woman in LatinAmerica reveal that approximately 10 percentof women did not register their children becausethe local registration office lacked the proper stationary(IADB 2006).A natural first step in redressing the legal iden-6

tity crisis is to reduce the financial and physicalbarriers to access that disproportionately burdenpoor and rural communities. With respect tothe financial barriers, an obvious reform is theelimination of fees for registration and acquisitionof a first copy of the necessary identificationdocuments. The usual arguments for user fees forgovernment services do not apply for legal registration:legal identity is not a scarce resource thata government might legitimately want to ration,nor is registration a service that people have anincentive to “over-consume” if they do not bearthe costs of providing the service. Also, most ofthe cost of a registration programme is the fixedcost of creating and maintaining the necessarybureaucratic infrastructure; the variable cost associatedwith the number of registration requestsis likely to be relatively small. As between eliminatingregistration fees altogether and providinga waiver for poor individuals, the former approachis generally preferable as it eliminates the administrativecosts associated with determiningwho is eligible for a waiver. The costs of operatingregistration programmes, in most cases, shouldbe met through lump-sum budget allocationsmade out of general public revenues rather thanthrough user fees.In addition to eliminating fees, prospective registrantsshould, where possible, be given multipleavenues through which they can register theiridentities, rather than forcing them to rely on asingle bureaucratic provider of registration services.This redundancy might admittedly entailsome administrative costs, but it would yield twosignificant benefits. First, this system would alloweach individual to select the method that is easiestand cheapest for her. Second, having multipleproviders of registration services reduces the opportunitiesfor corruption, abuse, and delay, becauseprospective registrants will avoid a registrationprovider that has a bad reputation (Shleiferand Vishney 1993). As a rough-and-ready ruleof thumb, every individual should always have atleast two realistic, viable options for registeringherself or her child. Of course, right now manypeople have zero realistic, viable options, so goingfrom zero to one would have to be counted animprovement, but two or more would be better.In communities that have the requisite informationtechnology infrastructure, it might also bepossible for private firms, civil society organisations,governments, or some combination of allthree to set up offices where people can registerthemselves using a simple interactive computersystem, perhaps with assistance from on-sitetechnical staff (Barendrecht and van Nispen2007). This alternative may not be realistic forall poor communities, but where it is feasible, itmay be a better alternative to relying on paperforms and in-person interaction with governmentbureaucrats. Employing such a strategy, where itis feasible, may free up more resources that canthen be targeted at other communities.The difficulty of reaching poor communities, especiallydispersed rural communities, remains achallenge. There are several strategies that governmentsand interested organisations might use toimprove the outreach and efficacy of registrationefforts. One strategy is to simplify the registrationprocess and to improve training of government officialsand others. Another technique that has shownpromise involves the wide distribution of semiportableregistration kits. In the Democratic Republicof Congo, for example, UNDP and the UnitedNations Mission to Congo succeeded in registeringapproximately 25.7 million Congolese in 2006 inadvance of the national elections. They did this byusing planes, boats, trucks, canoes, and carts todistribute registration kits, each of which containeda laptop computer, fingerprinting materials, and a7

digital camera that could be used to issue photoID cards on the spot (Paldi 2006). The Cambodiangovernment used an even more aggressive approachto ‘mobile registration’: following changes to theCambodian Civil Code that made birth registrationmandatory, mobile registration teams — run bynon-governmental organisations but with the government’sblessing — have been going door-to-doorto deliver free birth registrations to people’s homessince 2004. The results have been dramatic: overthe course of only a few years, the number of registeredCambodian citizens increased from 5 percentto 85 percent (Damazo 2006). A UNICEF-backedprogramme in Bangladesh has employed a similarstrategy, sending trained registrars house-to-house,with similar results: in the ten years since this programmebegan, over 12 million births have beenformally registered (UNICEF 2006).Another potentially valuable approach to improvingregistration efforts is to ‘bundle’ registrationwith other service delivery programmes. For example,many countries have, or are considering,extensive vaccination programmes for children inpoor communities. It may often be relatively easyfor the health worker providing the vaccination toregister each child she vaccinates (ADB 2005).This approach, used successfully in Bangladesh,is more cost effective than financing a separateregistration campaign alongside the vaccinationcampaign for the same population (UNICEF2006). In addition, it is conceivable that themother, and even the extended family members,can be registered at the same time without muchextra effort, thus profiting from a fitting chainregistration service. Similarly, some poor women— sadly, not nearly enough — receive some formof prenatal care, and some have the assistanceof a health care professional at delivery. Whilewomen receiving prenatal and delivery care arealready more likely to register their children, empoweringhealth providers to register newbornsmight substantially improve registration efforts.For example, a pilot programme in large publichospitals in South Africa was successful in registeringlarge numbers of poor children (UNICEF2003). Primary school registration at enrolmenttime is yet another opportunity for registeringchildren who might otherwise lack a legal identityif they had not have been registered at birth.An alternative strategy that might be effective,provided that incentives are well targeted, is outsourcingthe partial or entire registration processto local stores, banks, and other places were peopleengage in economic activities. Similarly, somepoor women — though, sadly, not nearly enough— receive some form of prenatal care, and somehave the assistance of a health care professionalat delivery. While women who receive prenataland delivery care are already more likely to registertheir children, empowering these healthproviders to register newborns might substantiallyimprove registration efforts.Another sort of ‘bundling’ strategy might linkformal legal registration with traditional culturalpractices such as naming ceremonies (ADB2005). Just as religious leaders are often empoweredto officiate at weddings and legally validatemarriages, so, too, can religious or communityleaders officiating at childbirth rituals be empoweredby the state to register children. This approachhas the advantage of making registrationseem less like an alien formality imposed by thestate and more like an integral part of familiarcultural traditions. A related observation is thatlocal chiefs or community leaders can often serveas a valuable liaison between registration authoritiesand poor communities. The local chief canboth provide information to the community anddeal with the state authorities.8

Thus, reaching out to local cultural and religiousleaders, and empowering them to formally registerindividuals, may be a more viable strategythan attempting to expand the state registrationbureaucracy. At the same time, care must betaken not to grant local elites a monopoly on theprovision of formal legal identity. A useful rule ofthumb regarding registration is that every individualshould always have at least two realistic,viable options.Reducing Political Opposition to Full RegistrationFee waivers, redundancy, outreach, and bundlingmay all help redress non-registration that arisesbecause of a lack of bureaucratic capacity, butall too often the denial of a legal identity resultsfrom an explicit or tacit political decisionto exclude certain segments of the populationfrom full and equal participation. This problemis especially obvious in the case of groups thathave been denied citizenship on grounds of theirethnicity or their status as refugees or migrants.Examples of groups that have no formal citizenshiprights, or very limited ‘second class’ citizenshiprights, include the Russians in Estoniaand Latvia, the Kurds in Syria, the Palestiniansthroughout the Middle East, the Rohingyas inMyanmar and Bangladesh, the Lhotshampas andBihari in Bangladesh, the Banyarwanda in Congo,and the Nubians in Kenya. 3Even in cases that do not involve overt deprivationof citizenship, political considerationsmay influence government decisions toleave barriers to formal registration in place. Forexample, in the case of the Peruvian highlanders,formal registration could potentially drawlarge numbers of poor indigenous Peruvians intothe political process, posing a potential threatto the incumbent political elites. Additionally,precisely because the lack of legal identity mayblock access to government social services,politicians may recognise that extensive legalregistration of the poor may be very expensive,because registration would put greater demandson the public treasury.When legal exclusion derives from a lack of politicalinterest in providing legal identity — or,worse, from an affirmative political desire to denylegal identity — one strategy that is sometimeseffective is to increase the international profileof a problem and to identify those countries thatdeprive their residents of an adequate legal identityon a discriminatory basis. Such ‘naming andshaming’ approaches may not be effective againstcountries where the interest in discriminatoryexclusion is especially strong or where the interestin international reputation is especially weak,but in some cases greater international attentionto the issue may help effect a shift in policy. Forexample, international pressure appears to haveinfluenced the Thai government’s stance towardthe registration of the approximately 2.5 millionpeople living in northern Thailand, most of themmembers of various Hill Tribes, who lack officialregistration documents and who consequently aredenied citizenship (Lynch 2005, Lin 2006). Inaddition to country and situation-specific internationalpressure, it would be useful if an internationalorganisation, such as UNICEF, UNESCO, orsome prominent NGO, regularly ranked countrieswith regard to their policies on registration, citizenship,and legal identity. This sort of publicitybasedapproach should be carried out in conjunctionwith more sustained efforts to gather reliabledata on the scope of the legal identity problem.However, any international attempt to addressthe legal identity issue must be sensitive to legitimatestate interests in restricting citizenshiprights, regulating immigration, addressing ongoinginternational disputes, and combating voting9

or social services fraud. Thus, although greaterinternational attention and the use of ‘namingand shaming’ approaches may be useful, the internationalcommunity must take care to developits evaluations and prescriptions through a dialoguewith relevant stakeholders.Another possible approach to combating politicallymotivated legal exclusions is to bring legalclaims before international human rights tribunals.The track record of this strategy is mixed,however: while international human rightslitigation has sometimes succeeded in raisingawareness, the tribunal decisions themselveshave typically not been enforced effectively.While international human rights litigation mayhave a place in the broader campaign to addressthe legal identity crisis, it would be a mistaketo presume that politically-motivated exclusioncan be cured by litigation. Political problemsdemand a political solution, and human rightslitigation is useful only if it is part of a broaderpolitical strategy.More generally, the crisis of politically-motivatedlegal exclusion highlights the need to increasethe relevance and effectiveness of the variousinternational covenants and declarations thatestablish the basic human rights to legal identityand nationality. Part of the problem mightbe attributable to a failure of national and internationalpolitical will to make the enforcementof these fundamental rights a priority. Anotherproblem might be that most of the existing humanrights conventions and protocols discussgeneral goals or end-states, but do not establishconcrete benchmarks or standards by which tojudge compliance efforts. It may therefore beworth considering if existing international humanrights instruments relating to legal identityshould be supplemented with clear internationalstandards establishing markers by which nationalactions on legal identity can be evaluated.An alternative or complement to publicinternational action might be greater efforts bythe donor, academic, and NGO communities toestablish institutes and foundations dedicated toraising the profile of the legal identity issue andmonitoring state compliance with the obligationto ensure that all people have proof of nationalityand are recognised as people in the eyes ofthe law.Providing Information and Creating Incentives toRegisterEven when opportunities to register one’s legalidentity are available, many of the poor may stillfail to take advantage of these opportunities. Onereason may be because poor people do not knowabout formal registration, or they do not understandthe benefits of a formal legal identity. Anotherreason may be that the poor are suspiciousof the state and its agents, and this warinessleads them to avoid formal registration even whenit would be in their interests. Yet a third possibilityis their rational calculation that the expectedcosts of formal registration outweigh the benefits.When ignorance or wariness of the state are themajor obstacles, one method of redress may be torely on culturally familiar and reliable intermediariesto convey information about registration andto assist with the registration process. Bundlingof registration services together with other governmentor NGO services or with traditional ritualsand practices would be consistent with this approach.More generally, many successful registrationefforts have relied on paralegals, NGOs andlaypeople to assist poor individuals and communitiesin completing the formal registrationprocedure.For example, the Egyptian Centre for Women’sRights and other Egyptian civil society organi-10

sations, with the cooperation of the Egyptiangovernment and some financial support from theWorld Bank, have helped thousands of womenobtain legal identity cards (World Bank 2007). AUNICEF-backed project in Bangladesh run by localNGOs used a similar approach, with similarlyencouraging results (UNICEF 2006). Relianceon NGOs and community-based organisations isparticularly valuable in registering groups (suchas women and traditionally disadvantaged ethnicminorities), which may be especially wary ofthe state bureaucracy. In addition, there is someevidence that improvements in women’s healthand education will also improve birth registration.For example, studies in Latin America havefound that the likelihood a child will be registeredis positively correlated with the mother’s ageand education (UNICEF 2005). This and relatedfindings suggest that programmes designed toeducate and empower poor women, in additionto their numerous other benefits, may also helpredress the legal identity crisis.which case, institutional reforms and registrationdrives may not be helpful; they may evenbe counter-productive if they coerce or persuadepoor people into registration that is ultimatelyagainst their own interests.Major difficulties arise when poor people avoidformal registration for rational reasons — forexample, avoiding taxation, conscription, orvulnerability to a variety of state abuses. Ultimately,expanding access to legal identity inthis situation will require either mitigating theadverse consequences of formal registration orincreasing the benefits associated with formalregistration, both of which might entail extensivechanges to substantive law or political institutions.While this barrier to change defies cleargeneral solutions, it is nonetheless important torecognise it as a possibility. Well-meaning observersare sometimes too quick to assume thatthe poor are either ignorant or irrational whenthey fail to take advantage of an apparentlyavailable government service. It may be thatthis avoidance is both informed and rational, in11

3. Strategies to CreateAffordable, Inclusive andFair JusticeThe Nature of the ProblemThe Social Realities of Access to JusticeThe poor themselves know best when they needjustice most. Legal needs surveys and case studiesdisplay a recurring pattern of situations inwhich poor people have needs or grievances thatare translated into justifiable claims invokingsubstantive rights (Michelson 2007; UNDP Indonesia2007). First, and foremost, they need personalsecurity and guarantees that their physicalintegrity is not threatened. Worries about personaland physical safety and fear that property or otherassets will be taken by force diminish the humanresources people have left for seizing opportunities.This also requires legal protection for physicalassets (property rights), human capital (labourrights), and the ability to engage in profitablemarket transactions (entrepreneurial rights). Poorcommunities also require basic services that cannotbe supplied efficiently in the private market,such as essential utilities, a healthy environment,public security, and a social safety net. The legalsystem must protect access to both private rightsand public goods and services if poor people areto be able to escape poverty. Protection of theirproperty not only requires effective registration,transparent and accountable land tenure systems,but also protection against expropriation and proceduresand accessible enforcement mechanismsthat resolve conflicts (see Chapter 2). Similarly,their interests as employees and as entrepreneursshould be recognised formally, as well as protectedagainst attempts of others to take advantage oftheir efforts (see Chapters 3 and 4).Surveys consistently show that the needs ofindividuals for legal interventions are concentratedaround the major transitions or changesin personal status in a lifetime. A likely reasonfor this is that property and other assets oftenaccrue within a relationship. This is especiallytrue for poor people. Their homes usually belongto families and kinships. They make use of theirarable land where the different members are designateddifferent tasks, roles and rights, whilstformal officially recognised ownership is uncleareven though a clear informal regime may exist.They work in businesses as employees, but alsoas spouse, as a nephew, or as business partner.Communities jointly own pastures, share water,and use the same fishing grounds. These closerelationships are powerful tools for value creation,but they also build on inter-dependent relations.The partners are tied to each other by specificinvestments, which will be lost if they leave therelationship (Williamson 1985). And often thepoorest person will have more to loose: tenantsand employees tend to invest more in this specificpiece of land or in the business, than thelandlord or the employer invests in their person.Women often invest more time and effort in thefamily and its assets than their husbands. Thatmakes it difficult to leave the relationship, andmakes them vulnerable to exploitation.The formal (modern) legal system, with its focuson the individual and not on a more or lessstrongly defined collective entity, which is alsomirrored in how ownership is construed, oftendiscriminates against poor people or excludesthem de facto. In some societies, property thatdoes not clearly belong to an individual will beregarded as state property (see Chapter 2). Theassumption that contracts are the only meansthat allocate residual ownership to one of thepartners in the relationship equally works against12

the poor. Usually, they do not formally regulatetheir relationships. Even in developed countries,marriages, land use arrangements, and the relationshipsaround small businesses are often notdealt with in contracts, out of convenience, mutualtrust or because it is impossible to foreseeevery contingency.Thus, the most serious legal problems thatthe poor report in legal needs surveys revolvearound transitions in these relationships. Deathof the head of the family, divorce, termination ofland use relationships, termination of employment,leaving a community (selling property), changesin business relationships, and expropriation forproperty development are the most common transitions.These transitions do not only create problemsof division of property, but also do so in asetting that is likely to lead to conflict. This is particularlytrue in areas with scarce natural resourcesand high population growth where poor familiescannot create sufficient extra value between transitionsto the next generation to make up for thegrowth in numbers of mouths that have to be fed.In post conflict zones, and in areas struck by naturaldisaster, dislocated persons need to find propertywhere they can rebuild their lives. The claimsof those returning home create extra transitionproblems and thus legal needs.The paths to justice available to the poor in orderto cope with these problems and for accessingtheir rights often develop spontaneously. Communitiestend to organise social structures that dealwith conflict. Within days from the setting upof a refugee camp, the inhabitants create socialnorms and start addressing certain individualswith their grievances. Where a formal registrationsystem is lacking, some person may start collectinginformation about who owns which pieceof land and make these data available to others(see Chapter 2). Sometimes these structures willmirror structures from their home areas becausewhole communities have been moved to thesame locations. Or such structures are of a morepractical nature then reflecting formal or informalprinciples of justice or customary normative systems.Whether the disadvantaged can use themsuccessfully to deal with their problems is variableand depends on access to resources, powerrelations and other factors. Another option forthe poor is often present in the form of religiousnorms and faith based dispute resolution mechanisms.The scope of these mechanisms may belimited, however, to family issues and crime.They are less likely to extend to property rights,employment problems, and the issues related tosetting up businesses on which the Commissionon Legal Empowerment of the Poor focuses.In some communities, informal dispute resolutionmechanisms exist. A recent survey of informaljustice systems identified the following commoncharacteristics of these systems (Wojkowska2006). The problem is viewed as relating to thewhole community as a group — there is strongconsideration for the collective interests at stakein disputes. Decisions are based on a process ofconsultation. There is an emphasis on reconciliationand restoring social harmony. Arbitratorsare appointed from within the community on thebasis of status or lineage. There is often a highdegree of public participation. Rules of evidenceand procedure are flexible and no professionallegal representation is needed. The process is voluntary,although there is frequently a lot of pressureinternally in the family or other groups onthe ‘victim’ to be part of the process. The decisionis based on consensus, providing a high levelof acceptance and legitimacy. There are no cleardistinctions between criminal and civil cases,and between informal justice systems and localgovernance structures. Enforcement of decisions13

is secured through social pressure or more organisedstructures invoked to ensure that parties tothe conflict abide by the common decision.Because these systems have been studiedmore intensively than the loose spontaneousordering that has been discussed above, more isknown about their weaknesses. These often workagainst the poor. Informal systems tend to reinforceexisting power structures. Because they arebased on consensus, women and disadvantagedgroups may not be assisted to overcome differencesin power levels. Mediated settlements canonly reflect “what the stronger is willing to concedeand the weaker can successfully demand.”(Wojkowska 2006). And sometimes local normssuggest solutions that are clearly against the interestsof the weakest (they are regularly all poor).For those living on less than $1 a day, the formallegal system is often out of reach. As we haveseen, fees for birth registration can already be unaffordable,and a court action to protect propertyrights or to enforce a contract with a tenant is outof the question. The only dealings the poor mayhave with the official justice system may be asdefendants in criminal cases, in which they willnormally have to cope without legal representation.They may suffer from bureaucratic proceduresand red tape (see Chapters 2, 3 and 4), or frompolice abuse. On the other hand, if the poor livein a country that has a functioning legal system,the influence of formal legal rules and the threatof intervention by neutral courts, even if just aremote possibility, should not be underestimated(Kauffmann 2003).The actual situation from which processes improvingaccess to justice have to start can be summarisedas follows. The poor have legal grievancesand are even more likely to have such grievances,because of the scarcity in which they live andbecause they are more likely to be dependent onothers that are more powerful. They may havesome options to access their rights, throughspontaneous arrangements, through faith-basedsystems, through informal justice, or through theformal legal system. But through these options,taken jointly, they are unlikely to obtain fair andjust outcomes against reasonable cost.Starting with the legal needs of the poor is essentialin a legal empowerment approach. Suchan analysis can clarify which elements of the ruleof law are particularly important for the poor andto which neutral interventions they need access.Targeting the most common legal needs can helpto make legal institutions more responsive. Attemptsto improve access to justice are less likelyto succeed if they aim at access to criminal andcivil justice in the abstract. Justice is costly toprovide and priority setting is essential. Table 1highlights some likely priorities, and shows inwhich parts of this chapter these are discussed.It takes the perspective of individuals needinglaw to protect them and to solve their disputes,rather than the perspective of the lawyer who appliesrules. Which norms do poor people need toknow and to apply, and which interventions canhelp them?Seen from this side, many norms (like the onesprotecting property against theft, and life againstmurder) are self-evident, whilst other norms mayyet need to be formed, or interpreted to becomeeasily applicable (such as the ones on division orcompensation in property disputes or on terminationof an employment contract). Likewise, theneeds for interventions may be different. Seenfrom the perspective of the poor, criminal actsshould perhaps primarily be deterred, problems inongoing relationships should primarily be settledin a fair and just manner, for commercial transactionssimple enforcement of debts may be the14

Table 1 Needs for Norms and InterventionsPersonal security and property protection> Mainly criminal law, notcovered in this chapterIdentifi cation of person, property,business (registration) >See Section 2 of this chapterIssues within long term relationshipsin which the poor invest (entrepreneurial,family, land-use, employment,community) >Section 3Market transactions (debt, credit,consumer) > Section 3Protection against unfairgovernment interference (police,detention, other) >Section 4Problems arising out of failure ofgovernment to perform positiveduties > Section 4NormsResponsibility to protectRespect for others’ human rightsRules that deal with standard complicationsefficientlyDefault rules for fair treatment duringrelationshipRules of thumb for division of assets atterminationRules regarding reasonable qualityexpectationsSimplifi ed contractual regimesRegulation of government conductRespect for human rightsNorms relating to positive dutiesIntervention capacityGeneral prevention strategiesRetributive/restorative/criminaljustice for most serious crimesRegistration capacity that serves theentire populationA setting that facilitates settlement,with:A credible threat of a neutral intervention(settlement in the shadow of the law)Self-enforcement through reputationmechanismsEnforcement of simple contractsComplaint procedures with independentenforcementResponsive governmentComplaint procedurespriority, and complaints against government mayhave to be used primarily as a tool for creatingmore responsive government. But any strategy toimprove access to justice should start from a thoroughanalysis of the particular needs in the localsituation, as well as an inquiry into the way thelocal institutions already fulfil them.An analysis like this not only shows what the ruleof law and access to justice look like from theperspective of the poor. It also makes clear thattheir demands for justice are not unlimited orunrealistic. The poor need some norms in particularto protect them and to give them opportunities.They do not need a court or lawyers for everyproblem that they have in relation to other people,but in some situations they are vulnerable.In relationships in which they are dependent onothers, they need a credible threat of an interventionby a neutral and trustworthy person. Similarly,their human rights and their contractualrights should be backed up by the possibility ofenforcement. Like other people, the poor tend tosettle their problems themselves. But like peoplewho live under a more effective legal system, theyneed the shadow of law to get access to fair andjust settlements of their differences.Increasing Quality and Reducing TransactionCostsThe observation that poor people have unmetlegal needs does not, however, adequately diagnosethe problem to be solved, nor does it provide15

sufficient guidance as to the best solutions. Thereason for this is three-fold. First, access to legalservices — and, for that matter, access to justice— is not valuable in and of itself. The legal systemis a means for improving social welfare andsocial justice. Justice services are valuable insofaras they advance those underlying goals. Second,justice services are a scarce and costly resource,and like any scarce resource, they must be producedand allocated efficiently. Third, while poorpeople consume fewer justice services than isoptimal from a social welfare perspective, this istrue of most goods and services that the poor wantto consume. Poor people have unmet legal needs,but they also have unmet needs for food, clothing,shelter, land, medical care, transportation, credit,leisure time, and virtually every other scarce resource.Everyone who advocates spending socialresources on providing justice services to the poorshould therefore be required to explain why accessto justice should be a priority.As a thought experiment, it is instructive to considerwhether it would not be better simply totake the amount spent on an access to justiceprogramme and give it directly to poor people inthe form of a cash transfer. After all, if the poorrecipient is most in need of legal services, shecan spend the transfer on such services. If sheneeds something else more, then she can allocatethe transfer to that need instead. The point is notthat general redistribution in the form of welfarebenefits should always be preferred to reformstargeted specifically at justice services. Rather,thinking about the comparison to general redistributionis useful because it forces the analystto approach the problem of access to justice interms of what can be improved in the system ofdelivery of such services rather than in terms of‘unmet need’.Applied to access to justice, the challenge canthus be phrased in the following terms. Start withinvestigating the legal needs of the poor, thenlook for strategies that increase the quality ofwhat people get when they try to obtain accessto justice, and decrease the costs. Phrased inthese terms, the size of this challenge becomesapparent. In order to ensure that legal servicesreach the poor, quantum jumps in price/quality(Prahalad and Hart 2002) should be achieved.The case study presented in Section 2 regardingaccess to legal identity shows how difficult thiscan be in practice. Even a procedure that aimsto register simple data and provide citizens withmeans to prove their identity is difficult to organisein a way that effectively reaches out to thepoor. Fortunately, it also shows where strategiesto improve access may be located.First, users weigh the costs of access againstexpected benefits. If costs are higher thenbenefits, they are not likely to register. Thesecosts can have many different forms. A motherwanting to register her five-year-old child mayhave to travel, pay fees, spend time to obtaindocuments, or consult a specialist in legal services.The benefits of accessing the procedurecan be huge. A child obtaining a registration isallowed to go to school or can get health care.Similarly, resolving a dispute about water withina community may lead to better use of land thathas to be irrigated and lead to improved, morestable and more productive relationships. However,as the example of access to identity registrationshows, there can be hidden disadvantages.Claiming rights may increase one’s visibility asan object of exploitation, or as a citizen that hasto pay tax without corresponding benefits. Thus,access to justice will not materialise unless itsbenefits outweigh its costs.Next, in order to organise access to registrationservices, a quite substantive government infra-16

structure is necessary. This is even more so forthe complex interventions of the legal system.Establishing the rule of law requires a smooth interactionof many different institutions that cooperateto perform complicated tasks. A functioninglegal system has mechanisms for lawmaking inplace, but also for facilitating settlement, neutralfact-finding, neutral decisions in disputes, andenforcement of rights. Police, courts, prisons,lawyers, and clients themselves form a very complicatedsupply chain. This is also true to someextent for informal systems. What its clients getdepends on local mechanisms that create socialnorms, the possibilities to challenge them if necessary,the quality of the forum that deals withtheir grievances, and the local ways of acceptingand implementing decisions.What helps, is to give people choice. Multiplepoints of access do not only liberate the poor inthe sense that they increase the odds that interventionsfit their problems. They also trigger aninnovation process in which it becomes transparentthat the poor prefer some ways of delivering justiceservices above others. This gives service providersincentives to improve what they deliver. Choicesare already part of the realities of access to justice.People have choices between access to informalprocedures and formal ones. Choices between differentforms of alternative dispute resolution (ADR)and choices between settlement and decision bya neutral party. Although having more choice caninitially lead to higher costs in the search for themost appropriate approach, it is a sure way, in thelong run, to empower the poor. Finally, choice is aweapon against the new dependencies a legal systemcreates. Instead of depending on their opponent,disputants become dependent on professionalswith a dedicated and protected position: governmentofficials, licensed lawyers, official judges,or the powerful in their community. Increasedchoice may be the answer to the monopolies thatcome with official positions.The case of registration also shows in which directionto search for approaches to reduce thecosts of legal services. Interactive computer systemsthat let people perform some registrationtasks themselves, mobile registration units, andbundling registration with other services are butexamples of a more general class of opportunities.In the European Middle Ages, kings andnobles travelling the country were offering mobiledispute resolution services. Social workers helppeople to sort out the problems of life, and maybundle this with valuable pieces of legal advice.Filing grievances online can save travel costs andthe costs of intake by professionals. If citizensobtain access to the right information, self-helpcan not only empower them, but also relieve thesupply chain of costly tasks.A related lesson from the registration example isthat it shows how liaisons can be formed. A legalsystem functions by forging productive links: betweenformal and informal; between governmentservices and services provided by the market;between settlement negotiations and the shadowof a neutral decision; between clients and professionals.Rule of law is a combination of publicgoods (laws, information, neutral interventions bypolice and courts) and services delivered by privatesuppliers (private safety measures, self help,legal services, neutral interventions from ADR,local justice, religious institutions).The last lesson is that politics matters. Exclusionor limiting access can be profitable for the onesalready inside the system, as the examples aboutethnic groups that are denied legal identity show.One way or the other inclusion should be mademore attractive for insiders. Naming, shaming,or other sanctions can achieve this, and probably17

even better, by showing the ones with power thebenefits of increased security, or of a larger classof prosperous customers.This analysis also suggests which theoretical conceptsand strands of empirical knowledge can behelpful to improve access to justice:- Political economy and sociology can help toidentify the deals that have to be forged inorder to facilitate inclusion.- The image of delivery of justice through asupply chain, points towards the perspectivesof transaction costs economics and logistics(supply chain management).- Legal anthropology, law and sociology, negotiationtheory, conflict resolution theory andgame theory can yield valuable informationabout the construction of environments thathelp people to settle their differences.- Removing barriers to justice and the similaritiesto the delivery of health care or education,suggest remedies that emphasise the efficientcorrection of market failures (Shavell 1997,Barendrecht and van Nispen 2007). While the‘unmet legal needs’ framework typically leadsdirectly to proposals to increase legal aid subsidiesor build a better formal legal infrastructure,the market failure framework both offersmore guidance on how to allocate scarcelegal aid subsidies and suggests other sorts ofstructural reforms that can improve access tojustice.- Knowing that the supply of justice is not apure market transaction, but involves publicgoods as well, and requires a substantial neutralinfrastructure invites the perspectives ofgovernment failure and of public management.- Many of the issues discussed above, and thelinks between access to justice and economicdevelopment, are topics studied by new institutionaleconomics, a body of thought thatemphasises the importance of public sectorinstitutions, including the legal system, ingenerating economic growth, and also focuseson transaction costs (North 1990).As we proceed with this section, we will discussfour strategies to improve access tojustice that have proven their value in practice,or seem to be particularly promising, and linkthem to these theoretical concepts. Our focuswill be on the need to respond to the essentialchallenge: how can the justness and fairness ofwhat is delivered be improved, and, in particular,how can costs are decreased? For this reason, thereduction of transaction costs figures prominentlyin our analysis.We start at the client end of the supply chain,with concerns about facilitating self-help, education,and with the theoretical concept of imperfectinformation. Then we turn to the provisionof legal services, using primarily a market failureperspective. Following this we will review strategiesto develop procedures that are better suitedto the legal needs and the resources of the poor.The potential of informal justice, and its links tothe formal legal system, are discussed at the endof this section.Enabling Self Help with Informationand Community OrganisingFor a person with limited resources trying to getaccess to justice, the first (and sometimes theonly) option is to decide what she can do herself.Her time may be less scarce than money. If shecan find ways to solve the problem without payinglegal fees that is what she will tend to prefer. Soa first strategy for legal empowerment may be toenhance the possibilities for self-help in the areaof access to justice.18

The Working Group has noted that this is a topicthat has not yet attracted sufficient attention inacademic thinking about access to justice. Thereis a certain tendency to equate access to justicewith access to legal services, assuming that theonly road to justice leads through lawyers andcourts. This is rapidly changing, however, nowthat even the Western world discovers that manypeople appear in courts without legal representationand that information about legal rights anddispute resolution is an essential tool for empowerment,as well as for prevention of social strife.The UK government even set up a Public LegalEducation and Support (PLEAS) Task Force. Atthis stage, however, the available information islimited, and this is certainly an issue on whichfurther research is warranted.Information about Norms: Legal EducationWithin this strategy that encourages self-help,know-how about legal norms is essential. Poorpeople may not receive the protection or opportunitiesto which they are legally entitled becausethey do not know the law or do not know how togo about securing the assistance of someone whocan provide the necessary help. This lack of informationengenders vulnerability to exploitation andabuse, and impedes legal empowerment (NCLEPKenya 2007, NCLEP Philippines 2007). In manydeveloping countries, simply finding out whatthe law is can be a time-consuming and costlyendeavour. In Bangladesh, for instance, the governmentonly publishes a small number of copiesof the statutes passed by Parliament, and thesewere available only to those who pay a fee. Thefew public libraries in Bangladesh suffer from anacute shortage of legal resources (Afroz 2006).In Tajikistan, new statutes are typically publishedonly in the Parliamentary Gazette, which is notwidely accessible, and ministerial decrees arenot published at all. This makes the simple taskof figuring out what the law is a time-consumingchore even for a trained legal professional (ADB2002). Furthermore, many countries draft andadminister the law only in the national language(often the language of the former colonial government),which many of the poor do not speak. Thislanguage barrier creates a significant transactioncost for poor people who might otherwise availthemselves of the legal system. 4An obvious way to remedy this is to inform peoplemore broadly about norms and interventions thatthey may have to rely on. Information technologyis arguably the most promising avenue forthis, now that the poor will increasingly have accessto internet connections close to the placeswhere they live. Preferably, such informationmust address the practical priorities of specificpopulations. Street vendors want to know whichspecific regulations allow them to ply their trade;what specific lawyers, government offices or nongovernmentalorganisations (NGOs) they can goto for help if police harass them; or how to pressfor reforms of laws that have not yet formalisedtheir status and protected their livelihoods. Conversely,women living in societies in which thelaws discriminate against them may be interestedin constitutional provisions or international humanrights treaties that at least provide a basisfor hope, confidence and activism in favour ofequal rights. The information should also begeared towards the best practices for solving theproblems the poor face. What are the rules andthe best ways for solving inheritance problems? Afarmer working for years on a plot of land who isconfronted by others who show him a deed thatseems to prove their property-rights will probablywant to know the going rate for settling such aproblem, instead of getting abstract informationfrom the civil code about property and leasingcontracts (Barendrecht and Van Nispen 2007).19

A related option is teaching the poor abouttheir rights. It can show them that the law ison their side, or that it is deficient and shouldbe changed, or that they should be confidentin pressing for the reform of bad laws or theimplementation of good ones. Non-formal legaleducation (NLE, as opposed to formal law schooleducation) is geared toward making the disadvantagedmore legally self-sufficient by buildingtheir legal capacities. It can take place throughcommunity training sessions, radio and televisionbroadcasts, theatre plays, and printed and audiovisualmaterials and, as discussed below, paralegaldevelopment. A crucial point about theseeducational efforts is that they must be pitchedat the levels of sophistication of lay people andtheir particular situation. Effective NLE typicallyborrows from more general international developmentpedagogy in that it is interactive and creative.It may feature such techniques as discussions,games, role-playing and quizzes.Before interventions are considered, however, itis useful to investigate what causes the lack ofinformation, why market forces do not provide asolution for this, and what are the consequencesof this lack of information for the provision ofjustice services to the poor. In an efficient marketfor justice services, prospective consumers wouldbe able to evaluate their own legal needs andseek out appropriate providers. Furthermore, consumerinformation about the nature and qualityof the legal services offered would ensure that themarket price for legal services reflects the valueof that service to consumers. Not all prospectiveconsumers need to be perfectly informed,because the prices themselves would conveyinformation (cf. Schwartz and Wilde 1979).Nonetheless, a critical mass of informed potentialconsumers is necessary for the market to allocatelegal services efficiently. If a population of potentialconsumers lacks sufficient basic informationon what legal services are available, their benefitsand costs they involve, and how to evaluate theirquality, then the market is unlikely to allocatelegal services efficiently even if potential consumerswould be willing to pay a price that potentialsuppliers would accept.Lack of sufficient information about legal rightsand entitlements, and about available legal services,is thus problematic for the poor themselvesand also causes justice services to be insufficientlyresponsive to the needs of the poor. Butwhy does this lack of information arise? In mostmarkets, consumers learn information about serviceavailability and quality from three sources.The first source of information is the suppliers,who typically have an incentive to disseminateinformation about the services they provide. Thesecond source of consumer information consistsof other consumers — either directly of indirectlythrough the price mechanism. The third sourceof information is general media coverage. Ifthese three sources of information are sufficientin most consumer markets, why might they notbe sufficient to communicate information aboutrights and legal services to poor communities?Understanding the answer to this question willhelp reformers design interventions that are appropriatelytargeted to the underlying problems.We consider first the question. Why might legalservice providers not disseminate the relevantinformation? There are several likely explanations.First, there may not be providers willing to offerlegal services to a given population at the priceconsumers would be willing or able to pay. If thatis the reason, then the lack of legal informationis a consequence of some other market failure.This suggests that lack of legal information maysometimes be more symptom than disease. Second,general information about legal rights and20

entitlements is a public good. If expected profitsfrom providing legal services to a poor communityare relatively low and the costs of disseminatinginformation to that community are relatively high,there may be insufficient incentives for any onejustice provider to supply information. Lawyers,courts, or ADR providers may have little reasonto inform their possible clients about the rulesthey need to solve their problems. This problemis likely especially acute with respect to legalinformation that is not immediately connected tothe need to hire a legal professional. Third, somecountries impose stringent restrictions on advertisingfor legal services and on the unauthorisedpractice of law, and these professional conductrules. Although these restrictions are sometimesdefended as necessary to protect vulnerable consumersfrom deceptive or misleading information,they may also make it difficult for service providersto disseminate useful information (Rhode2000, Barton 2001).These observations suggest that eliminating manyof the other market failures discussed later in thischapter may also redress the informational problem,as legal service providers will have an incentiveto communicate more about legal entitlementsand how to defend them. Thus, while it isoften supposed that disseminating more informationabout legal rights is the first step in promotingaccess to justice, it may sometimes turn outthat improvements on this dimension follow otherreforms without the need for substantial additionalgovernment or donor spending. Also, an information-disseminationstrategy that relies in largemeasure on private service providers requires aliberal policy toward the advertising of legal servicesand the solicitation of clients. While manycountries have traditionally viewed legal advertisingand solicitation as unseemly, overly aggressiveprohibitions of these activities may stifle theeffective communication of legal information. Inaddition to relying on individual service providersto disseminate information, bar associationsand other lawyers’ organisations are a naturalcandidate for educating the public about law andlegal services. Because these organisations representthe legal profession as a whole, they canassist lawyers in overcoming the collective actionproblem that reduces the incentives of individuallegal service providers to disseminate informationabout legal rights. Bar associations, however,might have too little incentive to disseminateinformation about legal services providers otherthan lawyers, such as paralegals.With respect to the second source of information,other consumers, when a serviceis consumed only rarely within a given population,then other potential consumers are unlikelyto be a useful source of information. This suggeststhe possibility of a vicious circle in which adearth of information about legal rights and legalservices leads to limited use of the legal system,and limited use of the legal system perpetuatesthe lack of information about law and legal services.This problem is likely to be especially acutewhen social networks for sharing information arerelatively small and insular. To address this problem,reformers should strengthen informationsharingnetworks that allow transmission of informationabout law and legal information. Buildingnetworks of legal service providers, NGOs, andcommunity advocacy groups can go a long way toincreasing the informal dissemination of legal information.Additionally, the dissemination of legalinformation is likely to be more effective when legalservices are integrated with other social servicesprovided by an umbrella NGO. Uninformedpotential consumers are unlikely to seek out alegal service provider if they do not even knowthey have a legal problem. But if they seek out21

some other trusted service provider and discusstheir problem, and that service provider has anadequate knowledge of the legal system, then thepotential legal services consumer is more likelyto learn that her problem has a legal dimensionand that she can seek some form of legal redress.This is yet another argument for ‘bundling’ legalservices with other social services (ADB 2001a).Third, even when all the above strategies havebeen implemented, there is likely to be a residualneed for governments or donor-subsidised disseminationof legal information, especially generalizedlegal information or information that is notimmediately connected to an ongoing or imminentdispute. For this sort of targeted legal informationdissemination, governments and NGOscan make use of the mass media or the Internet.Linguistic barriers (including both language barriersand illiteracy), cultural barriers, and a weakcommunications infrastructure (including limitedaccess to radios and televisions) may limit theeffectiveness of mass media. Different nationalmedia also differ in their propensity to devote attentionto legal issues. Experience suggests thatthe best approach to mass legal education is touse a mix of print media (both newspapers andpamphlets), posters, radio, and television, alongwith strategies that integrate legal informationinto popular entertainment such as comic books,soap operas, popular music, local theatre, andinteractive, participatory activities (ADB 2001a,Abdur-Rahman et al. 2006).However, it should be emphasised that knowledgeusually is not enough. Farmers may learn thatthey are entitled to land. But that knowledge isuseless if government personnel, the military, acompany or a landlord are powerful enough toignore the law, sometimes by corrupting or intimidatingthe police, the courts or land ministryofficials. Thus, promoting knowledge of the lawis worthwhile, but as a stand-alone strategy itseldom galvanises legal empowerment. And assumingthat knowledge is power can be counterproductiveif it confines legal empowerment strategiesto simply teaching people their rights.Self Help Interventions: Forming of Peer GroupsIn the experience of the disadvantaged, it oftenis more correct to say that “organising ispower.” We saw that besides knowledge about thenorms that fit their problems, access to justicealso implies that there is a credible threat of anintervention. To assert their rights, the disadvantagedoften have to organise around mutual interests.A woman may know that it is illegal for herhusband to beat her. But she may only be able tomake him stop if the women in her communityband together to shame him, pressure otherwiseindifferent police to take action, persuade malecommunity leaders to intervene or seek the helpof lawyers or NGOs. In this way, they can increasethe incentives on their partners or their opponentsto live up to norms.Sometimes community organising (or organisinggroups within a community) can directly targetproblems such as violence against women, lackof land title or property theft. Under other circumstances,where civil society is too weak orentrenched and opposition too strong, a more indirectapproach may be necessary. Group formationaround relatively ‘safe’ development issues such aslivelihood, micro-credit or reproductive health canpave the way for more assertive action down theline, as the groups and their NGO partners gainmore credibility in their communities. Later, oncetheir group has established some credibility, andif they so desire, it is possible to focus on morerights-oriented work. Women in Bangladesh havethereby benefited from integration of legal empowermentinto a reproductive health programme22

From an economic perspective this strategyaims create an efficient, effective system fordelivering legal services. The following analysiswill again be informed by a transaction costs andmarket failure framework. This approach is unconventional:most discussion of access to justiceproceeds (1) from the observation that poor peoplehave unmet legal needs, to (2) the assumptionthat the best way to remedy this problem isto provide subsidised legal services, to (3) theconclusion that governments and donors shouldincrease funding for various forms of legal aid.The usual discussion then focuses on the formthat legal aid services should take — whetherthey should be delivered by governments orNGOs, whether they should emphasise lawyers,law students, or paralegals, how they should befunded, and so forth. Our working group suggeststhat this view of improving access to legal servicesis too narrow. When one defines the problemnot as ‘unmet legal need’, but rather as somespecific failure or distortion in the market forlegal services, a variety of approaches other thandirect subsidisation emerge, and the appropriatescope for subsidised legal aid services becomesmore refined and more focused.Lower Cost Delivery Models: ParalegalsParalegals and law students are critically importantto improving legal service delivery to poorcommunities. The term ‘paralegal’ may be somewhatmisleading insofar as it suggests an assistantwho performs ministerial legal tasks. Paralegalsin many developing country programmes arebetter thought of as community activists who notonly have a basic training not in legal principles,but also a familiarity with local community normsand practices and an ability to offer advice andadvocacy services that go beyond narrow legaladvice. Many paralegal programmes have provenefficient and effective in expanding legal assistancein poor communities (McClymont and Golub2000, McQuoid-Mason 2000, and Maru 2006).A particularly notable example is the Timap forJustice Initiative in Sierra Leone, which hashelped poor individuals deal with problems likecorruption in government service delivery, domesticviolence and child support, and some criminalmatters (Maru 2006).Law students are another relatively cost-effectiveway to invest scarce legal aid resources. Legalaid clinics staffed by law students or recent lawschool graduates in Russia, Ukraine, South Africa,India, and elsewhere have demonstratedremarkable competence in delivering valuablelegal aid services to poor communities at low cost(Golub 2004, USAID 2002). Therefore, governmentsand donors who have to allocate a limitedlegal aid budget might do well to place more emphasison supporting the activities of paralegalsand law student clinics.Strengthening the national bar association anddeveloping an effective working relationship withthe bar is important in developing effective targetedlegal aid programmes, especially when theservices of attorneys are required. Although oneto-onelawyer-client relationships would normallynot be affordable by the poor, nor perhaps bygovernments or donors who might subsidise legalaid, there could be a role here to be played bybar associations. They could help to gather anddisseminate information in the legal communityabout access to justice issues, and provide usefulformal or informal oversights. They could, moreover,offer political support for access to justicereform and increased funding for necessary legalaid services, help to determine the most worthycandidates for targeted legal aid subsidies, andpossibly sponsor continuing legal education programmesconcerned with meeting the legal needsof the poor. It is, of course, possible that some24

ar associations might be wary of certain approachesto legal services reform (such as thosethat call for increasing competition in the provisionof legal services or reducing the demandfor legal services); or, they might be excessivelyenthusiastic about other approaches (those, forexample, that call for large government or donorsubsidies to lawyers who offer legal aid services).Access to justice reformers cannot ignore the bar,even where those structures are weak and disorganised,because the long-term sustainability ofsubsidised legal aid programmes will also haveto depend on the support and collaboration of astrong and motivated lawyers’ association.Legal Services that Empower the ClientsQuality of legal services matters as much as cost,however. In fact, the conventional approach tolegal services envisions experts providing technicalassistance to needy clients. This approach isnot concerned with clients’ agency or empowermentoutside the pursuit of redress for any givenlegal claim. Some legal services efforts do consciouslyseek to empower the people with whomthey work. Empowerment techniques includeincorporating education into every aspect ofservice delivery, working with and strengtheningcommunity organisations, organising collectiveaction to address justice problems, and engagingin community education and community dialogueon justice issues. Paralegal approaches may beattractive, then, not simply for cost advantagesbut also because paralegals may be better positionedto engage in a broader, empowermentorientedmethod of legal service delivery. In theend, however, this is a matter of philosophy andattitude, rather than the professional status of thelegal service provider.This creates a need for appropriate training.Working with the poor involves a set of skills thatis quite different from what most law schoolsteach and what most lawyers practice. Mechanismsfor inculcating these development-orientedskills and perspectives are NGO internships forlaw students and young lawyers and law schoolclinical legal education programmes. The resultis ‘development lawyering’, as it is sometimescalled, which can involve a willingness to trek outto the remote rural areas or into crowded slums.It can equally involve viewing litigation as a lastresort and administrative advocacy, alternativedispute resolution and building of the poor legalcapacities as preferred options. Such lawyeringfrequently requires skills suitable for carryingout nonformal legal education — interactivetechniques rather than lectures. It involves anawareness of how the law can relate to other developmentfields. This includes viewing the disadvantagedas partners with whom to strategiseon law reform and implementation. Similarly, itincludes listening rather than dictating to clients— the hallmark of any good lawyer, but particularlychallenging in helping impoverished peoplewho usually defer to more educated and affluentindividuals.This type of service may be desirable, but it is notyet clear whether they form a sustainable businessmodel and this may be one of the reasonsthat there is little spontaneous supply of theseempowering legal services. Suppliers may be hesitantto empower their clients to solve problemsby themselves, because they may fear this leadsto loss of future business.Alternative Dispute ResolutionAnother form of broadening legal services is toexpand the use of various forms of alternativedispute resolution (ADR), including small claimscourts, as well as arbitration, mediation, and conciliation(Lopez-de-Silanes 2002, Hammergren25

2007). Such mechanisms prove preferable forthe poor because they are more accessible thancourts, affordable, comprehensible and (often)effective. They can include government administrativetribunals, where paralegals can sometimesprovide representation, such as for agrarianreform and labour disputes in the Philippines.Third party arbitration courts have been set up inmany countries of the former Soviet Union where,in connection with livelihood projects, the partiesselect arbitrators for land, agrarian or propertydisputes.This is not to say that ADR is always preferableto, or mutually exclusive with, litigation. It canbe severely hampered by gender biases or otherpower imbalances between disputants (as canthe courts, however). It is often inappropriate forhandling criminal conduct, particularly violentconduct (though non-state systems are oftenstill used for that purpose). And there are manycontexts, such as with public interest litigation inSouth Africa, where going to court is an effectivelegal implementation strategy.From an economic perspective, ADR is most appropriatewhen the primary objective is to resolveindividual disputes over private rights and benefits(Landes and Posner 1979). For those sortsof disputes, the case for substantial public subsidisationof judicial dispute resolution is muchless compelling — though the state may stillneed to supply courts as a backstop to make surethe ADR processes comport with basic principlesof fairness. Reformers should attempt, when possible,to steer private disputes into appropriateforms of ADR, and to husband scarce judicialresources for disputes that involve public goods(including the articulation of norms and principles)and fundamental public values.In addition to the arbitration, mediation, and conciliationprogrammes traditionally associated withADR, reformers might also address the demandfor judicial services by encouraging or requiringthe resolution of more disputes (at least in thefirst instance) in the administrative bureaucracyrather than the courts. For example, the claimsof injured workers could be resolved by workers’compensation boards rather than in lawsuitsagainst employers. Consumer issues could bebrought before easy accessible, low-cost consumercommittees. A similar strategy for reducingdemand for expensive judicial services is to adoptreforms that allow for the resolution of certaintypes of disputes according to customary law orother traditional practices of the non-state sector.These approaches raise a host of additionalconcerns related to the equity and efficiency ofthe bureaucratic justice system and the non-statejustice system, which subsequent sections of thischapter will discuss in more detail. For purposesof the present discussion, bureaucratic and customarydispute resolution can be considered asspecial types of ADR.The design of just and effective ADR systemsis itself an enormous topic. It is also a subjectwhere it is difficult to make general recommendations,because the optimal design of ADR systemsdepends very much on the unique circumstancesof each country. Three concerns aboutADR programmes are especially prominent. Thefirst is that these programmes are often biasedin favour of powerful interests and lack adequatesafeguards to protect less sophisticated parties(UNDP 2005).The second concern is that ADR programmestend to become increasingly ‘proceduralised’over time — that is, they begin to look more likequasi-courts, and they lose the cost and speedadvantages that justified their creation in the firstplace. The third concern has to do with the final-26

ity of ADR decisions. If it is too easy to challengean ADR ruling in court, then parties do not have asufficient incentive to take ADR seriously (Shavell1995). On the other hand, the harder it is to contestADR decisions, the greater the concern thatimportant individual rights and entitlements arebeing decided outside of the judicial system bynon-state actors.While all of these problems are serious and legitimateconcerns, a number of countries have hadconsiderable success crafting ADR programmesthat reduce the burden on the judicial systemand increase access at a relatively low cost. InBangladesh, for example, local mediation councilsresolve 60 -70 percent of local disputes (US-AID 2002). In Argentina, the Ministry of Justiceand USAID supported the creation of legal servicecentres in Buenos Aires to provide mediationservices, and these centres appear to have beeneffective (USAID 2002). Again, while the designof appropriate ADR programmes is challengingand context-dependent, most available evidenceindicates that developing cost-effective ADR programmesis an important though imperfect meansof providing an alternative to using an overcrowdedcourt system.Bundling with Other ServicesLegal aid programmes are most effective whenthey are bundled with other social services ratherthan offered as stand-alone programmes. Forexample, the South African Legal Aid Board,which experimented with a variety of models forproviding civil legal aid, found that the most effectivemodel is a ‘justice centre’ model — a ‘onestop legal shop’ that provides comprehensivelegal services through a combination of lawyers,advocates, paralegals, and administrative staff(MacQuoid-Mason 2000). Similarly, many LatinAmerican countries have had success with ‘Casasde Justicia’ (Houses of Justice) that provide assistancewith both legal and non-legal aspectsof common problems, such as child support andcustody issues, property disputes, domestic violence,and administrative matters (USAID 2002).This model may be more effective than state subsidisationof private lawyers and advocates whoprovide legal services to the poor.Arelated point is that international donorshave had more success funding local NGOsthat provide a variety of services, including legalservices, than in funding NGOs that provideexclusively legal services. More encompassingorganisations tend to be more effective in reachingthe target population, and they also tend to bemore sustainable in the long term (ADB 2001a).Thus, adding legal services capacity to existingcommunity-based organisations is a more promisingstrategy than supporting or establishing neworganisations that focus exclusively on providinglegal aid. One possible ‘bundling’ strategy thatholds particular promise is the integration of legalaid services with microfinance institutions (MFIs).MFIs have regular access to poor communities anda group-based service delivery model well-suited tolegal aid services, especially when collective actionis necessary. Reformers have already begun to experimentwith incorporating health and educationservices within existing MFIs, and early indicationssuggest this integration has been effective (Dunford2002). Adding legal aid services seems like areasonable next stepMany of the generic and actual examples citedin this paper reflect how legal implementationcan build on or integrate with other developmentactivities and fields. In fact, legal empowermentoften is most effective when this takes place.The integration with community organising andgroup formation represents this phenomenon.Another example is the use of the media, which27

can play an important role in mobilising the poorto assert their rights or the public to support theiradvocacy. In a more substantive vein, the urbanpoor and tenant farmers who receive land titlesmay need multi-faceted assistance to make bestuse of their new property. This can include adviceon and availability of credit programmes for theformer and agricultural technologies for the latter.Removing Constrictions of the Supply of LegalServices to the PoorAnother reason why poor individuals may not haveadequate access to legal services is the artificialconstriction of the supply of legal service providers.In an efficient market, if potential consumersare willing to pay more than it would cost a potentialsupplier to provide a service, the providershould enter the market to provide the service.Collectively, this dynamic should drive the priceof the service down to an efficient level. However,if barriers to entry prevent potential suppliersfrom entering the market, the market price willbe artificially high and certain consumers willnot be able to acquire services they would liketo purchase. The excluded consumers are oftenthe poor, since they are less able to pay a highermarket price.Many observers believe that this sort of marketfailure is common — perhaps pervasive — in themarket for legal services. There are two primaryreasons why the supply of legal service providersmight be artificially constricted. The first has todo with the nature of legal education, and thesecond has to do with the regulation of the legalprofession.With respect to education, the formal legal systemin many countries is the province of the elite,and this legal elitism extends to the way in whichlawyers are trained. Many law schools preparetheir students to practice the sort of law that ismost relevant to the affluent or to the internationalbusiness community, and the population of lawstudents is often drawn disproportionately fromthe more well-to-do segment of society. On top ofthis, in many countries the number of slots at lawschools is very limited: often there are only oneor two major public law schools with a limitednumber of spaces, and it is difficult for privatelaw schools to enter the market.The end result is a supply problem: Developingcountry law schools train few lawyersoverall; the lawyers that are trained are disproportionatelyinterested in the legal problems ofthe elite; and those lawyers who might considerfocusing on the legal problems of the poor facesubstantial entry barriers because they have notreceived much early training in the relevant fieldsand skills (NCLEP Ethiopia 2007). Even if representationof poor clients could prove financiallyor personally rewarding for larger numbers of potentiallawyers, distortions in the legal educationsystem may entrench distortions in the supply ofsuch lawyers relative to what one would observein a hypothetical efficient market.One step that might redress this problem is tomake it easier to enter the market for providinglegal education, for example by relaxing accreditationrequirements or encouraging distancelearning. Elite lawyers might sneer at ‘nightschool’ or ‘trade school’ lawyers, but expandingthe opportunities for legal education willhelp increase the supply of lawyers, especiallylawyers who come from non-elite backgrounds.Additionally, it may be advisable to create andfund more training programmes for paralegalsor other non-lawyer service providers (McLymontand Golub 2000), as well as training programmesfor practicing lawyers who want to move intopractice areas that emphasise the provision oflegal services to poor or otherwise disadvantaged28

clients. The organised bar or other associations oflegal professionals may be especially helpful inpursuing these goals, especially in the contest ofcontinuing legal education.Of course, one must guard against the dangersof ‘diploma mills’ that give students alaw degree but not any real skills or training, especiallywhen these fly-by-night operations exploitless educated prospective students. This dangershould not be exaggerated, especially when comparedwith the significant costs associated withoverly limited opportunities for legal education.Nevertheless, in some developing countries, thepoor may suffer as much from an ‘oversupply’of poorly-trained, dishonest ‘lawyers’ as they dofrom an under-supply of competent lawyers interestedin representing poor clients. The solutionto the quality control problem, however, cannotbe sharp restrictions on access to legal education.Rather, it must be a combination of sensibleregulation, market competition, and informationdissemination.In addition to expanding opportunities for legaleducation and training, reforming the nature oflegal education at the elite law schools couldmake it easier for young lawyers to pursue careersthat include a substantial amount of public servicework or compensated representation of poorclients. There is no one right way to do this, anddifferent law schools will necessarily take differentapproaches to curricular reform. With that caveat,possible reforms might include expanding courseofferings on subjects of particular relevance topoor clients (such as landlord-tenant law, labourlaw, land law, natural resources law, customarylaw, mass torts, and criminal defence); providingmore opportunities for clinical legal education;and using incentives or requirements to encouragelaw students to spend a period of time aftergraduation doing public interest work or providinglegal aid. Additionally, elite law schools shouldexplore ways to increase enrolment of studentsfrom disadvantaged backgrounds, and to providespecial classes to such students so that they cancompete with their classmates from elite backgrounds(Menon 2007). While there is no guaranteethat students from disadvantaged backgroundswill end up providing legal services to the poor,they are probably more likely to do so as a statisticalmatter, and they may also serve as role modelsfor other members of their communities.The risk of an approach that emphasises drawingmore talented young people — especiallytalented young people from disadvantaged backgrounds— into the legal profession is that theirtalents might be better deployed in some otherfield (Murphy, Shleifer and Vishny 1991). Manywho think and write about legal education andlegal aid have an unfortunate tendency to neglectthe opportunity costs associated with a greaterallocation of talent to the legal sector. Nevertheless,in most developing countries the supply oflegal service providers in poor communities is soconstricted, and existing law school training isso distorted in the direction of preparing younglawyers for elite practice, that the benefits of expandingthe opportunities for legal education arelikely to exceed whatever costs arise from divertingsome number of talented youths from alternativecareers in business, medicine, science,public service, or some other calling.Distortion in the legal education system is onesource of the supply problem in the market for legalservices. Another potential problem may arisewhen countries adopt stringent ‘unauthorisedpractice of law’ rules — that is, when countriesmandate that certain legal services can only beoffered by a certain legal professionals, such aslicensed attorneys, barristers, or notaries. Whilethese restrictions may arise from the purest of29

motives — such as the desire to maintain minimumquality standards and to protect consumersfrom exploitation — they often have the effectof conferring a monopoly on a particular set oflegal service providers. This drives up the priceof legal services to the disadvantage of consumersin general and poor consumers in particular(Rhode 2009, 2004, Spaulding 2004). Thisphenomenon has led to calls in some quarters forcomplete elimination of prohibitions on the unauthorisedpractice of law, and in other quarters formore modest changes that would allow paralegalsand lay people to perform a larger proportion ofthe activities that are currently restricted to legalprofessionals (Cantrell 2004, Kritzer 1997,Rhode 2004, NCLEP Philippines 2007).Though some bar associations have shown an appreciationof the problem and indicated a desireto work with reformers to liberalise the market forlegal services, other legal professional associationshave fiercely opposed any reforms that mightthreaten their monopoly on legal services (Hammergren2007, Messick 1999). The argumentsagainst loosening restrictions on who can providelegal services typically emphasise the need to protectconsumers from incompetent or unscrupulousservice providers. Of course, many service marketsfunction effectively without strict ex ante licensingschemes and entry barriers, so the case for thissort of regulation in the legal services context ishardly self-evident. Moreover, there is a small butgrowing body of empirical research — most of it,admittedly, conducted in rich countries — thatindicates non-lawyers (especially paralegals) andlay people can perform a variety of ‘legal’ servicesas effectively as lawyers, and that marketmechanisms and less intrusive regulation can beeffective in protecting consumers from exploitation(Cantrell 2004, Kritzer 1997, Domberger andSherr 1989). This evidence, though suggestiverather than conclusive, indicates that liberalisationof the market for legal services — in the form ofweakening restrictions on who can provide particularlegal services — is likely to improve access tojustice for the poor substantially, while imposingrelatively few costs on society so long as alternativequality-control institutions are in place.A major attraction of a reform strategy that emphasisesthe liberalisation of the market for legal servicesis that, compared to many other legal reformstrategies, liberalisation may require fewer governmentor donor expenditures, at least in the medium-to long-term. Instead of compensating for amarket distortion through continuous payments tothe individuals, the liberalisation strategy focuseson curing a market distortion through a change inthe regulatory scheme. The major obstacle to theliberalisation strategy, however, is likely to be political:As noted above, many (though not all) associationsof legal professionals strongly oppose thissort of liberalisation. Organised legal professionalsare indispensable partners in achieving the objectivesof expanding access to justice and promotinglegal empowerment (Grajzl and Murrell 2006), andit would be a serious mistake to alienate the barby adopting an overly confrontational posture withrespect to the liberalisation in the market for legalservices. Though the appropriate implementationstrategy will depend on the specific circumstancesof each individual case, as a rule of thumb it isprobably advisable for reformers to work with thebar to find points of agreement and opportunitiesfor collaboration; to begin the process of liberalisingthe legal services market with those legalservices where the most powerful lawyers andlawyers’ associations are least threatened; and toemphasise forms of liberalisation that increase theparticipation of non-lawyers in contexts were fewlawyers currently offer services.For example, reformers could support special ex-30

ceptions to ‘unauthorised practice’ restrictions forparalegals that want to offer legal services in poorrural communities that are not currently servedby many lawyers. Or, reformers could encouragearrangements where non-lawyers provide servicesunder the nominal supervision of a licensed legalprofessional (cf. Maru 2006). These gradual firststeps may build political support for broader liberalisationof the legal services market while atthe same time reassuring the legal establishmentthat doing so will not threaten their livelihoodor undermine the reputation and integrity of theprofession. A further advantage to this gradualistapproach is that it allows for regular feedbackand adjustments to make sure that consumer interestsare adequately protected in the liberalisedmarket. A badly designed and overly aggressiveliberalisation strategy is likely to backfire if largenumbers of consumers find themselves victimisedby dishonest or incompetent service providers.The fundamental point here is that the legal servicesmarket will not operate efficiently for the benefitof the poor if the supply of individuals who cansupply legal services to poor people is artificiallyconstricted by the nature of the legal educationsystem or by a regulatory regime that restrictsentry excessively. Therefore, reformers shouldadopt measures, appropriate to the particular circumstances,to eliminate both distortions in thesystem of legal education and restrictions on themarket for legal services, when these distortionsand restrictions artificially restrict the supply oflegal service providers for poor communities.Financing of Claims: Legal Insurance andTargeted Legal AidThe costs of justice services are likely to remainconsiderable, even if the broadening suggested inthe preceding paragraphs would take place. Butindividuals do not need expensive legal servicesfrequently. These events are likely to occur onceor a few times in their lifetime. Even then thecosts can be limited, unless it is necessary totake the issue up to a court for litigation and enforcement.So it is interesting to consider whetherthe costs of litigation can be insured by privateor public arrangements, or whether governmentsshould invest in subsidising these services.• Insofar as legal services confer private benefitson individuals, one might expect thatthese services would be efficiently suppliedin well-structured private markets. If peoplewould benefit from hiring a lawyer to helpwith a problem or dispute, they will hire one.If the cost of securing legal representationexceeds the expected value of the services,then it would be inefficient to hire a lawyer.But in the real world, serious market failurescomplicate this facile characterisation of thelegal services market. One set of problems,discussed below, is that the costs of pursuinga legal claim may deter even those with positiveexpected value claims from retaining thenecessary legal services. Even if we put thatproblem aside, we would still have to considertwo other market failures that can leave litigantswho ought to retain a lawyer unable todo so: First, private mechanisms for providingoptimal insurance against legal risks are oftenunavailable or inadequate.• Second, many poor people lack access to awell-functioning private market for financingthe pursuit of their legal claims. Both of theseproblems share a common root: poor peoplehave limited assets, but litigation typicallyrequires a relatively large up-front transfer ofresources to a legal services provider.The inadequate insurance problem arises primarilyin cases where a poor individual is the target31

of some legal action brought by the governmentor another party. For example, a poor personmay suddenly find herself the target of an evictionproceeding, a private lawsuit, or — mostterrifying of all — a criminal prosecution. Whenthis sort of disaster occurs, the individual maysuddenly find herself in need of expensive legalservices, but she may not have sufficient assetson hand to pay these costs herself. One mightreasonably suppose that the private value to thepotential target of having access to such servicesin case of a legal emergency exceeds the probability-discountedcost to potential providers ofpromising to make such services available. Inother contexts where this is the case, privatefirst-party insurance markets emerge: The potentiallyneedy individual pays some regular fee tothe insurer, and in the event of emergency theinsurer pays the majority of the cost of providingthe emergency service. But although efficientprivate insurance markets for legal services havedeveloped in some parts of Europe (Killian 2003,Regan 2003), they are generally rare elsewhere inthe world. The lack of effective insurance againstlegal risk burdens the poor much more than theaffluent, because the affluent are better able toself-insure — for example, by having large ‘rainyday funds’ available to cover unforeseen emergencyexpenditures.One reason for the dearth of effective private legalinsurance arrangements may be the genericproblem that very poor individuals devote all theirassets to short-term subsistence; they would notbe willing or able to buy legal insurance even if itwere available. Insofar as that is the main cause,the most obvious solution is straightforwardredistribution of wealth rather than any reformtargeted at legal services specifically. Anotherreason may be that poor people lack sufficientaccess to information about the benefits of legalinsurance. This consideration is a variant on thegeneral concern about the lack of adequate legalinformation, considered in a later section.Other reasons for a failure in the market for legalinsurance involve problems with insurance marketsgenerally. The first problem is ‘moral hazard’:those with insurance are less likely to take care toavoid taking actions that are likely to trigger theneed for insurance coverage. The second problemis ‘adverse selection’: those at greater risk aremore likely to purchase insurance, which leadsto a vicious cycle in which price increases deterpurchases by relatively lower-risk individuals, andthe increasing concentration of high-risk individualsin the insurance pool drives the price upfurther (Bolton and Dewatripont 2005). In otherprivate insurance markets, providers and regulatorstry to deal with the moral hazard and adverseselection problems through devices like deductiblesand co-payments, price discrimination onthe basis of risk factors, and mandatory groupinsurance plans. These mechanisms may not beadequate to address the problem in the context oflegal insurance, however. The result, then, is thatmany people of modest means may not be ableto purchase private insurance against legal risks,even if they are willing and able to do so.One straightforward solution to pervasive failuresin the market for legal insurance is for the stateor the international donor community to step in toprovide universal insurance against certain typesof legal risks. The most obvious and widespreadform of government-administered legal insuranceis the provision of public defenders for indigentcriminal defendants. Governments and NGOs thatoffer free or subsidised legal assistance to individualsfighting eviction, defending against civillawsuits, or contesting fines levied by governmentagencies are also essentially providing subsidisedlegal insurance.32

The case for government or donor-funded legalinsurance is powerful in the presence of the marketfailures described above, but it is important torecognise that such insurance is very expensive.It also involves significant redistribution of socialresources — not only from the well-off to thepoor, but among different sub-groups of the poor.Subsidised legal insurance does nothing to mitigatethe moral hazard problem, and it may erodeindividual’s incentives to take precautions to avoidbeing subject to legal action. Subsidised insurancealso reduces the incentives of marginally indigentindividuals to self-insure even when they coulddo so (cf. Hoffman, Rubin and Shepherd 2005).Moreover, although there is no adverse selectionproblem under a universal insurance scheme— because opting out is impossible — the schemetransfers resources from people who rarely makeuse of emergency legal services to those who usethese services more frequently. Often this resourcetransfer takes the near-invisible form of the opportunitycosts of the resources spent on emergencylegal services for high-risk individuals and groups.Those resources might otherwise have been spenton other legal or non-legal services that would benefitdifferent populations of poor individuals.This is not to say that state or donor provisionof emergency legal insurance is a bad idea.Indeed, in some cases — such as the provisionof competent criminal defence counsel free ofcharge to indigent defendants — state-fundedlegal insurance may be a moral and legal obligation.But because the operation of a universallegal insurance scheme is so costly, it is worthconsidering other techniques that reformersmight employ to redress the failures in the marketfor emergency legal insurance. One such approachis to expand the use of local communitybasedorganisations that allow individuals to pooltheir risk. For example, labour unions can — andoften do — provide legal services on behalf oftheir members, especially to contest terminationdecisions and adverse employment conditions.Tenants’ associations can provide emergencylegal assistance to contest evictions; similarly,while landlords’ associations can offer emergencylegal assistance to take action against unruly ordestructive tenants. The advantage of relying onsmall community-based representative groups toprovide emergency legal insurance is that thesegroups may be better able to monitor and policetheir members and to apportion insurance costsin rough proportion to risk.The financing problem typically involves poorindividuals who have some legal claim — eithera positive legal entitlement or an injury to a legallyprotected interest — that has a positivemonetisable value that is greater than the cost ofthe legal services necessary to pursue the claim.In an efficient market, because this claim has apositive net expected value, the individual shouldbe able to retain representation and receive anaward (perhaps through litigation, but more likelyin a settlement) that exceeds the cost of the legalservices. But in many cases poor individuals donot have the assets on-hand to pay the up-frontfees necessary to retain legal services in theprivate market (Yeazell 2006). Moreover, theirdisputes usually unfold with other poor peopleas defendants, and are mostly about division ofproperty rather than damages. It is unlikely thatthere is a ‘deep pocket’ around that can be thetarget of a claim. For these reasons, the solutionthat their claim is financed by others — by theirlawyer for instance — is usually not available.That being said, there may be situations wherefinancing of claims is an option, such as in thecase of personal injury arising from road trafficaccidents, and this will increasingly be the caseat higher stages of development. To that end gov-33

ernments may consider to remove artificial barriersto the market for financing of claims, for instanceby changing the rules against contingencyfee arrangements (Kritzer 2004, Yeazell 2006),although this may prove to be a controversial issue.Another alternative, which combines elements ofthe contingency fee system with a more traditionalcivil legal aid system, is the ‘contingency legal aidfund’ (CLAF) (Capper 2003). In a CLAF system,the government establishes a fund to subsidiselitigation by indigent civil plaintiffs. Lawyers whorepresent such plaintiffs are reimbursed for a portionof their costs if they lose. If they win, on theother hand, they are required to contribute a portionof the damage award to replenish the fund.A CLAF system would place more burden on thepublic treasury than a system that relied on contingencyfees, but it would be less expensive thana traditional civil legal aid system. Similarly, whilea CLAF system would have less powerful incentiveeffects than a contingency fee system: cases witha low probability of winning look more attractive,and cases with a high probability of winning lookless attractive, under a CLAF system as comparedto a contingency fee system. Whether that is agood thing or a bad thing depends on the socialvalue we attach to expanding the opportunities forindividuals with facially weak claims to have accessto a lawyer. CLAF may also be an attractive‘middle way’ for countries that have traditionallyrejected contingency fees, but are interested inexperimenting with market- or incentive-basedalternatives to traditional civil legal aid. It is alsopossible to use the same basic approach suggestedabove for emergency legal insurance:greater reliance on relatively small, communitybasedrepresentative organisations. In addition toproviding support for members who are facing alegal emergency, these organisations could alsoprovide financial support for members who need tohire a legal professional to pursue a legal claim fordamages against some other party; the claimant,if victorious, could then pay back the organisationfor fronting the money. Alternatively organisationslarge enough to retain their own legal servicescould ‘loan’ their legal representatives to membersin need without charge.The preceding discussion has focused primarilyon cases in which an individual’sability to access legal services confers benefitsprimarily on that individual. However, the privatebenefits that an individual may derive from effectiveaccess to the legal system may not alwaysbe equal to the social interest in providing suchaccess (Shavell 1997). In some cases, the socialresources — in terms of both time and money— that result from an individual’s pursuit of alegal claim may be very high, even though thecosts to the individual are relatively low. In thosecases, individuals will have an incentive to ‘overconsume’legal and judicial resources. In othercases, and that is far more likely to be a problemin relation to the rights of the poor, individualpursuit of legal claims may confer more generalbenefits on a larger class of people, or on societygenerally. In those cases, individuals may havetoo little incentive to press their legal claims.There are three primary reasons why this mightoccur.First, each individual legal claim brought by aninjured victim against an injurer contributes to thegeneral deterrence of unlawful conduct. The individualclaimant, however, does not internalie thefull value of this deterrence benefit (Shavell 1997).Second, where an individual seeks a remedy thatinvolves the reform of an institution or the eliminationof a harmful unlawful practice, that remedy,like general deterrence, will typically benefit34

a much larger class of people. As a result, eachindividual’s incentive to pursue that systemicrelief may be too small.Third, each individual who pursues a legal claimmay influence the development of the underlyingsubstantive law. Comparative studies have foundthat this is true even in countries where, as a matterof official legal ideology, judges merely applypre-existing law to new disputes (MacCormick andSummers 1991, 1997). Even though an individuallitigant internalises some of the benefit of a favourablechange in the law, she typically will notinternalise the full social benefits of such changes.Thus, individuals have insufficiently strong incentivesto press for beneficial legal reform (Landesand Posner 1979). Furthermore, litigants whohave only occasional contact with the legal systemwill be at a disadvantage to entities that are‘repeat players’, because the latter will generallyhave a stronger incentive to influence the developmentof the law. This may put poor individuals ata systematic disadvantage relative to entrenchedinstitutions and elites (Galanter 1974).For these and other reasons, the pursuit of legalclaims — and the investment in capable legalservice providers to advance these claims — maybenefit many besides those directly involved.Where disputes have such ‘public goods’ characteristics,individual demand for legal services willbe too low from a social perspective. In thesesituations, reforms that provide an incentive tosecure legal services specifically (as opposed toefforts to redistribute income generally) may beappropriate.One approach to redressing this type of marketfailure would be for governments, NGOs, or internationaldonors to provide targeted legal assistancein cases where the individual pursuit of alegal claim is most likely to confer a public goodas well as a private benefit (Shavell 1997). Asecond approach to addressing this sort of marketfailure would be to empower local communityadvocacy groups and other representative civilsociety organisations (including, for example,public interest advocacy groups, labour unions,renters’ or landlords’ associations, and coalitionsof small business interests) to pursue legalclaims on behalf of their members. While theseorganisations may not be perfect representativesof collective or public interests, they may have astronger incentive to pursue legal relief that hasbroad public benefits than does any one individual.An established community organisation isalso more likely to be a repeat player in the legalsystem, which means that it typically will have astronger incentive to pursue a long-term strategyof legal change. Furthermore, community-basedorganisations, while hardly perfect, are likelyto have better judgment than national governments,international donors, or other NGOs aboutwhat allocation of scarce legal aid resources willachieve the greatest collective benefit.These observations suggest three approachesto strengthening the role of local civil societyorganisations. First, it is important to create aninstitutional environment in which such groupsare relatively easy to form and sustain (NCLEPPhilippines 2007). Second, it may often be awise to empower organisations to pursue legalremedies on behalf of their members orthe general public. Relaxing rules on who canbring a suit for example, by liberalising standingrequirements and expanding the availabilityof representative actions, two reforms that theIndian Supreme Court has pioneered, may enablecommunity organisations to pursue publicinterest litigation even when no individual wouldhave a sufficient incentive to do so (Dembowski2000). Third, because local community organi-35

sations may make better decisions about how totarget scarce legal aid resources, it is often advisablefor governments and international donorsto provide funding to these local organisationsand allow them to decide how to allocate theseresources. That suggestion must be tempered,however, with the recognition that corruptionand abuse by these local organisations may beserious concerns. Thus, effective monitoring isessential. Finally, and more controversially, theincentives of claimants or legal service providersto pursue claims that serve the public good maybe strengthened through the use of special damageawards and fee-shifting arrangements.The preceding discussion leads to the followinggeneral recommendations:• First, in the context of legal entitlements witha high private value, governments and donorsshould target their subsidies at those caseswhere individuals find themselves in legalemergencies and self-insurance or privateinsurance are not viable options. Providingfree legal representation for indigent criminaldefendants is the most obvious example, butthere are other cases in this category as well.• Second, when legal aid resources are scarce,it makes sense to ration these resources sothat legal aid is targeted primarily at caseswhere the pursuit of the individual legal claimis more likely to benefit a larger class of disempoweredindividuals: 1) disputes wheredeterrence of future wrongdoing is particularlyimportant; 2) ‘impact’ litigation that seeksbroad institutional reform remedies or changesin the substantive law.• Third, governments and donors should encourageand facilitate the organisation of localgroups that can provide legal representation(or funding for legal representation) to theirmembers. In many cases, governments anddonors should funnel their legal insurancefunding through these groups rather than tryingto reach individuals directly. Local, community-basedrepresentative groups, much likethe rotating credit associations celebrated inthe literature on micro-finance, allow individualsto pool their risk and provide them with asource of financing in times of need. Theseorganisations also provide more effective monitoringand allocate resources more efficientlythan states or donor organisations.Reducing Transaction Costs:Wholesale ReformsThe preceding section concluded with an analysisof the situation where one lawsuit creates benefitsfor a large number of poor people. This is anexample of a more general strategy to look for approachesthat lead to economies of scale. Like thebenefits of access to justice can spread over manypeople, there are also approaches that reduce thecosts of access to justice for many people at thesame time. A typical example is the costs thatresult from complex and archaic procedures thatserve little or no useful function. It is often cheaperto eliminate the source of such costs ‘wholesale’than it would be to provide ‘retail’ assistance toindividuals who want to use the system. Thus,when the diagnosis of the problem is high transactioncosts of using the legal system, reformersshould consider wholesale solutions as an alternative,or complement, to subsidised provision ofindividual-level legal services. Such solutions include:1) making the laws simpler, focusing accessto justice efforts on common problems the poor; 2)creating small claims courts with simplified proceduresthat do not require a lawyer’s assistance;and 3) allowing those with similar complaints tobring their cases up as a group or class. A fourthand more general strategy would be to find econo-36

mies of scale in the legal system.Consider as a simple example, access to basicinformation about the law. As we sawin many developing countries simply finding outwhat the law is can be a time-consuming andcostly endeavour, because the laws are not availablein print, or only in a language not understoodby the poor. One way to ameliorate thesetransaction cost barriers would be to provide orsubsidise legal service providers who are fluent inboth the national language and the local vernacular.This approach, however, would be extraordinarilyexpensive. A more sensible solution wouldbe to translate the law into all significant locallanguages, to provide user-friendly terminologyor explanatory notes for likely incomprehensibleterms and jargon, to disseminate it widely, to ensurethat law is administered (to the extent possible)in the language of the relevant region, andto provide centralised translation services wherethis is not possible (e.g. NCLEP Pakistan 2007,NCLEP Tanzania 2007, NCLEP Uganda 2007).While this set of approaches is not cost-free, it isa much cheaper way of reducing linguistic barriersto access than providing individual-level legalassistance. 5Standard Routes for the Most Urgent Legal NeedsOne of the values instilled in law students allover the world is that solutions to legal problemsshould be highly contextual, taking into accountevery aspect of the situation. This ideal is alsoreflected in the way law firms and courts tend tobe organised. A case is assigned to a lawyer, or toa judge, who spends as many hours on the caseas the case needs. Although other billing methodsexist, most lawyers are paid by the hour, sothat they have fewer incentives than other similarservice providers to look for standardised solutionsto similar problems. Standardisation doesoccur in bigger law firms, but these are not verylikely to serve the poor.Compare this to doctors and other healthcareproviders, who increasingly work from protocolsthat reflect the best treatment practices for commonailments. These protocols are informed byresearch and make implied trade-offs betweenquality (risk) and costs. The protocols are availableon the Internet, so that clients can checkthem, and hold their doctors accountable if necessary.Like people come to doctors with moreor less standard problems, many legal problemsof individuals are rather similar. Termination ofemployment, changes in land use or rented housingarrangements, splitting up of families, deathof parents, termination of cooperation betweenbusiness partners and expropriation for propertydevelopment are the most common transitionsin a life time. They tend to lead to similar problemswith division of property and redefiningrelationships in such a way that social capital ispreserved. Issues between husband and wife, betweenlandlord and tenant, between users of thesame source of water, or between employer andemployee follow certain common patterns as well.This creates possibilities for economies of scale.Standard information leaflets for clients can savethe costs of intake and leave clients better informed.Best practices for the settlement processcan be designed. Rules of thumb for division ofproperty can be defined, if necessary with standardexceptions when common reasons for derogationfrom the more general rule occur. Tradeunions can specialise in employment issues, andleave family issues to other specialists.However, policy makers should also investigatewhy this standardisation does not happen spontaneously.One possible reason is that providersof justice services have little means to influ-37

ence others in the supply chain to accept moreefficient settlement and litigation procedures.Their clients, often opponents in a conflict, arenot very likely to cooperate in order to find themost efficient process. The incentives on lawyers,who are in a unique position as professionalsbecause they can directly create work for eachother, are very different from those in a normalsupply chain. There, producers, distributors andclients all have the same incentives to cut thetransaction costs, because there is an exposureto outside competition. The incentives on judgesand other neutrals may also work against standardisation.They have no duty to the disputants tomake a trade-off between costs and quality whenthey organise the process through their decisionson procedure, and in some legal systems they aresupposed to leave the management of the procedureto the parties.These issues regarding the management of thejustice supply chain have, as far as the WorkingGroup could establish, not yet been studied indepth (Hadfield 2000 is one of the exceptions).An open question is, for instance, why legalservices to individuals tend to be performed byindividual lawyers, or small partnerships, and notby bigger companies that offer standard servicesfor common problems, such as is the case forbanking and insurance. Another issue is wherethe responsibility for the design and improvementof procedures should be located: Is this primarilythe task of the legislator, of the judiciary, or isthere a role here for bottom up processes as well?We now turn to this topic of improving the designof procedures Simplifying ProceduresAn attractive approach to reducing legal transactioncosts wholesale, rather than attempting tosubsidise these costs on a retail basis, would beto simplify the substantive and procedural law.One essential step could be to allow individualsto advance their legal claims without representationin small claims courts or other moreinformal tribunals (Lopez-de-Silanes 2002,Buscaglia and Ulen 1997). Adopting this approachis probably not without costs: Simplifyinglaws so that they can be understood and invokedby uneducated lay people may require makinglaws cruder, less nuanced, and less efficient,although some may argue that targeting lawsbetter to the problems of the poor may have theopposite effect. If the legislator has sufficientinformation and background analysis regardingwhat constitute the most common concerns andgrievances of poor people and other disadvantagedgroups, the substantive legislation may betailored to be receptive to such grievances.There may be several layers within pieces oflegislation that aim at different target groupsensuring that principles of equality and nondiscriminationare adhered to, whilst on anotherlevel the legislation is drafted in a sufficientlysophisticated manner to cater for the needs fornuances and detail. Administering laws in smallclaims courts or informal tribunals entails dispensingwith some of the procedural safeguardsthat attend more formal legal proceedings, andthe adjudicators in such forums may be lesscompetent. However, many of the legal issues ofpoor people are reasonably simple in legal termsthe problem is that they are met with overtly andunnecessary completed procedures that onlywork to exclude the poor from justice settlementmechanisms.One way of dealing with this is to provide peoplewith ‘simple’ and ‘sophisticated’ procedures nextto each other. Poor plaintiffs will then be able tochoose the procedure they find is most appropriateto their problem and circumstances. However,this requires clear consumer information, andnecessitates designing ‘simple’ procedures that38

at least meet certain quality thresholds.Nonetheless, legal and adjudicative simplificationmay drastically reduce the transactioncosts of access to justice for a very largenumber of potential consumers of justice services(NCLEP Tanzania 2007, NCLEP Uganda 2007).The net social welfare gains associated with thisstrategy may be much larger than the net gainsassociated with trying to provide every needy individualwith sufficient legal aid to navigate thecomplexities of a more ‘sophisticated’ legal andjudicial system (Galanter 1976, Hay, Shleifer andVishny 1996, Posner 1998).General formalistic court procedures may alsobe altered to accommodate poor people or peoplewho have had little contact with formal statestructures before appearing in court. Archaicregulations regarding dress-codes, how to sit orstand, the set up of the court where the judgesand the officials of the court sit on a higher plateauthan the audience and the parties to thesuit, use of official language without necessaryinterpretation into local languages are all featuresthat can easily be removed and interpretation canbe organised with little extra resources.A potential political difficulty with these sorts ofwholesale institutional reforms is that many ofthem reduce the demand for the services offeredby attorneys or other legal professionals; indeed,that is part of the point of such reforms. Thus,even when wholesale transaction-cost reducingstrategies are efficient, they may provoke politicalopposition. For example, Brazil recently establishedsmall claims courts in which individualscan appear without having to retain counsel.The Brazilian Bar Association opposed the provisionand is contesting the legality of this aspectof the small claims court system (Hammergren2007). Similarly, the bar association in Uruguaystrenuously objected to transaction-cost reducingreforms that streamlined and expedited civiland criminal trials (Messick 1999). And whenPeru wanted to liberalise its property registrationsystem to make it more accessible to low-incomePeruvians, lawyers and notaries objected becausethe reforms eliminated the monopoly thatthe legal profession previously had on verifyingand registering property ownership (World Bank1997). In other cases, though, organised bar associationshave recognised the value of reformsto reduce aggregate transaction costs, and havebeen a powerful ally of pro-poor reformers. It istherefore important to cultivate the support ofthe legal profession when pursuing these sorts ofreforms.Bundling Claims: Class ActionsAnother important situation in which the transactioncosts associated with individual-level legalservices may lead to failures in the legal servicesmarket involves situations is when many individualssuffer a relatively small injury from a commonor similar source. In such cases the aggregateinjury to social welfare may be large, but no individualhas sufficient incentives to incur the costsof securing the legal services necessary to seekredress of the injury. While it would be possibleto address this problem by providing subsidisedlegal services to every individual who might havea valid legal claim, this approach is extremely inefficient.An alternative approach is to authorisesome form of aggregate multi-party or representativelitigation, so that a small number of legalservice providers can represent a large group ofsimilarly situated individual.One model for such litigation is the class actionmechanism widely used in the United States.While class actions have their flaws, the classaction device has been a powerful tool in expand-39

ing access to justice for disadvantaged groups inthe United States (Bloom 2006). In the developingworld, class action suits have also producednotable successes for poor people in India, SouthAfrica, and elsewhere. Although class action suitsare less common in civil law jurisdictions, recentlysome civil law countries, including Brazil andIndonesia, have begun to experiment with authorsclass action suits for certain types of issues (Gidi2003). While these reforms have their problemsand detractors, there is some evidence that theclass action mechanism has improved access tojustice for the poor. In Brazil, for example, classactions against municipal governments have successfullychallenged illegal taxes and illegal fareincreases for public busses. Brazilian plaintiffshave also successfully deployed class action litigationagainst private companies to redress masswrongs such as product defects, environmentaldamage, and abusive or deceptive marketingpractices (Gidi 2003).This is not to say that U.S., Indian, or Brazilianapproach to class action litigation is the rightmodel. Rather, the point is that when large numbersof poor people are victims of the same orsimilar legal injury, it is prudent to design somesort of mechanism through which they can pursuetheir claims collectively, rather than requiringeach potential claimant to pursue her own claimseparately. That latter approach entails either awholesale denial of access to justice (if few or nopotential claimants are able to afford adequatelegal representation) or massive costs (if largenumbers of claimants pursue their individualclaims separately). One attractive political featureof expanding access to multi-party representativelitigation is that, in contrast to transaction-costreduction strategies that reduce demand for legalservices, expanding the availability of collectivelitigation devices tends to increase the demandfor legal services and therefore should appeal tothe legal profession (at least its more entrepreneurialmembers). Political opposition to this sortof reform is more likely to come from potentialtargets of class suits, including government agencies,municipalities, and large corporations.An alternative bundling mechanism to class actionsthat also supports a controlled handlingof large numbers of similar (tort) claims is theestablishment of a compensation fund. Compensationfunds usually provide fixed amounts ofcompensation to injured parties in cases wherethe rules of (tort) law and/or the institutional legalinfrastructure function inadequately or functionnot at all, e.g. in post-war and post-disaster situations.Simple, user-friendly application procedures,for instance run by NGO’s in collaborationwith the local community and authorities, couldfacilitate people in need of basic subsistence torebuild their lives with monetary and non-monetarymeans at relatively low transaction costs.Other Ways to Reduce Costs of Access WholesaleStandardisation of settlement and negotiationprocesses, improving procedures, and bundlingclaims are but examples of ways to reduce transactioncosts wholesale and to raise the quality ofprocedures and outcomes. A substantial proportionof the costs of access to justice comes from theprocess of finding, establishing and substantiatingthe facts. How extensive fact-finding should be,however, is a design issue for procedures, that isseldom addressed explicitly. There is an obvioustrade-off between the costs of the registration proceduresand processes to settle disputes or to enforcerights and the costs of error if the wrong factsare established. Requiring unnecessary documentsor evidence can be a serious barrier to access.The issue of fact-finding is again related to theapplicable legal criteria and the way they are pro-40

duced. In most legal systems, the rules of privatelaw that determine the outcome of the most commondisputes of the poor are rather open ended.Both in common law and in civil law countriescase law is supposed to generate more guidanceover time, but deciding and publishing cases oneby one is not the only — and often not the mostefficient — way to procedure criteria that canhelp people to settle disputes. Neutral institutionslike government commissions, committeesof judges, or academics can play a useful rolehere. An example is damage scheduling, whichguides the disputants and the judge when theyhave to establish the value of a personal injuryclaim without binding them. This is very commonin European legal systems that have to dealwith personal injury claims. Such criteria mayreduce the costs of fact-finding substantially, canincrease transparency of the outcomes, and makesettlement easier to achieve (Bovbjerg et al.). Oneof the key issues here is that these rules act asa presumption, without sacrificing the possibilityto tailor the result to the specific circumstances,thus saving decision costs without a correspondingincrease in the costs of error (Schauer 1991,Kaplow 1992).Another example in which wholesale reformmakes more sense than subsidising individual legaltransactions involves the legal documentationof common transactions — such as sale, rental,and employment contracts — as well as commonlegal documents like wills, title registrations, andgovernment claim applications. Securing the assistancenecessary to draft legally valid versionsof these and other formal documents can be expensive.As a result, poor people may simply foregothe activity in question (which is inefficient),may forego legal documentation (which is risky),or, in the case of transactions with a more sophisticatedparty, may rely on documents provided bythat party (which might lead to exploitation).One solution to this problem is to provideretail legal aid services, provided either bylawyers or paralegals. The advantage of this approachis that the legal service can be tailored tothe individual client’s needs. The disadvantage,however, is that this client-by-client approach isextremely expensive. Another drawback of oneon-oneservices especially in commonly occurringlegal needs is the non-profitability of the servicefor the larger community. An alternative strategymight be for local lawyers, in collaboration withcivil society groups and other community-basedorganisations like local councils, chambers ofcommerce, banks, among others, among others,to draft and disseminate standard-form documentsfor common legal transactions and provideeducation and outreach explaining the significanceof the documents. This approach sacrificesindividual tailoring in the interests of exploitingeconomies of scale. However, it facilitates sharingthe benefits of legal services amongst groups ofcitizens in comparable situations at lower costs.The bottom-line message is: The inability of poorpeople to access the legal system is frequentlythe result of the transaction costs associated withthe pursuit of valid legal claims. It is often thecase that many individuals face similar transactioncosts arising from a common source, orwould have to pay similar transaction costs toseek redress of a common legal injury or problem.In the presence of such aggregate or redundantlegal transaction costs, reformers should try toaddress the problem at the wholesale level, ratherthan focusing exclusively on the provision ofretail-level legal aid services or neutral disputeresolution to individuals. Wholesale reform strategiesinclude both reforms that eliminate thesource of significant legal transaction costs forlarge numbers of individuals (e.g., legal stand-41

ardisation and simplification) and also reformsthat enable large numbers of potential claimantsto pool their resources to pursue their commonlegal interests rather than forcing them all to pursuetheir individual claims separately (e.g., classaction mechanisms).Improving Informal and CustomaryDispute Resolution 6Most poor people — especially the poorest of thepoor — have little or no contact with the formallegal system, and are not likely to do so even ifall aspects of the legal empowerment agendaare implemented. They instead seek justice fromcustomary law (which may be highly formalisedand is sometimes officially recognised by thestate system) and from informal norms, practices,religions and institutions. For example, in sub-Saharan Africa, customary land tenure law coversroughly 75 percent of land and in some countries,such as Mozambique and Ghana, over 90percent of land transactions are governed by customarylaw (Wojkowska 2006). In urban shantytownsin Columbia, squatters who cannot rely onthe formal system because of their illegal statushave established informal urban justice systemsto deal with disputes and provide basic services(Faundez 2006). Traditional and modern civilsociety institutions continue to play an importantrole in local dispute settlement in Afghanistan.Traditional decision making assemblies are estimatedto account for more than 80 percent ofcases settled throughout Afghanistan (AfghanistanHDR 2007). These examples are merelyisolated illustrations of a much more pervasivephenomenon: the predominance of non-state justicesystems as the primary mode of dispute resolutionin the lived experience of the overwhelmingmajority of the world’s poor.One element of the Legal Empowerment’s agenda,of course, is to enable more poor people tomake the transition from the informal sector tothe formal, while at the same time integratinguseful norms and practices from informal or customarysystems. These approaches are discussedin detail in the chapters prepared by the Commission’sworking groups on property rights, labour,and business, and we will, therefore, not focuson the formalization of the informal sector or onfacilitating the transition from the informal sectorto the formal. Formalization is not always possible,however, and indeed, not always desirable, asthe other working groups discuss in detail in theirchapters within this volume. Informal justice systemsmay be more culturally familiar, more easilyaccessible, cheaper, and better tailored to localcircumstances than the state-run legal system.Poor people may also be more willing to use nonstatejustice systems because of a general distrustor fear of formal state institutions, includingthe formal justice system (NCLEP Uganda 2007).For these and other reasons, many countries haveopted to formally recognise, or tacitly accept, thelegitimacy of customary law in certain geographicregions or substantive areas. And some systemsare formally integrated in the formal legal systemand reflected in substantive legislation and thestructure of the judiciary. Regulations have alsobeen enacted to provide formal procedures forwhat legal system to chose and for how far thecustomary system may reach in the formal judiciaryand justice system. Informal or customarysystems, of course, have serious problems, and itwould be a mistake to romanticize or glamorizethem. Informal and customary law can be oppressiveto women. They are almost totally excludedfrom participating in the decision making ofjirgas/shuras resulting in serious consequencesfor their status and the protection of their rights(Afghanistan HDR 2007). Informal systems may42

also exclude other disadvantaged social groups,may perpetuate the power of local elites andstifle dissent, and may be unsuited to rapideconomic development (NCLEP Uganda 2007).Just as poor communities may find it difficult toaccess formal justice institutions, marginalizedmembers of poor communities may find it difficultto achieve equal access to the institutionsof customary or informal justice (NCLEP India2007, NCLEP Philippines 2007). Nonetheless,despite these problems, reformers must acknowledgethat in many situations replacing informal orcustomary justice systems with the formal legalor bureaucratic institutions of the state is eitherimpossible or would do more harm than good.Therefore, alongside programmes to improvethe state justice systems, reformers should seekout opportunities for strategic interventions thatimprove the operation of informal or customaryjustice systems and facilitate the efficient integrationof the formal and informal systems.Ultimately, reforms and improvements to thenon-state justice system must emerge ‘bottomup’from the participants in that system. Whilea government’s role in facilitating reform of nonstatejustice systems is necessarily limited, itcan (perhaps in collaboration with internationaldonors working through government) take actionsto influence the development of non-statejustice systems. We may group them under fourcategories: education and awareness campaigns;tailored legal aid services; targeted constraints,and structuring institutional relationships.Education and Awareness CampaignsEmpowering the poor to demand changes in thecustomary system is the first approach. Reformerscan encourage transformation from within simplyby providing information about individuals’ legalrights under the constitution and about the normsof the formal legal system. In Bangladesh, forexample, the Constitution forbids the practice oforal divorce, but in poor rural communities, thepractice is still widespread. A Bangladeshi NGOfound that simply informing the members of localcustomary courts that oral divorce was forbiddenby the constitution substantially reduced thepractice. More generally, this NGO found that itwas possible to introduce norms from nationallaw into community deliberations and mediationpractices otherwise based on customary law andtraditional norms (Golub 2000).Although this may be an exceptional case,education and awareness-raising campaignsmay have long term effects on the evolution ofcustomary law systems. This effect may be particularlypowerful if educational efforts are coupledwith improved access to the state system as analternative to the customary system. Customary legalofficials who want to retain their authority maythen feel some competitive pressure to modifythe norms of the customary system to align themmore closely with those of the formal system. Educationefforts are not likely to reap visible shorttermbenefits, but in the longer term they mayeffect significant change in cultural practices.A variant of the education-oriented approach isto provide information on how other customarycourts have resolved similar disputes. Implementingschemes that let customary officials anddisputants in customary systems know how othercustomary courts have resolved similar issuesmay encourage consistency, limit abuse, and allowfor the gradual evolution of the customarysystem. This is not to say that customary legalsystems should be converted into common lawstyle courts with binding precedent. Rather, thesuggestion is that information sharing not onlyabout the norms of the formal legal system, butalso about the norms adopted by other custom-43

ary or informal systems, may improve the overallfunctioning of the system and empower poor peopleto challenge customary practices that seemlike arbitrary abuses of power.Tailored Legal Aid ServicesMost government and donor sponsored efforts toprovide more legal services to the poor emphasiseaccess to the formal legal system. Hence,a significant fraction of legal aid resources aretargeted at subsidising lawyers or reducing costsassociated with using the formal court system.But as it turns out, many poor people tend torely on informal or customary justice systems. Intheory, these alternatives may be more familiarand accessible; but in practice, many poor people— particularly women, young people, and membersof other disadvantaged groups — may alsofind it difficult and intimidating to navigate thecustomary system. These vulnerable individualsmay also be subject to abuses by the local eliteswho administer traditional justice systems.Reformers should, therefore, consider targetinglegal aid resources and legal service providerswho can help poor people deal with both thecustomary and the formal state system. Theparalegal programme in Sierra Leone discussedearlier is exemplary in this regard (Maru 2006).These paralegals have a basic training in formallaw, but they are also drawn from the local communityand are familiar with local traditions andcustomary law. They can therefore assist clientswith the non-state justice system. They can alsomonitor abuses, and are better positioned to adviseclients on when they should threaten to takea dispute to the formal state system. Particularlyin light of the fact that markets for representationservices for non-state justice institutions are typicallythin or non-existent, legal aid resources maybe especially productive when focused on subsidisingthis sort of representation.Targeted Constraints on Informal JusticeThe most straightforward strategy for trying toreap the benefits of non-state justice while avoidingits flaws is to accept (formally or tacitly) thelegitimacy of non-state justice systems withincertain limits, but to strategically and aggressivelyintervene to require the non-state systemto respect certain fundamental norms that mightotherwise conflict with traditional practices. Thatis, instead of attempting to displace or formalizethe informal system entirely, government reformersmight selectively impose a relatively smallnumber of especially important norms on the customarysystem.This approach is appealing because it seems toreflect a reasonable compromise between theinterest in preserving and promoting non-statedispute resolution and the interest in respectingfundamental constitutional principles and humanrights norms. This proposed compromise, however,immediately raises the question of exactlywhich norms are so fundamental that they musttake precedence over informal or customary practices.Because this question implicates the appropriatedesign of formal laws on topics includingproperty, labour, and business activity, ourchapter does not cover this aspect of the problemin detail. It is worth emphasising, however, thatthe most prominent and difficult set of questionsconcerning the degree to which formal law shouldtrump informal law concerns the status of womenand domestic relations.Despite the fact that many customary systemsclaim that the subordination of women is consistentwith traditional cultural practices, this is onearea where the state should be more aggressivein limiting their authority. Taking a strong standagainst gender discrimination in customary sys-44

tems is important both for intrinsic moral reasons— reflected in the human rights principles laidout in the Convention for the Elimination of AllForms of Discrimination Against Women — andfor pragmatic economic reasons. This is in lightof the growing body of research that genderequality and women’s empowerment fosters sustainableeconomic growth and promotes healthand education.South Africa and Tanzania both offer powerfulrecent examples of cases where the state hasrecognised the legitimacy of customary law up toa point, but has required that customary systemschange to respect the equal rights and status ofwomen. In South Africa, NGOs successfully lobbiedfor the passage of a ‘Recognition of CustomaryMarriages Act’ that formally recognised marriagesconcluded in accordance of customary law,but only if customary law provided for equality ofhusband and wife in terms of status, decisionmakingauthority, property ownership, and childcustody (Centre for Applied Legal Studies 2002).Tanzania has enacted two Land Acts that conferformal recognition on customary title, but alsomandate the elimination of customary practicesthat discriminate against women with respectto land ownership (Ikdahl et al. 2005, Tsikata2003). Neither the South African nor the Tanzanianlaws have been implemented perfectly, andcustomary gender discrimination is still a pervasiveproblem in both countries, but these experimentsnonetheless suggest that it is possible toenact reform built around a political compromise:formal recognition of customary law in exchangefor the rejection of certain customary norms thatare repugnant to principles of non-discriminationand gender equality.Another lesson of both the South African andTanzanian experiences is that these sorts of reformstrategies cannot be imposed immediatelyfrom the top down. Where cultural practices anddiscriminatory attitudes are deeply entrenched,successful legislative reform requires sustainedconsultation, lobbying, and political organisingefforts. Also, in some cases the pursuit of genderequity goals might need to be tempered bypragmatic considerations, and it might be betterto pursue a gradual reform strategy that starts bytargeting only the most extreme forms of genderdiscrimination, and then progressively expandingthe scope of this anti-discrimination principle. Asthe example in Box 2 shows, a complex legal universegoverns the legal position of poor women inmany developing countries. This example furtherilluminates the effect of legal regimes in the fieldof inheritance and property rights of women andits effects on the prevalence of and societal situationwith regard to HIV/AIDS.While the implementation strategy will vary bycountry, targeted interventions to eliminate discriminatorypractices — particularly gender-baseddiscrimination — should be a prerequisite towidespread recognition or acceptance of customarydispute resolution systems.Structuring Institutional RelationshipsThe government can also influence access tojustice in non-state institutions by structuringthe institutional relationship between the stateand non-state justice systems. One basic issuethe government must consider is whether to giveone justice system exclusive jurisdiction over aparticular class of disputes, or whether disputantshave the option of choosing between differentsystems. (The absence of choice may be de jure— as when the formal law gives customary courtsin a particular area have exclusive jurisdictionover family relations or property disputes — or defacto — as when the formal court system is so45

Box 2 Coping with Legal Pluralism in Relation to Women’s Rightsin EthiopiaIn the Amhara region in Ethiopia, photographs of bothhusband and wife are required on the land title. Theprovision also restricts one spouse from selling or inany other way transfer the property without the knowledgeof the other. This also reduces confusion that mayoccur at the death of one spouse. Although Ethiopia isquite advanced from a formal legal perspective, theissue of women’s inheritance and property rights is stillcomplex. This is demonstrated for instance through theinter-relationship between the HIV/AIDS epidemic andwomen’s property and inheritance rights. Comparatively,a ten-country study on women’s inheritance rightsin sub-Saharan Africa suggests that unequal housing,property and inheritance rights increase women’svulnerability to HIV, because it is, in part, why womenremain in abusive marriages. Moreover women areoften blamed for the deaths of their husbands and subsequentlyforced from the household and left destitute.If they remain in the household, they are treated asservants or are married off to the father, uncle, brotheror another close male relative — a practice known as“wife inheritance.”To address the issue of HIV and women’s inheritanceand property rights an initiative was launched. Theaim was to build the capacity of the formal and informaljustice systems, to generate individual and collectiveaction and to empower women in gaining equaltreatment in owning and inheriting property. A comprehensiveanalysis of the legal framework was carriedout which included a review of the statutory, civil andcustomary laws. The study provided a solid empiricalfoundation and underlined the strength of Ethiopianlaw. However, the substantive laws are not being appliedor enforced. This is a result of a number of factors,including lack of awareness, lack of enforcementand ineffectiveness of the court system. Additionalchallenges include a lengthy and costly legal process,which most Ethiopians cannot afford, cultural barriers,free legal services are not yet readily available; the fearof being shunned and stigmatised by both family andsociety; and conflicting laws which cause confusion ordiscrimination against women.The conflict between religious law and constitutionallaw has also come to the fore. It stems from a clausein the constitution which recognises the adjudicationof personal and family matters under religiousor customary law, if both parties agree. Article 34(5)of the constitution states [on Marital, Personal andFamily Rights], ‘This Constitution shall not precludethe adjudication of disputes relating to personal andfam-ily laws in accordance with religious or customarylaws, with the consent of the parties to the dispute.’The conflict arises out of provisions in the Shariá lawthat contradict the terms set forth in the constitution.In reality, women are sometimes coerced into ‘consenting’by pressure from family or society. Although thesechallenges exist, Ethiopia is surpassing neighbouringcountries in the sense that they do not need to createnew laws or reform archaic ones. Initiatives and campaignshave been set in motion to counteract some ofthe problems and to respond to the challenges that aredemonstrating encouraging signs.expensive and inaccessible that customary lawis the only affordable option.) Some have arguedthat integrating the customary system of disputeresolution into the mainstream legal system maybe an effective way to import desirable features ofthe formal system — including norms of genderequality and regularity — into the more accessiblecustomary system (NCLEP Uganda 2007).Others praise NGO efforts that have not focusedon a formal integration of the formal and informalsystems (Golub 2007), such as the Bangladeshiprogrammes that have taken up the issue of legalempowerment for women (UNDP 2002). Rather,some of these efforts have used the threat or realityof litigation (that is, the formal system) as anincentive for resistant or recalcitrant parties to46

participate in the informal system and for suchparties to honour agreements they have made. Thede facto impact has been to increase women’spower and well-being in informal systems that arevery gradually becoming less gender-biased.When there is overlapping jurisdiction betweenlegal systems, a second issue arises:What should the rules be for choosing a forumand selecting the appropriate law to apply? Althoughone must be cautious in offering conclusiveanswers to these general questions, a usefulgeneral presumption is that individuals shouldalways be able to opt into the state system in theearly stages of a dispute, and they should be ableto challenge decisions of the non-state systemthat are repugnant to fundamental human rightsprinciples. However, disputants who have electedto have a dispute resolved through the customarysystem should not be able to seek to undo anadverse judgment by re-litigating the dispute inthe formal court system. These are basic principlestypically applied to ADR systems, and whilethey may not be universally applicable, they tendto promote efficiency, fairness, and healthy institutionalcompetition.4. Improving Access toJustice in the GovernmentBureaucracyThe Nature of the ProblemThe preceding section focused on access to theformal (adjudicative) legal system and to informaljustice mechanisms. But courts and out-of-courtfacilities are not the only institutions that enforceindividual rights and resolve disputes. A greatdeal of such work is done by public bureaucracies,especially in the context of governmentregulation and service delivery, do a great dealof such work. Often the first (and sometimes theonly) line of defence individuals have againstgovernment abuses and threatening or already encounteredinjustices from neighbours, the widercommunity or companies is through the bureaucraticsystem. If that system is not adequatelyaccessible for and responsive to the needs andinterests of poor individuals, then it will not bepossible to legally empower the poor throughbureaucratic means. Therefore, it is important toconsider the problem of access to bureaucraticjustice.One of the most important public bureaucracies,and the one which has great impact on the livesof many poor communities, is the police force.Public order and security are essential publicgoods, and a well-functioning law enforcementapparatus is necessary to provide individuals witha stable and orderly living environment and toprotect them from violence and exploitation. Yetall too often the police not only do not provideadequate protection to vulnerable communities,but are themselves perpetrators of violence andexploitation (Anderson 2003).In addition to law enforcement, state bureaucra-47

cies (including local authorities) are also responsiblefor providing a variety of other services,including clean water, health care, education,transportation, infrastructure, and social insurance.The degree to which these and other servicesshould be supplied by the state rather than themarket is a subject of considerable controversy,and not a matter on which a position is takenhere. Even when these services are supplied in acompetitive market, it is almost always a marketthat is regulated by some public bureaucracy.Indeed, in most countries the provision of accessto a competitive market is — perhaps paradoxically— the responsibility of government regulatoryagencies.Yet all of these public bureaucracies may bevulnerable to a variety of ‘government failures’,analogous in some respects to the ‘market failures’discussed earlier. The great variety of governmentfailures can be grouped into three majorcategories: malfeasance, underperformance, andincompetence.‘Malfeasance’ is the tendency of bureaucrats,or bureaucratic organisations, to abuse theirpower to pursue illegitimate goals. The mostwell-known and comprehensively studied form ofbureaucratic malfeasance in poor countries is, ofcourse, corruption (Shleifer and Vishny 1993).Public officials may demand bribes, may showfavouritism to family or friends, or may use theirpower vindictively against personal enemies.Powerful incumbent politicians may also viewthe bureaucracy as a tool for entrenching theirown power rather than a means for improvingpublic welfare. Whatever the form of malfeasance,the results for the poor are fairly similar:deprivation of services, of (avenues to) sharedpower, and of security. These problems are pervasiveand much discussed throughout the developingworld. Malfeasance may also take moresubtle forms. For example, even well-meaningbureaucrats may be prone to subconsciousprejudices resulting in a continuous neglect ofcertain interests or measures with unintendeddiscriminatory effects for certain groups. Also,when certain groups are more effective at mobilisingresources to influence bureaucratic decision-making,public decisions may be distortedin favour of these groups, even if the bureaucraticdecision-makers are not consciously biased,and even if these interest groups are acting legallyand in good faith.The second category of bureaucratic failure,‘underperformance’, refers to the tendencyof even well-meaning bureaucrats to pursue theirmissions with a socially insufficient level of effort(Bueno de Mesquita and Stephenson 2007). Thebasic problem is that the rewards a bureaucratreceives are imperfectly correlated to how hardshe works or how well she performs. As a result,bureaucrats may be slow to complete tasks or respondto inquiries, and may have weak incentivesto figure out how to improve the overall efficiencyof the system, preferring to rely on pre-existingapproaches to new problems rather than puttingin the time and effort to come up with betterones. Another form of underperformance thatderives from the same basic incentive problem isinsufficient bureaucratic responsiveness to consumerinput or consumer complaints. Even hardworking,public-spirited bureaucrats may becomedemoralized and give up if they feel like mostmembers of their organisation are more interestedin leisure than in innovation.Third, bureaucratic organisations may simplylack the competence or capacity to achieve theirassigned tasks, even when the bureaucrats themselvesare well-motivated (Huber and McCarty2004). Bureaucratic competence depends ona variety of factors, including the talent level of48

the individual bureaucrats, budgetary resources,the design of bureaucratic institutions and procedures,and appropriate feedback and accountabilitymechanisms. Where some or all of theseare deficient, government bureaucracies will notbe successful.Where the government bureaucracies that aresupposed to deliver services and protections tothe poor suffer from malfeasance, underperformance,or incompetence problems, and the poorare powerless to change this. Remedying thissituation requires reform along two related dimensions:• The first dimension is public administration:How can we design bureaucracies that performtheir assigned functions with integrity, effort,and responsiveness to their clients? How canwe structure service processes, bureaucraticgrievance and dispute resolution proceduresthat are fair, efficient and user-focused?• The second dimension of bureaucratic justicereform involves administrative law: What setof legal rules and procedures will empower thebureaucracy to achieve its goals while simultaneouslyconstraining potential abuses of power?What is the proper degree of judicial andpolitical oversight of government agencies?Public Administration ReformTo improve access to bureaucratic justice throughreform of public administration, reformers shouldwork to strengthen external monitoring and toimplement structural reforms that will improvebureaucratic incentives and capabilities. Theright mix of reform strategies will vary dependingon the political and institutional circumstances indifferent countries, and will also have to take intoaccount the specific social and cultural context.Nonetheless, experience in a variety of countriessuggests that there are some general lessons tobe drawn about the types of public administrationreform that may be appropriate.External MonitoringEffective and responsive public administrationoften requires monitoring by entities outside thebureaucracy, including the intended recipientsof bureaucratic services, the general public, andother government agencies.One institutional reform that many countries haveimplemented to improve monitoring is the establishmentof an independent ombudsman’s officeto respond to complaints and investigate allegationsof malfeasance. In Peru, for example, theombudsman was able to resolve a dispute involvingallegations that an agency had overchargedconsumers for electricity and telephone services:After the ombudsman investigated, issued areport, and credibly threatened litigation, theagency took action to address the consumer complaints.The effectiveness of an ombudsman may,as this case illustrates, depend on backgroundinstitutions such as an effective court system thatgive other agencies an incentive to take theombudsman’s recommendations seriously.The effectiveness of ombudsman offices mayalso depend on their resources. The Philippines,for example, has an ombudsman’s office that isconstitutionally very powerful, but chronic underfundinghas rendered it less effective in practice.Similarly, although the Pakistani ombudsman hassecured relief for some victims of maladministrationand has been hailed as one of the most successfulinstruments of the Pakistani governmentin serving the people, the number of complaintslodged has increased dramatically making the officegreatly overburdened. It has also been unableto address systematic bureaucratic failures thatgo beyond the resolution of individual disputes49

(ADB 2001b). These and other examples suggestthat while an ombudsman or and similar institutionaldevice may be helpful, it is not a panacea.Other legal and institutional reforms may improveaccess to bureaucratic justice by aidingthe efforts of private individuals and organisationsto monitor the bureaucracy. Educating poorcommunities about their rights and means ofredress vis-à-vis the bureaucracy is an importantfirst step in ensuring bureaucratic accountability.Providing legal or quasi-legal assistance is another.Both of these issues are versions of the moregeneral issue of how to provide access to legalinformation and legal services, discussed earlierin this chapter. However, particularly in caseswhere legal service providers support the publicagainst state behaviour, attention must be paid toinstitutional arrangements which protect the independenceof justice services providers, becausesuch services will inevitably be more threateningto the state than, say, health or education.Government agencies can and should take additionalsteps to facilitate monitoring of bureaucraticperformance. For example, bureaucraciesshould employ an accessible case tracking system,which individuals and organisations canuse to monitor the progress of disputes throughthe bureaucratic system. USAID helped developa case tracking system in Bosnia-Herzegovinathat allows civil society organisations to monitorcases at various stages in the administrativeprocess and to draw the attention of responsibleauthorities to cases that have been ignored orseem to be languishing in the system without aresolution (USAID 2006). Another approach thatcan contribute to increased public accountabilityis the introduction of citizen charters, which arepreferably developed in collaboration with thecommunity. Citizen’s charters should containclear standards for performance that are fit to bemeasured and benchmarked by the bureaucracy,independent agencies and the community itself.In this way the public has a yardstick for assessingpublic service delivery. An illustrative bottomup example of the citizenry measuring publicperformance are the efforts of citizens’ groups inBangalore, India — these groups conducted consumersurveys regarding the performance of localgovernment agencies and published the resultsin order to create pressure for reform. This ‘namingand shaming’ approach spread to other statesin India as well (Narayan 2002). Where feasible,modern information technology (e.g. Internet, cellphones, etc.) could be used to disseminate informationon bureaucratic performance more broadly,which would facilitate external monitoring.Structural ReformsAs useful as it may be to improve external monitoringmechanisms, significant progress towardimproving access to bureaucratic justice may requiremore systematic reforms of the bureaucraticinstitutions themselves. A starting point is theimprovement of each agency’s internal adjudicativeprocedures, monitoring mechanisms, appealsprocesses, and grievance procedures. The administrativedispute resolution system and the publicinterventions aimed at facilitating the resolutionof disputes between private parties do not alwaysreceive as much attention from governments andthe donor community as the judicial system, butmore people — and a larger proportion of poorpeople — are more likely to come into contactwith the bureaucratic system than the court system.(This would certainly be true of non-criminalmatters.) Government bureaucracies responsiblefor delivering essential services and for interventionsin relationships between citizens shouldhave a well-functioning system for providingenforcement and mediation services, addressingcomplaints, resolving disputes, and providing50

edress. These systems should be cost-efficient,transparent, user-friendly and swift.Asecond strategy for making public bureaucraciesmore responsive to the needs of poorcommunities is increasing the participation ofpoor communities, or the public generally, in bureaucraticdecision making. Participatory methodssuch as interest-based dialogs, consensusbuilding, and public collaboration aim to activelyengage people in decision-making processes thatconcern their lives (Vidoga, 2002). The possibilitiesto have input, to voice concerns, to makerecommendations and to co-produce outcomesare likely to improve the quality of public decisions.Participation further increases the public’sunderstanding and acceptance of decisions, andadvances a sound partnership between the bureaucracyand the citizenry. An interesting exampleof participatory regulatory decision making isthe system of municipal water regulation in PortoAlegre, Brazil. The municipality wholly owns thePorto Alegre Municipal Department of Water andSewage, but it is a separate legal entity with financialand operational autonomy. The mayor appointsthe Department’s general director, but itsmanagement board includes representatives froma wide range of civil society organisations. PortoAlegre also uses a participatory budgeting processin which citizens register their vote on budgetpriorities after hearing presentations from thedirectors of different service departments. Overall,this arrangement appears to have succeededin creating incentives for high-quality service delivery(UNDP 2006).Other countries have also experimented with participatoryregulatory decision-making. Vietnam,for example, recently established a legal frameworkfor consultative relations between local-leveladministrators and the people they serve. Thisframework allows citizens to provide input andoversight in selected areas of local planning anddecision-making (ADB 2001c).Direct public participation in regulatory policymakingdoes have its drawbacks, however. Bureaucraciesdesiring to introduce participation shouldnot underestimate the efforts it will possibly take.Issues that need attention are, among others, thedesign of the procedure for participation, the roleand authority citizens will have, and decisionsabout representation. For example, expectations onboth sides should be made clear from the beginningon. Decision-making processes may need tobe adjusted to the abilities of the non-professionalparticipants, who may be illiterate, inexperienced,or perhaps distrustful. The provision of supportivefacilities could be necessary, or the involvement ofneutrals and experts who can help to process information,assess options and facilitate negotiations.And even so, not all issues might be equally suitedfor participatory decision-making. Sometimes, anagency needs to be able to credibly commit not tochange its policy in response to short-term publicpressure. It might be difficult, for example, to encouragelong-term investment in telecommunicationsinfrastructure if investors know that rates willbe set in participatory fashion by consumers: evenif consumers initially want to encourage investmentby promising a high rate of return, it may bedifficult for them to make that promise credible ifinvestors know that future rates will be set by anagency that is dominated by consumer interests(Levy and Spiller 1996, Henisz and Zelner 2001).A third strategy for improving access to bureaucraticjustice would emphasise reforms that institutionalisestandards of good governance andpromote public services morale. By giving bureaucraticmanagers sufficient means to offer theirsubordinates incentives for good performance, todiscipline bad performance, and to reorganise outdatedpractices, bureaucratic organisations could51

e restructured in a way that reduces inefficiencyand waste and avoids inertia. This strategy may bepolitically sensitive, however. Civil service unionsare very powerful in many developing countries,and for decades they and their members haveenjoyed almost complete tenure and salary protections,little oversight, and few serious demands. Itmay therefore be risky for the government to takeon the civil service unions by proposing reformsthat would threaten the power or livelihoods ofthese unions and their members. Therefore, measuresenhancing bureaucratic justice and servicequality need to take into account the interestsof both the civil servants and their representingorganisations. Reorganisations might be moreacceptable if they are build on trust rather thandisapproval, motivate good practices rather thanpunish incompetence, stimulate learning fromfeedback rather than reprimand underperformance,and provide safeguards for justified concernsregarding job security, wage guarantees andstatus. Approaching this delicate issue thereforerequires skilful politicians to enter into a consensus-buildingprocess with stakeholders and puttogether ‘package deals’ in which the existing civilservice establishment is given benefits in exchangefor accepting reforms that promote greaterbureaucratic productivity and efficiency. As analternative or complementary strategy, reformerscould try to build a countervailing coalition thatwould push for bureaucratic reform.A fourth type of strategy might promote decentralisation,bureaucratic redundancy, or somedegree of privatisation in service delivery, at leastfor certain types of service. The advantages ofdecentralisation are that it brings bureaucracy‘closer to the people’, may increase accountabilityand responsiveness to local needs, and maypromote healthy competition between regions iflocal governments have input into bureaucraticgovernance within their jurisdictions (Girishankaret al. 2002). Decentralization, however, mayincrease risks of corruption if it weakens centralizedoversight and depends on local individualsto make impartial decisions on matters affectingtheir family, friends, and enemies (UNDP 2006).Decentralization may also reduce competence ifpowerful central bureaucracies are more likely toattract talented individuals.Bureaucratic redundancy — that is, having two ormore separate agencies or office provide the sameservice to the same target population — has threemain advantages. First, it reduces the likelihoodof incompetence or corruption by giving consumerswith a choice of provider (Shleifer and Vishny1993). Second, if bureaucrats are rewarded atleast partially on the basis of demand for theirservices, redundancy may lead to healthy competitionbetween providers. Third, redundancymay facilitate experimentation and innovation.Bureaucratic redundancy also has costs, however.The first and most obvious is the extra budgetarycost of staffing two or more offices to provide essentiallythe same service. The second concernis that the existence of multiple providers mayblur lines of accountability and, if incentives areimproperly aligned, may encourage bureaucrats to‘let the other guy do the hard work’ (Ting 2003).Privatisation of service delivery functions holdsthe promise of more efficient service delivery.Consumer choice, value for money, proximity tothe client and hands-on mentality are some appealingelements of this basic change towardsgovernance (Rhodes, 1997). The remix of bureaucraciesand markets containing the use ofbusiness principles and incentive structures isbelieved to motivate both the publicly and privatelyorganised service providers to adjust theservice delivery to the specific customers’ needs,resulting in an increase in effectiveness, respon-52

siveness and transparency (Lane, 2000). However,privatisation also risks undermining publicaccountability and creating more opportunities forcorruption. Some high-profile scandals have doneserious damage to the image of privatisation as areform strategy. While these cautionary tales illustratethe dangers of ill conceived or badly managedprivatisation efforts, they should not obscurethe fact that some privatisation schemes cansubstantially increase the access of poor communitiesto vital government services. For example,water provision in Chile is heavily privatised, butsubject to a strong regulatory system and coupledwith a subsidy programme to address equity concerns.The scheme is widely viewed as effectivein providing clean water to poor communitiesefficiently and equitably (UNDP 2006).Administrative Law ReformIn addition to general public administrationreforms, there are a number of strategies forimproving access to bureaucratic justice thatemphasise a more direct role for the legal andjudicial system. Administrative law may affectbureaucratic performance in two distinct ways.First, legal rules enforced by courts may facilitateor enforce the public administration reformstrategies discussed above. Second, courts andlitigants may take a more active role in overseeingthe activities of the public bureaucracy. While administrativelitigation is only a small componentof a much larger set of governance institutions,and poor people are unlikely ever to be involveddirectly in a lawsuit against a bureaucratic agency,administrative law and litigation may nonethelesshave an important role to play in expandingaccess to bureaucratic justice for the poor. Thus,in this area of administrative law reform, the issuesof access to bureaucratic justice and accessto legal justice overlap.Legal Mechanisms to Facilitate Participation andMonitoringThree major types of administrative law reformmay enhance the efficacy of external monitoringmechanisms: freedom of information (FOI) laws,‘impact statement’ requirements, and whistleblowerprotections.FOI laws are meant to increase the transparencyby giving citizens entitlement to informationabout bureaucratic rules, decisions, and practices.Traditionally, many governments resistedFOI legislation on grounds of privacy or secrecy,and certain private interests may oppose FOI legislationif these interests benefit from the abilityto manipulate a relatively opaque administrativeprocess for their own benefit. Despite this, recognitionof the benefits of FOI legislation seems tobe on the rise: 65 countries currently have someform of FOI legislation, with most of those lawsenacted since 1990 (Kocaoglu and Figari 2006).FOI laws do have some important costs. Firstly,the traditional objections based on privacy or secrecyconcerns may have merit in some contexts.Therefore, certain exemptions to FOI laws relatedto issues like national security, ongoing courtproceedings, and personal or commercial privacymay be appropriate, though these exemptionsshould be narrowly drafted and construed. Secondly,in poor countries with weak bureaucraticcapacity, compliance with FOI requirements andresponding to FOI requests can be extremelycostly, and could end up paralysing the bureaucracy(Russell-Einhorn et al. 2002). This suggeststhat reformers should be careful not to simply liftFOI laws ‘off the shelf’ from wealthy countries;rather, FOI laws must be carefully tailored to theneeds and capacities of particular countries.Impact statement’ legislation requires a governmentagency to provide a public report on the53

impact of a proposed action on some importantpublic value before the agency takes action.The most common legislation of this type is the‘environmental impact statement’ requirementpioneered by the U.S. National EnvironmentalPolicy Act of 1970 and adopted by numerousother countries and some international organisations.Though the specifics of these laws vary,they all require that agencies prepare a report onthe impact of major proposed actions on environmentalquality. Other types of impact statementrequirements have also been proposed, and afew have been implemented, though the environmentalimpact statement is still by far the mostcommon version of this strategy. One approachthat might be worth considering is the use of a‘poverty impact statement’ that would requireagencies, after consulting the poor community, toproduce a report on how their initiatives are likelyto affect the poor. The main advantages of impactstatement laws are, first, that they increasepublic accountability and the efficacy of externaloversight by disclosing potential adverse effectsof agency action, and, second, that they mayalter the agency’s own internal decision-makingprocess by drawing attention to issues that mightotherwise be ignored or neglected. However, impactstatement requirements, like FOI legislation,can be burdensome, especially for under-fundedor low-capacity agencies. Saddling bureaucracieswith too many impact statement requirementsmay induce ‘paralysis by analysis’. The appropriatebalance between these competing interestscannot be resolved in abstract or general terms.Whistleblower protection statutes are a thirdform of administrative law reform that seeks toimprove transparency and political accountability.Without credible protections, individuals withina bureaucratic organisation who learn about corruptionor other forms of malfeasance will be reluctantto come forward because they fear retaliation.Effective whistleblower protection statutestypically enable individuals to make complaintsanonymously or confidentially, imposing seriouscivil and criminal penalties on those who retaliateagainst whistleblowers, and (sometimes) givingpotential whistleblowers a financial incentive tocome forward either by offering them a set ‘bounty’for useful information or by offering them apercentage of any money the government recoversfrom wrongdoers as a result of the whistleblower’sreport. Whistleblower protection statutes may notbe effective in redressing endemic or high-levelcorruption, especially when the enforcement ofthe laws is unreliable, but these statutes maynonetheless be effective and important elementsof a broader anti-corruption strategy.Judicial Review of Administrative DecisionsFOI legislation, impact statement laws, andwhistleblower protection statutes are all legalmechanisms through which courts enforce rulesthat enable other actors — NGOs, politicians, andthe media — to monitor bureaucratic performancemore effectively. Thus, increasing the abilityof individuals and groups to make sure these lawsare enforced may improve poor people’s access tobureaucratic justice.Litigation and judicial institutions may also play amore direct role in ensuring bureaucratic accountability.Such litigation can take two main forms.First, some litigants pursue what might be termed‘oversight’ litigation. Individuals who believe thata government agency has taken, or is about totake, some illegal action that adversely affectstheir interests may file a legal challenge. The judiciarythen assumes the role of public monitor,ensuring that the agency has acted lawfully.The second form of litigation is so-called ‘publicinterest litigation’ (PIL). Citizen groups typically54

ing PIL suits to effect broader legal change orinstitutional reform. PIL has played a significantrole in the strategy of social reform movementsin South Asia and South Africa in particular, andit is increasingly common in other parts of theworld as well (NCLEP India 2007, Dembrowski2000, Gloppen 2005, Hershkoff and McCrutcheon2000). The distinction between oversightlitigation and PIL is more a matter of degree thana difference in kind. Oversight litigation moreclosely resembles a traditional lawsuit alleging aprivate injury to a legally protected interest, whilePIL seeks to involve the judiciary in a more overtlylaw-making or reformist role, but in practicemany oversight suits seek institutional changes,and much PIL is directed toward the redress ofwidely-shared private grievances against bureaucraticinstitutions.Litigation is not the most desirable form of improvingadministrative accountability and bureaucraticjustice. In the first place, any strategy thatrelies on litigation and judicial review is likelyto be expensive and time-consuming. ‘Retail’administrative lawsuits may also put an enormousburden on the court system. For example,in many Latin American countries citizens whobelieve they have been wrongly denied a governmentbenefit can file an amparo claim directlyin the civil courts, thereby circumventing the administrativereview process. These amparo claimsclog the courts, and because they are focusedonly on the individual claim they tend not to addressthe root cause of bureaucratic failure.Secondly, courts may lack the expertise neededto understand the complex, technical issues thatoften arise in administrative law or institutionalreform cases. Judges, however, may overestimatetheir own competence in such matters. Somecountries have attempted to address this problemby establishing specialised administrative courts,but even in these cases judges are at a comparativedisadvantage compared to other institutionswhen considering issues of bureaucratic institutionaldesign.Finally, some observers have raised the concernthat well-intentioned reformers, especially thosewith elite legal backgrounds, may be seducedby the appeal of litigation as a vehicle of socialchange and pursue this strategy at the expenseof more valuable — but less visible and exciting— political organisation, lobbying, and education.The three concerns cited are all valid, and litigationshould generally not be the first line ofdefence (or offence) in dealing with an abusive,unaccountable, or underperforming bureaucracy.Nevertheless, having available litigation as aweapon of last resort may be vital in making theother mechanisms of bureaucratic justice functioneffectively. The principles that should applyto both to administrative oversight litigationand to PIL are the same as those discussed inthe context of access to legal justice generally:reformers should work to eliminate failures inthe market for legal services and litigation, andestablish institutions that allocate scarce judicialresources to the cases where judicial interventionis most necessary and appropriate. Thus, desirableapproaches may include broadening rulesof standing, adopting one-way fee-shifting rules,facilitating representative or collective lawsuits,and targeting scarce legal aid resources at casesthat affect large numbers of people, while at thesame time reformer should provide more optionsand resources for non-judicial relief of administrativedisputes, and should require exhaustionof administrative remedies as a precondition forjudicial review.55

5. Conclusions andRecommendationsIn order to escape the poverty trap, poor peopleneed a legal system that enables them to realisethe full value of their physical and humancapital. The three substantive cornerstones ofthe legal empowerment agenda are property law,labour law, and law for small business. Reformof the substantive law, however necessary, wouldnot be sufficient to achieve true legal empowerment.For the legal system to play a role inempowering the poor to lift themselves out ofpoverty, they need more than laws conferring theappropriate mix of rights, powers, privileges, andimmunities; they also need a legal and judicialsystem that can make these legal entitlementspractical and meaningful. Empowering the poorand disadvantaged to seek remedies for injusticerequires efforts to develop and/or strengthen linkagesbetween formal and informal structures andto counter biases inherent in both systems. Ourworking group has examined the issues involvedand has developed guidelines to provide ways ofimproving access to justice.Summarising our main conclusions, we stressthat access to justice requires granting allpeople an individual identity (see Section 2 ofthis chapter), and that realising this goal requires:• Addressing the lack of bureaucratic capacityin states’ identity registration systems byeliminating user fees, supporting outreach,working through non-governmental organisations,and bundling registration services withother social services or traditional practicesand creating one stop shops.• Counteracting politically-motivated legal exclusionby a combination of facilitation ofpolitical dialogue, legislative reform, internationalattention, engaging national humanrights machineries, stakeholder consultations,and community involvement.• Creating incentives to register one’s legal identitywith the state by providing information,working through trustworthy local intermediaries,and minimising the adverse consequencesof formal registration.In Section 3 of this chapter, we identified fourstrategies to improve access to justice, taking thejustifiable problems of the poor as starting points.They build on the options poor people have availableto address these problems and to enforcetheir rights: spontaneous ordering mechanisms,informal, faith-based and customary justice, aswell as the formal legal system. The common aimof these strategies is to lower costs that may beinvolved and increase justness and fairness of theoutcomes poor people may obtain. These strategieshave proven their value in practice, or seemparticularly promising in the light of a theoreticalframework that emphasises reduction of transactioncosts and remedying market failure:• Empowering the poor through improved disseminationof legal information and formationof peer groups (self-help strategies). This canbe done by strengthening information-sharingnetworks across consumer groups and organisations,by using information technology, nonformallegal education and media campaigns,tailored to the target population and theirproblems.• Broadening the scope of legal services for thepoor, in several directions: an orientation towardsempowerment, coaching and learning;lower cost delivery-models (through paralegals,or otherwise); bundling with other services(health care, banking, insurance) and intro-56

ducing the concept of one stop shop; use ofthe methods and skills of alternative disputeresolution, mediation and arbitration; and legalaid services that are capable of assistancewith the informal system as well as the statesystem. Moreover, the market for legal servicesshould gradually be liberalised by reducingregulatory entry barriers (such as ‘unauthorisedpractice of law’ restriction) for serviceproviders, including non-lawyers, who are interestedin offering legal services to the poor.Scarce legal aid resources should be targetedto cases where the legal claim produces publicgoods (such as general deterrence or legalreform) and to situations with very high stakesfor the individual (such as criminal defence).• Reducing aggregate legal transaction costs byadopting a combination of legal simplificationand standardisation reforms, expanded opportunitiesfor representative or aggregate legalclaims, and improving the climate for fair settlementsin the shadow of law, by ensuring acredible threat of a neutral intervention.• Combining formal or tacit recognition of theinformal justice system with education andawareness campaigns that promote evolutionof the informal state system, targeted constraintson the informal system (in particularlimits on practices that perpetuate the subordinationof women), and appropriately structuringthe relationship between state and nonstatesystems so that the informal system canprovide an efficient means of resolving privatedisputes, but people are able to use the formalsystem when crime and fundamental publicvalues are implicated.and obtain necessary services, access to justicereform may require not only improving access toadjudicative justice, but also improving access tobureaucratic justice (discussed in Section 4). Addressingthe failures of the bureaucratic systemmay entail:• Public administration reforms, includingreforms that improve external monitoringand also structural reforms (such as improvingbureaucratic adjudication and grievanceprocedures, expanding public participationin administrative decision-making, pursuingcivil service reform to expand opportunities forperformance incentives in government administration,and increasing decentralisation andredundancy in bureaucratic service provisionto improve efficiency and combat corruption.• Administrative law reforms, including appropriately-tailoredexpansions of freedom ofinformation laws, impact statement requirements,and whistleblower protections, as wellas appropriate but limited judicial review ofadministrative action.Because many poor people have to rely on accessto the (local) government hierarchy rather thanthe adjudicative system to resolve their disputes57

Chapter 1 Endnotes1 Excellent recent reports prepared by the Asian Development Bank(ADB) (2004, 2005, 2007), UNICEF (2002, 2005), and the Inter-AmericanDevelopment Bank (IADB) (2006) form the basis of much of thematerial in this section. These organisations have taken an importantleadership role by bringing this problem to the attention of the internationalcommunity - gathering vital information on the nature andscope of the problem and developing possible strategies for reform.2 For example, the International Covenant on Civil and PoliticalRights, Arts. 16 and 24; International Covenant on Economic, Social,and Cultural Rights, Arts. 6 and 13; Convention on the Rights of theChild, Arts. 7—8; International Convention on the Protection of theRights of All Migrant Workers, Art. 9; Convention on the Elimination ofAll Forms of Discrimination Against Women, Arts. 7—9; American Conventionon Human Rights, Art. 20; European Convention on Nationality,Art. 6; African Charter on the Rights and Welfare of the Child, Arts. 6and 11.3 Sources discussing these and other groups include Lynch and Ali(2006), Lynch (2005), Amnesty International (2005), Sokoloff (2006),Refugees International (2006), Kalvaitis (1998), and Adam (2006).4 Describing this barrier as a ‘transaction cost’ is not meant totrivialise the feelings of cultural and social exclusion this linguisticbarrier may also engender. This phenomenon may create a type ofpsychological cost to using the legal system that is as signifi cant, inpractical terms, as the economic cost.5 It is worth noting, however, that the issue of linguistic barriers toaccess, like the issue of legal identity discussed earlier, may implicateserious political confl icts. Sometimes linguistic barriers to access arisebecause of government policies designed specifi cally to disadvantageparticular ethnic groups, or to advantage the wealthy relative to thepoor. Thus, even if the fi nancial costs of dealing with this particularobstacle may be relatively low, the political costs may be greater.6 Much of this discussion is based on an excellent recent reportprepared by Ewa Wojkowska (2006) of the UNDP’s Oslo GovernanceCentre.Chapter 1 BibliographyAdam, A.H. 2006. The Nubians and Statelessness: History in Defi ningModern Lives, available at http://www.justiceinitiative.org/statelessness_meeting.Afroz, T. 2006. ‘Access to Law: The Bangladesh Perspective.’ availableat http://www.adb.org/Documents/Books/Strengthening-Criminal-Justice-system/chap04.Anderson, M.2003. Access to Justice and Legal Process: Making LegalInstitutions Responsive to Poor People in LDCs (IDS WorkingPaper 178, Feb. 2003).Ardaya, G. and G. Sierra.2002. Toward an Inclusive Elections Process:Final Report of Pro-Citizens’ Participation Consortium.UKDepartment for International Development. La Paz, Bolivia.Amnesty International.2005. Myanmar: The Rohingya Minority: FundamentalRights Denied. available at: http://www.justiceinitiative.org/statelessness_meeting.Asian Development Bank (ADB). 2001a. Law and Policy Reform at theAsian Development Bank 2000. vol. 2, available at http://www.asianlii.org/asia/other/ADBLPRes/2001/2.pdf._____. 2001b. Report and Recommendation of the President to theBoard of Directors on Proposed and Technical AssistanceGrant to the Islamic Republic of Pakistan for the Access toJustice Programme, available at http://www.adb.org/Documents/RRPS/PAK/rrp_32023.pdf._____. (ADB) 2001c. Legal Empowerment: Advancing Good Governanceand Poverty Reduction, 2000, available at http://www.adb.org/Documents/Others/Law_ADB/lpr_2001_Part_2.pdf._____. 2002. Technical Assistance Completion Report — DisseminatingLaws and Strengthening the Legal Information System,TA 3238-TAJ, available at http://www.adb.org/Documents/TACRs/TAJ/tacr_taj_3238.pdf._____. 2004., Technical Assistance for Establishing Legal Identity forSocial Inclusion, R188-04 (Oct. 4, 2004)._____. 2005. Inception Report: Establishing Legal Identity for SocialInclusion, RETA No. 6188 Aug.10, 2005)._____. 2007. Legal Identity for Inclusive Development (CarolineVandanabeele and Christine V. Lao, eds.).Axworthy, L. 2007. Quoted in ‘Toward Consensus.’ Legal EmpowermentQuarterly. July 2007.p. 2.Barendrecht, M. and P. van Nispen, Micro-justice (International LegalAlliances), available at http://www.intall.org/documents/PaperMicrojustice0704.pdf.Barton, B. 2001. ‘Why Do We Regulate Lawyers?: An EconomicAnalysis of the Justifi cations for Entry and ConductRegulation.’Arizona State Law Journal 33:429-490.Bloom, A.2006. ‘The Economics of Civil Justice: From Justice to GlobalPeace: A (Brief) Genealogy of the Class Action Crisis.’Loyolaof Los Angeles Law Review. 39:719.Bolton, P. and M. Dewatripont.2005. Contract Theory. Cambridge andLondon: MIT Press.Bueno de Mesquita, E. and M. Stephenson. 2007. ‘Regulatory QualityUnder Imperfect Oversight.’ American Political ScienceReview. 101(3):605-620.58

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ChapterTWOEmpowering thePoor ThroughProperty Rights63

EXECUTIVE SUMMARYProperty Rights are Human Rights‘Everyone has the right to own property alone as well as in association with others … .No one shall be arbitrarily deprived of his property.’ 1Property rights must be understood as afundamental human right. 2 The body andmind are the first and most immediateproperty of persons and thus respect for thisproperty is related to the respect of the integrityof the individual. 3 Throughout history the ideaof human rights has developed in close associationwith the idea of private property rights. 4Early defenders of human rights consideredproperty rights as important as freedom of religionand freedom of speech. But the majority ofthe world’s population does not have adequateaccess to secure property rights, and their realisationremains an arena for social and politicalcontestation.Absence of Property Rights andPovertyThe absence or insecurity of property rights is acentral and ubiquitous cause of poverty, not onlyin the very poorest states, but also in middleincomecountries such as Brazil, Russia, Indiaand China. 5 The relationship between absence ofproperty rights and poverty is moving from argumentand anecdote to comparative analysis andmeasurement. Secure property rights facilitateeconomic transactions, ensure efficient and sustainableresource use, allow for the evolution ofeffective credit markets, improve business climateand investment opportunities, and ensure economicaccountability and transparency. Equally,the absence of such rights undermines economicdevelopment and hinders governance. Analysis ofthe World Bank’s Country Performance and InstitutionalAssessment (CPIA) ratings for 2005 indicatesthat on a scale of 1 to 6 (with 1 being thelowest score), only five of 76 developing countriesscored 4 on objective measurement of propertyrights and rule-based governance. 6 As all five aresmall island states, this indication confirms thatproperty rights of the absolute majority of the peoplein developing countries are not protected intheory or practice, contracts are not enforced, andregistries and other institutions required to protectproperty function poorly or not at all. 7Especially Vulnerable GroupsCertain groups are frequently and systematicallydisenfranchised through lack of access to propertyrights in many countries. Women, who constitutehalf of the world’s population, own around10 percent of the world’s property. 8 Virginia Woolfeloquently expressed the long arch of history thathas not only excluded women from property in64

the West, but that has made entire state institutionsmasculine preserves. 9 Even when womenhave de jure property rights, their de facto controlof land is tenuous, and men largely mediatedaccess. In Imo and Abia states in Nigeria, forexample, average household farms are 9.8 hectares,of which only 2.4 hectares are allocatedto women. However, this land is not a claim, butrather a lease, which women must organise fromtheir husbands. Further, widows cannot own land;their husband’s family keep it in trust for theirchildren. 10 As Robin Nielsen has pointed out:‘At various stages in women’s lives, their rightsto land are dependent on fathers, brothers, husbandsand sons. A more precarious foundation forland rights is difficult to imagine.’ 11 Ensuring thatwomen’s names appear on land records, that theirrights are enshrined in communal property systems,and that inheritance rights of widows anddaughters are established and protected, wouldgo a long way towards improving their condition.This is essential to empowerment and the promotionof entrepreneurial activity and should beplaced at the centre of property reform efforts.Equally, indigenous people around the world tendto suffer from weak or prescribed property rightsnot adequately recognised by law. These groupsoften hold land collectively, so ownership andaccess patterns do not always fit easily into imported,non-indigenous property systems of absoluteand individual nature. As they are largelydisenfranchised, the customary land rights of theindigenous tend to be overlooked. The AbayandaPygmies in Uganda, for example, have beenentirely dispossessed of their land; they haveendured persistent lack of recognition by thecentral government of legitimate claims to theirproperty. Indeed, the problem is far from solvedin developed countries. In 1902, Norway passedlegislation requiring full knowledge of the Norwegianlanguage for property ownership, effectivelymaking it impossible for the indigenous Sami toown land.In 2004 an International Labour Organisation(ILO) expert committee concluded that an Actpassed in 2003 to rectify centuries of exclusionarypractices still did not meet the minimumstandards for the ILO convention on the rights ofindigenous and tribal peoples. 12 Global reformof property rights regimes must allow for formalrecognition of customary land rights as the basisfor inclusive property systems that include indigenouspeoples. There are some good examplesin The Commonwealth Native Title Act of 1993in Australia, and the landmark Te Ture WhenuaMaori Act in New Zealand, both of which respectthe customary land rights of indigenous groups.Although time will tell if laws of this nature canchange deeply entrenched exclusionary practices,but legal empowerment for poor indigenousgroups will certainly remain key to tackling thischallenge in both OECD and developing countries.Urban slum dwellers are also excluded fromformal property systems. At least a third of theworld’s poor, or a billion people, are living inslums without legal protection of their assets. 13Ironically, it is often insecurity of land tenureand wrongful loss of land in rural areas that encouragethe poor to escape, while their propertyrights in urban areas are no less tenuous. Thereality of urban slum dwellers is sub-standardhousing conditions, forceful evictions, extortion,social exclusion, and environmental degradation,among other problems. The situation preventsdevelopment of adequate housing stock and theemergence of robust property and credit markets.Informal property systems are often perpetuatedin conflict-affected countries by flows of refugeesand Internally Displaced Persons (IDPs) from ru-65

al to urban areas, and this leads to further insecurityand overcrowding.Legal access to property rights for various groupsis clearly an over-arching and universal issuethat should be at the centre of global efforts toempower the poor; but it has in fact received verylittle coherent analysis to date. To unpack therelationship between poverty and property rightswe must understand that it is these rights thatprovide the basis for economic growth. The globaleconomy grew very slowly until the beginning ofthe 19 th Century. Before then, and for thousandsof years, notes Jeffrey Sachs, ‘there had beenvirtually no sustained economic growth in theworld’. 14 However, with the advent of the industrialrevolution and economic expansion, assetsexpanded and property rights evolved. Slowly theidea of private property ownership came to underpineconomic development in the West. Whilesocial, economic and political stability was upsetby two World Wars and the Great Depression, theGI Bill of Rights in the United States, the MarshallPlan and the incipient economic and politicalunion in Europe, and rapid development inEast Asia supported the growth of a middle-classthat led to further consolidation of legal propertysystems in these regions. The transformation frompredominantly extralegal property systems to formalproperty rights entrenched in law has sincecome to support functioning market economiesand polities.The Building Blocks of the PropertySystemThis transition has reduced global poverty substantially,but as outlined above, billions of peoplearound the world still lack secure propertyrights, which hinders their economic, politicaland social security. In order to examine how povertycan best be relieved, and why access to propertyrights is fundamental to the empowermentof the poor, it is necessary to identify buildingblocks of a fully-functional property system. Sucha system operates in the following four ways:1) As a system of rules that defines the bundleof rights and obligations between people andassets. 15 Property ownership creates ties thatbind individual citizens together through theformation of networks of economic and legalrights and corresponding obligations. Thecredible enforcement of these rights and obligationsrequires a judicial mechanism thatallows for equitable, transparent and efficientdispute resolution.2) As a system of governance. Property systemsare a central facet of state functionality, andas such are an important measurement of fiduciaryand administrative effectiveness. Theinstitutional order of the state is based ontechnical rules and relationships which defineinteractions between stakeholders, rangingfrom direct ownership of land to promulgationof rules that govern security of land andhouse tenure, land planning, zoning, taxingand other aspects of property management.Technological innovation, which has radicallyreduced the cost of information, has generatedthe possibility for further transparency and accountabilityin property systems as an instrumentof governance.3) As a functioning market for the exchange ofassets. A fully functional property system allowsland, houses, moveable property, equityshares, and ideas to be transformed into assetsto be bought and sold at rates determinedby market forces. This subjects the exchangeof property to a level of transparency and accountability,and allows for the developmentof financial mechanisms — including credit66

and insurance — to facilitate transactions andimprove economic outcomes. Land, housesand moveable property can thus be leveraged,and assets transformed from static investmentsinto capital which can be bought andsold. However, property rights are a necessarybut not sufficient precondition for the developmentof these financial mechanisms; theyalso develop through partnership between themarket, special funds targeted at access tofinance, and the state.4) As an instrument of social policy. In the absenceor failure of the market, the state oftenplays a direct role in addressing the needs ofthe poor. The state has at its disposal instrumentsthat can be used to endow its citizenswith assets as they relate to property, suchas public housing, low interest loans and thedistribution of state land. Such instrumentshelp to overcome natural competition for assets.The state also supports social cohesionthrough the development of co-ownership ofinfrastructure and services by government andthe citizen, supporting the equilibrium betweenindividual and collective interests. Provisionof infrastructure by the state criticallyaffects the value and desirability of assets,and can therefore fundamentally affect opportunitiesfor the poor.Dysfunctionalities in PropertyManagementThese four key building blocks can be viewed as acoherent framework through which to understandproperty rights. It follows that analysis of theseblocks allows us to identify where dysfunctionalitiesin property management might arise andwhere there are disconnects within key elementsof this framework. As far as the poor are concerned,they have trouble getting property in thefirst place (unfairly limited access). Where theyhave assets, their rights are often not adequatelyrecognised, or enforced, or given full backing ofthe law, and are consequently vulnerable to beinglost. Unfairly limited access to property and insecurityof assets are caused by dysfunctionalitiesin the property system that can be understoodfourfold:1) Misalignment of social practice and legalprovision. Social practice and law reinforceeach other when aligned towards commonobjectives, but when misaligned can underminestate legitimacy and accountability andweaken ties of citizenship. Law must evolveorganically to suit the context in which it is tobe applied and should not be perceived as theinstrument through which a minority imposesits power. Legal aspects of property systemsmust grow from land practices on the groundand incorporate customary interactions andnetworks. There have been two common sourcesof misalignment. Firstly, some states, particularlyduring the colonial period, imposedproperty systems on vast tracts of land thatwere previously regulated through customaryregimes of rights and obligations. The resultwas a major gap between daily practices of thepeople and requirements of formal law. Secondly,in urban areas, as de Soto has pointedout, ill-conceived laws have forced millions ofpeople into informality, as gaining access toland for housing is a lengthy process, measuredin terms of years if not decades. 162) Misuse of rules governing property. While rulesfor property systems may be both appropriateand equitable, they may still be open toabuse by those in power. Rules are resourcesthat can be subverted to serve the interests ofthe few, through corruption and lack of transparency,rather than acting as a framework67

for empowerment of the many. Equally, landregulations, rather than providing a frameworkwithin which parameters for property managementare set and transactions enabled, canbecome mechanisms for restriction of propertyrights and bureaucratic mismanagement.3) Lack of access to information and justice.Even where cadastres, land registers and otherrepositories of property titles, records anddocuments exist, restriction of access to suchinformation reduces the transparency and efficiencyof property transactions. Governmentsmust work to make information on propertyavailable to the general public and seek tocollect further data and opinion in innovativeways through the promotion of opportunitiesfor public debate on property and citizen resourcerights, and strengthening of knowledgesharing and analysis on these issues.4) Misuse of eminent domain. Corrupt governmentscan use the inherent power of the stateto seize private property and thus confiscateassets of the poor in the name of the publicgood. The primary remedy against wrongfulor unjust loss of property is a just policy ofland acquisition and resettlement; it can includeinnovative approaches, such as offeringpartnerships to the poor in developing assetscreated from investment in infrastructure andservices. International financial institutions,particularly the World Bank and the AsianDevelopment Bank, moved systematically inthis way in the 1990s to address the adverseimpacts that developmental projects had onthe standard of living of the poor. At the nationallevel, however, practices differ widelyand abuse, with regard to use of eminent domain(for depriving the poor of their assets),continues to be a problem. Reform of compulsoryacquisition mechanisms is necessary,as demonstrated most palpably in Zimbabwerecently, one of the few countries today whichconstitutionally permits appropriation withoutpayment of any compensation. 17 Review of 20land acquisition laws in Sub-Saharan Africa 18indicates three sources of this type of legaldisempowerment: (1) process of acquisition,wherein, for example, compensation valuingbillions of dollars remains unpaid in someregions without clear avenues of redress; (2)the basis for compensation payment, whichroutinely fails to take into account real coststo the loss of land, and (3) manipulation,through purposeful or poorly specified definition,of what constitutes ‘public purpose’. 19Property Rights and LegalEmpowermentProperty rights are defined through law, andtherefore the Legal Empowerment of the poor, ascitizens, can only come about through the protectionof those rights. However, legal status canhave strikingly different impacts upon citizenship:it can become an instrument for the creation ofopportunities for exercising rights, create entitlementsto rights for specific categories of people,or repress or deny contestation of those rights toothers. H.L.A. Hart’s distinction between internaland external views of the law shown in Table 1 isinstructive. 20Since internal actors are positioned in a hierarchy,the extent to which legal status producesloyalty to the social order depends on feedbackloops. ‘Loops’ between and among the actors affectthe degree of efficiency and effectiveness ofthe administrators in delivering rights or enforcingobligations in a manner that incorporates accountability.The ‘user’ perspective is essential for thelegitimacy of the system, as legitimacy is the outcomeof the degree to which people, once granted68

Table 1 Mapping the dynamics of legal statusExternalThe public, social movementsLegal community of practiceJudicial Review, civil society and mediaExcluded/ineligible peopleInternalThe authorizing environment for rule-making (Parliament, Congress,Cabinet Board of Corporations)Composers/Drafters (Constitutions, primary, secondarylegislation, by-laws, manuals)Administrators/OrganisersUsers/citizensa particular legal status or set of rights, such asproperty rights, come to identify and endorse thesocial order so produced. External actors are positionedto push the frontiers of the existing socialorder by questioning the balance between solidarityand inequality. They catalyse changes to existingcitizenship arrangements, in questioning thefairness or effectiveness of an existing legal status,and in the creation of new legal status for specificgroups. The creation and expansion of citizenshiprights is a process of contestation that can lead tonew interpretations of old laws and the promulgationof new laws, or the creation of new mechanismsto deal with issues that do not fit into anexisting framework. Thus, groups that question thestatus quo can prove that the law is malleable, justas indigenous groups have fought for, and won,recognition of customary land rights in Australia orNew Zealand.However, the provision of property rights inlaw does not always guarantee equality inpractice. While states can attempt to balanceinequality and solidarity, discrimination and socialclassifications remain entrenched in manysocieties. Inequality can stem from deep-rootedcultural distinctions such as caste, gender andrace, and the challenge then is to create conditionsfor property rights not just at the legal level,but through mechanisms that can fundamentallychange mental models and social practices at alllevels of society. Even in the European Union,where equality of men and women is a fundamentalaxiom of policy, gender mainstreaming insocial policy still remains a significant challenge,according to a recent European Commission reporton social inclusion. 21The degree to which an order is open or closed, toextending legal status to new groups or to changingthe status of existing groups, is an importanttest of its capacity for coping with change. Evenwhen creation of status is open in theory, mechanismsare needed to create trust in the socialorder. If property rights are legally extended toa previously disenfranchised group, that groupmust believe that their property will not be seizedthrough misuse of eminent domain.Therefore, context-based legal reform is critical togovernance in developing countries. There can beno blanket approach: expansion of property rightsin a coherent manner requires understanding oftrends and a tailoring of provisions to context.There must be a degree of coherence to lawsbased on fundamental rules, or those laws willnot be respected. If de jure property rights do notcorrespond with de facto property practices andcustoms, the subsequent legal misalignment willundermine rather than strengthen the system.Disorder and dysfunction has its own stakeholders,and if resources are seen as zero-sum,change can be perceived as highly threatening byentrenched interests.69

Property systems consist of a bundle of rights andobligations. In OECD countries, an entire seriesof legal innovations has evolved to allow for cooperativearrangements that underpin this dynamicand support transparent, effective property-basedeconomies. The same type of thinking has notbeen applied to developing-country contexts toexamine precisely how property arrangementscould be modified, and interactions codified, inways that would allow the poor to leverage theirassets and become legitimate stakeholders inglobal property systems. Urban slums representland that could be a valuable asset when conceptualizedin a different way as part of coherenturban planning strategies. Latent assets mustbe leveraged and their stakeholders — the poor— brought into dynamic new partnerships toalign law and practice in ways that allow for thesystemic expansion of property rights.Key Elements of a Reform StrategyThis process creates both a national and globalpublic good, and to bring it about governmentsof developing countries must enter into adouble compact - with their citizens and the internationalcommunity. To level the playing field forthe poor and operate in a manner that best servesthe interests of the disenfranchised, internationalactors must develop long-term partnerships withnational governments on property rights as partof the broader economic governance agenda. Areform strategy for effectively functioning propertysystems that empower the poor should be basedon land tenure security, creation of opportunity forinvestment, and adequate management of risk.The elements of such a strategy must:1) Promote Legitimacy by Adequate Participationand Deliberation. In general, future reform willrequire a legitimate state. For implementationat all levels, reforms must be based ondeliberation and inputs from those that theyare intended to affect. This will bring focus onrelevant issues, engender acceptance by localcommunities, and reduce the cost of reform.In Peru between 1996 and 2000, for example,3,500 meetings were held on land titling processesin different settlements around the country,helping to improve community satisfactionwith property reform efforts. 22 In particular, thegroups outlined above - women, indigenousgroups, and urban slum dwellers - and otherexcluded groups, must be given special attentionas part of this process. Support for initiativessuch as the establishment of coalitionsbetween urban and rural poor around commonconcerns including the effects of the rural exoduson rural economies and urban poverty are aproductive starting point. 232) Support Parallel Interventions. Implementationof rules that underpin a functioning system foraccess to, and registration of, property, do notautomatically create the mechanisms necessaryto support this system. By giving attention tothe four building blocks of the property system,governments must carefully plan and sequencethe interventions that will create the corollaryfinancial and legal instruments that underpineffective property rights and facilitate accessto managerial ability, technology, credit, andmarkets for new property owners to becomecompetitive. The evolution of efficient financialmarkets will depend on the ability to use land,and other property, as collateral. In developedcountries, more than two thirds of small businessloans are secured against land and realestate. Experience in South Africa and Brazildemonstrates that unconventional avenues(e.g. partnerships and joint ventures with oldland owners) may be a useful first step. Governmentsshould also develop methods for in-70

creasing finance for land reform and post-landacquisition services, including land banks,land-for-debt schemes and land for taxes. 243) Facilitate Private Sector Involvement. Thestate needs to set the parameters within whichprivate sector investment can take place, andremove any disincentives to this process. Feesfor property transactions, which in some developingcountries can be as high as 30 percent,act as an unnecessary form of taxation thatinhibits the free exchange of land throughmarket mechanisms and excludes the poor.Official land taxes must also be set at an affordablelevel for the poor and subsidies andtax provisions that provide distorting privilegesto large-scale farmers should be removed. InMexico, for example, certain groups ‘prefer notto regularise the land for human settlementto evade having to paying land tax, which promotesinformality in land markets.’ 25 Investmentclimate surveys indicate that access toland was the main obstacle to conducting andexpanding business by 57 percent of the enterprisesinterviewed in Ethiopia, 35 percentin Bangladesh and 25 percent in Tanzania andKenya.4) Promote Property Rights through Individualand Corporate Ownership. Property law shouldoffer clear and simple options of legal personalityand corporate ownership for smallbusinesses and corporative associations of thepoor. Legal personality so designed opens upa wide range of possibilities of ownership byhuman individuals, by members of collectives,and by collectives. Pro-poor property rights systemsfacilitate the ability of people to pool andleverage modest resources and limit liabilitiesin case of business failure or exit of partners.One of the keys to economic success of smallentrepreneurs in the developing world is thelimited liability of business owners, thus offeringthe possibility of controlled failure withoutdisastrous economic consequences for thevulnerable individuals involved. This legal instrumentof limited corporate liability has to beextended to the poor micro-entrepreneurs andrural producers. It constitutes one of the mainadvantages of formality of corporate ownershipand can trump unavoidable disadvantages.5) Create Systems for Collateralising Moveableand Intangible Property. Although many of thecitizens of the developing world lack securerights to use and transfer real property, mostof them own some tangible (moveable) or intangibleproperty. 26 To the extent that this typeof property is held securely and can be used toaccess credit and to create and grow businesses,the poor will have increased opportunities.Experience in a variety of developing countries(Georgia, Madagascar, Colombia, Albania, Bosniaamong them) suggests that there are importantlegal reforms that would allow the poorto leverage movable and intangible property.6) Co-management of Natural Resources. The majorityof the rural poor depend to a large extenton non-arable resources such as forests, pastures,swamplands, and fishing grounds. Theseresources require careful management to avoidrent-seeking and corrupt practices that resultin environmental degradation and economicinefficiencies. The state should enhance theasset base of the poor by enabling communitybasedownership and management of privatecommons, but it will have to play the role ofconflict manager among the communities andamong individuals. In the case of fossil energyresources requiring capital intensive extraction,treatment and distribution, the state shouldutilise transparent and fair auction procedureswhen involving the private sector, linked to71

conditionality of local community development.These procedures could be regulatedand implemented on the basis of multilateralcharters. 27 In the case of state co-ownershipof fossil energy reserves, the local populationsshould be included in the chain of value additionby tradable shares in general public funds.Distributing among the poor shares or otherforms of ownership participation in state ownedcompanies that exploit the natural resourceswill provide them with capital that, inter alia,can propel the expansion of small businesses.Another option is distributing titles to specialfunds created by governments to invest profitsyielded by commodities. 287) Utilise Modern Technology. Manual systemsof land registration are highly labour intensiveand lead to significant error and duplication.Moreover, the costs of manual land survey andregistration processes are often prohibitive.Recent advances in technology, including thewidespread availability of satellite imageryand handheld GPS devices, together with institutionalarrangements that put local actorsin charge of systematic adjudication, can significantlyreduce the cost and effort of issuingland registration documents. Moreover, moderntechnology can help to improve transparencyand at the same time make land administrationmore accessible. 29 There are caveatsto this process, identified in the report.Based on these principles, developing countrygovernments, supported by the internationalcommunity, must devise a series of innovative,pro-poor land reform policies that are distinctlyfocused on ensuring that more of the benefits ofproperty systems accrue to those at the very bottomof the economic ladder. A careful stocktakingof such efforts already underway in various partsof the world, including analysis of conditions thatgave rise to such efforts, and possibilities for theirexpansion, will be instructive. We can developtransitional reform mechanisms from experiencein the Philippines, for example, where the nationalgovernment employs intermediate instruments ofland tenure, such as land proclamations, to assurethe poor that they will not be evicted fromland they occupy, and that social services will beimproved while plot ownership is formalised. 30Or we consider how the South African experiencewith Mzansi accounts, providing low-fee bankingfor poor people working in the informal sector,could be replicated elsewhere. 31 Modalities exist toempower the poor through property rights, but wemust now scale up and catalyse them.ConclusionLegal Empowerment of the Poor through propertyrights requires sustained efforts. Property systemsthat exclude large segments of the global populationfrom property rights have to be discontinuedand we must expand the zone of legitimate landtenure through improved access and security.Developing country governments must enter intoa compact with their own citizens and with theinternational community to support this reform.The aid community understands that propertyrights must be a central tenet of any efforts toreduce poverty, and allocates funding on thisbasis. Today, the key challenge is to consolidatethinking and draw good practice from effectiveinterventions to date to improve pro-poor outcomes,develop effective land management institutions,establish clear rules for the managementof public land, and strengthen the institutionalframework and mechanisms for land transfer andaccess. Property rights are too central to humandignity and prosperity for current thinking andpractice to continue. Only with empowermentthrough property rights can we truly seek to reduceglobal poverty and reduce inequality.72

I. IntroductionAs these lines are being written, close to30,000 of India’s roughly 170 million landlesspeople are marching peacefully to Delhion the highway. They demand not to be drivenoff their land just because it was declared stateproperty; they demand property documents or theformal registration of documents in their possession;they demanded that unused state land beallocated to them, and they demand state protectionagainst violent guerrilla movements. Thefulfilment of these demands, and the solution tomany other property-related problems identifiedin this report, requires strong, sustained and context-basedreform. Such reform has to be foundedin political will and the associational power of thepoor, exemplified by the marchers in India.Legal Empowerment of the Poor is a frameworkof action which takes such demands seriously.It recommends the promotion of domestic legaland administrative frameworks providing the pooropportunities to use their talents and to transformtheir impressive economic efforts into anincreased and secured asset base. The agendaimplies a general reform of the law from an instrumentof domination into a system of effectiveprotections and opportunities for the poor. 32On the input side, the emphasis of legal empowermentis placed on participatory and accountableforms of law-making and public administration,giving voice to the poor and increasedownership of the framing of their legal and socialenvironment. Regarding the means, legal empowermentstresses the critical importance ofthe following: granting legal identity and accessto justice to all human persons, small businesscorporations, and civil society associations (seeChapter 1 of this report); securing property rightsof the poor as asset holders through comprehensiveand context-based property rights systems;protecting the poor as workers (see Chapter 3),and creating an enabling business environmentfor small entrepreneurs and the self-employed(Chapter 4). On the output side, a result-orientedlegal empowerment agenda stresses effectiveprotection of livelihoods of the poor and, moreoriginally, measurable creation of new opportunitiesfor diversifying livelihoods, thereby improvinglives. Escape from the poverty trap and creating amore decent life are seen as the principal aims.Property rights stand for the bundle of libertiesand claim rights tied to the allocation of aresource to a natural or legal person, corporation,collectivity, association, etc. The concept of propertyrights as human rights and as part of LegalEmpowerment of the Poor implies two agendas:legally enforced protection of the assets of thepoor, and general promotion of access to propertyby the poor.Through sustainable ownership and/or securityof tenure 33 individuals and communities becomemore autonomous. Even with modest assets, asholders of property rights, individuals and groupsbecome more active as independent members oftheir communities and nations. Private propertyrights allow people to pool their assets into transparentstructures of co-ownership with fair exitoptions. This is critical for the poor who have veryfew assets but who can achieve social and economicleverage by pooling assets into legally recognisedcommon or community property. Reliableand equitable property rights systems help settlecompeting property claims and facilitate theidentification of responsibilities and liabilities.The increased social stability and trust emanatingfrom robust property rights systems create appropriateenvironments for business and investment.Secure rights to use and trade property providestrong incentives to maintain and conserve re-73

sources. Individuals and groups with such rightstend to invest in the resources they hold. In general,property rights give people a horizon to planthe future for themselves and their communities.Structure and Goal of this ChapterNone of the above-mentioned benefits can beachieved easily with one-size-fits-all models. Thischapter elaborates the main features of reformwith a special but non-exclusive emphasis onthe poor. Section 2 identifies the most vulnerablesegments of society and the relation of theirpoverty and exclusion to the problem of propertyrights protection. Section 3 briefly assesses thebarriers and facilitators of change, drawing attentionto social actors as well as structural conditionsfavouring status quo or change, while Section4 contains a concise compilation of lessonsand experienced consequences of past reformactivities, and prepares the ground for the maindiscussion, in Section 5, on proposals within thefour building blocks of the property system. Theproposals aim at reforming the property system(viewed as an arrangement of rules defining orenabling bundles and bearers of property rights)in such a manner that it would enable the poor— especially women and indigenous communities— to access and to secure property. The suggestionsshould also help to reform the propertysystem so it could serve as a form of governance,as a functioning market of assets (including thepoor in the chains of value addition), and as asystem of social policy with targeted measuresof capacity building and access to property andhousing.Parallel reform work, sustained by constantmonitoring in all four dimensions, is advocatedin order to achieve real progress. Commonformal features of policy design and prioritisingare dealt with in a special paragraph of Section5. The establishment of fully functional propertysystems and positive effects for the poor is firstand foremost a national and local reform issuedemanding the renegotiation of institutional, legal,and social relations at the national and locallevel. However, an additional section of this reportalso points to important subsidiary and stabilisingaction by donor countries and multilateralarrangements.This chapter deals with the most general featuresof pro-poor property reform and is thus not to beread as a national or local implementation report.It builds, however, on lessons and practices thathave proven beneficial in many different contextsand that have been highlighted in numerous nationaland grass roots consultations of the CLEP.Our recommendations, therefore, deserve to beseriously considered and further tailored to local-realitycontext by property rights reform in thedeveloping world.Although not repeatedly mentioned throughoutthis chapter, the members of our working groupacknowledge the efforts of numerous governments,international organisations, and NGOs inthe field of property rights. And as many membersare themselves part of past and ongoing effortsin the field, our chapter was not written withany pretension to invent a ‘wheel’. The intent isthat it would serve to raise political awarenessand communicate a set of selected policy optionsfor decision makers in the hope of improving substantiallyequitable property rights protection forthe poor and societies at large. The general treatmentof such a sensitive and context-dependentissue implies an inevitable trade-off between simplicityand comprehensiveness.It should be noted at the outset that the chair,rapporteur and contributors to this chapter(named at the beginning of this volume) have all74

contributed to its substance. But as drafted andsynthesised by the rapporteur, the content mightnot always represent all the viewpoints and priorities.Positions taken should thus not be directlyattributed to all contributors — some positions,in fact, remain controversial among them. Thereare two general points in relation to which thecontributors voiced conflicting views to the rapporteur:the first concerns the role of the state;the second, the role of the market. While somesee the state as an indispensable part of the solutionto the problem of faltering property rightsfor the poor, others emphasise that it is ratherpart of the problem or even the root cause. And,while some see the market as an opportunity forthe poor to work themselves out of poverty, othersstress the fact that market forces marginalize thepoor and drive them into misery.Acloser look reveals that these diagnosticview points are often context-dependent. Torealise property rights for the poor, both the stateas enabler and lender of last resort in regulationand rule implementation, as well as the marketas prime producer of resources, need close attention.Both state and market have indeed beenneglecting or harming the poor, but in the fightagainst poverty there is no alternative to thedynamic relation between a reformed and morelegitimate state and a functional market that includesthe poor in the value chains. This chaptertherefore stresses the dynamic interdependenceof state and market and the equal importanceof their reform in the efforts to empower thepoor through property rights. There is consensusamong the members of the working group whichprepared this chapter that the state as suchshould not be the default owner of land propertyand natural resources. The state is, however, indispensableas regulator, enabler, and auctioneerof equitable property relations. Increasing thelegitimacy of the state thus belongs at the centreof the national and multilateral agenda of propertyrights protection.Realisation of property rights is about creating apositive feedback loop between the functionalityof property governance by the state on the oneside, and the meaning this systemic functionalityhas for the people in their everyday life and customs.Importantly, neither of these two elementsis to be understood as rigid and unchangeable. 34Culture and customs are subject to constantchange due to urbanisation, population growth,migration, social differentiation, technologicaldevelopment, etc., and so are the state’s institutionalrules and formal procedures. If propertyrights are to bring substantial benefits to the globalpoor, the formalised property systems of poorcountries and the social practices have to evolvetogether and in response to each other.75

2. Faltering Property Rights:the Nature and Scale of theProblemAbsence, unjust allocation, or insecurity of propertyrights harm the poor and hinder sustainabledevelopment of a society. 35 Faltering propertyrights protection is related to the disenfranchisementof billions of poor people. In many cases,the inappropriate property rights system is theimmediate cause of continued social, economic,and political disenfranchisement. This sectionwill highlight the most critical areas as well asthe most vulnerable groups of people affected bythe dire consequences of the absence or dysfunctionof property rights protection.Growing Slums and Legal VoidsAt least a third of the world’s poor live in irregularsettlements without coherent legal protectionof their assets. Population and urban settlementgrowth projections predict an aggravation of theproblem. The UN Human Settlements Programmeholds that over the next 25 years more than 2billion urban dwellers could be added to the closeto 1 billion now living in slums, with some 2.825billion requiring housing and urban services by2030. If no action is taken most of this growthwill occur outside the legally protected sector. 37The consequences of the exclusion of the poor asa result of rapid urbanisation and modernisationare being acutely manifested around the world. Inthe final analysis, among all the causal factors fordisplacement, first and foremost is lack of securityof tenure for the poor, who have no enforceableproperty rights or access to justice.Box 1 The world’s poor:a demographic noteGlobally 53 percent of the population is defined aspoor by the ‘living under US$2 a day standard’ or3.4 billion people. The poor live in mainly six regionsand particularly three: South Central Asia (whichincludes populous India), the even more populousChina, and Sub-Saharan Africa. They represent themajority in South Central Asia (75 %) and Sub-SaharanAfrica (75 %) and just under half of all Chinese(47 %). Together the poor in these three zonescomprise 70 percent of the global poor. 36Dire Consequences and Missed DevelopmentOpportunitiesWithout enforceable property rights, residents ofinformal settlements are often subject to forcefuleviction. They must fend for themselves or paybribes to local landlords to defend their right tooccupy land, protect it from harmful encroachment,and settle disputes. Lack of protection,of tenure and of legal leverage for economicactivity, decreases productivity. It leads to socialexclusion, reproduced over generations and visiblein the spatial segregation of the poor in theurban housing environment. Environmental andbehavioural degradation is closely linked to thevicious circles perpetuated by faltering propertyrights systems which fail the poor and slow downthe development of society at large. Residents inextra-legal settlements have no legitimate way totransfer a home to a family member or heir nor torent or sell to another. Illegal black land marketsemerge and abusive practices become prevalent.Due to a lack of property rights guarantee, manyassets in developing nations are not fungible. Thepoor and their potential business partners haveno criteria to establish or realise the potential oftheir assets. There is no clear reciprocity for holdingeach other accountable and no sufficient ba-76

sis to protect transactions or to pool assets withothers. For the national economy, extra-legalitysets off a cycle of disinvestment in housing; itrepresents a lost opportunity to stimulate productiveeconomic activity.Rural Poverty and Property RightsDespite continuing urbanisation, two-thirdsof the poor live in rural areas. Ninety-fivepercent live in China, South Central Asia and SubSaharan Africa. Together these rural poor accountfor around half the world’s total poor.Rural Land Relations and Extreme PovertyInsufficient land to live on, and insecure accessor rights over land, are well recognised factors insustaining poverty. 38 Rural landlessness is oftenthe best predictor of extreme poverty and hunger.Inadequate rights regarding land often result inentrenched poverty and are significant impedimentsto rural development and to alleviation ofhunger. 39 Elimination of the causes of tenure insecurityis thus imperative for fighting poverty.Rural Land Relations and Armed Confl ictConflict over rural land ownership and accessis almost always near the centre of armed civilconflict. 40 With various degrees of prominence,war over land access has been a driver, such asbetween the land rights of farmers and pastoralists(Burkina Faso), citizens and strangers (Côted’Ivoire), indigenous and proto-colonial groups(Namibia, Liberia, Mozambique), and ethnicgroups (Rwanda, Burundi, Sudan, Uganda). Essentially,it is about conflicts of interest — andlegal rights — between the rural rich and ruralpoor. Not surprisingly, attention to the legalrights of the majority of poor is often an earlyplatform of post-conflict reforms, most recentlyin Sudan and Liberia, 41 quite aside from theneed to address conflict-induced land losses andoccupations. 42Natural ResourcesLand is not the only aspect of rural property disorder.The majority of rural poor depend uponforests, pastures and swamplands. Forests aloneaccount for 3.8 billion hectares, of which onebillion grow in Asia and Africa, the two poorestregions. 43 Issues of who legally owns theseresources, the land on which they grow, and towhom the rental (concession) and product valuesaccrue is an urgent concern of the rural poor. 44As the tenure and benefit share of foreshore andseedbed resources, fish-rich swamplands and(especially near-surface) minerals all deliver millionsof dollars annually to non-customary ownersand, notably, to governments, there are ownershipissues to be considered.The importance of water rights and their relationto land rights is likely to increase. Already today,close to one third of the world’s population sufferfrom moderate to high water shortage. The WorldCommission on Water estimates that the demandfor water will increase by around 50 percent inthe next 30 years and that around 4 billion peoplewill live in severe conditions of water shortage by2025. 45 Increased pressure on water resources isa result of population increase as well as economicgrowth. The value of land and real property oftendepends directly on the existence of adequate waterrights. In this situation property rights definingwho has access to water will play a key role. Decisionsabout water rights will become increasinglyimportant with direct impact on rights and opportunitiesconcerning the use of land. 46Women Especially AffectedWomen own less than 10 percent of the world’sproperty: 47 They constitute half the world’s popu-77

Table 2 The rural poor in the poorest regions of the world(Population figures in millions)Poorest Regionsof the World**TotalPopulation2005Percentdefinedas poor*Number ofpoor 2005Percent inrural areasEst. number ofrural poorSub Saharan Africa 752 75 564 66 372South Central Asia 1615 75 1211 70 848China 1304 47 613 63 386North Africa 194 29 56 53 30Latin America and Caribbean 559 26 145 24 35Eastern Europe 297 14 42 32 134,721 56 2,631 64 1,684* Excludes Europe, Oceania, North America, etc.** The Population Reference Bureau uses the internationally-recognised criterion of living on less than $2 a day as the measure of poverty.lation, they produce between 60 and 80 percentof the food in developing countries, and they areresponsible for rural households in increasingnumbers. Much of the misery in the developingworld is due to statutory and customary propertysystems which disenfranchise women. 48 Wherewomen have property rights, they often comein ‘thin bundles’ as compared with men. 49 Toofrequently women face barriers to owning, using,and transferring or inheriting property. Womenface forcible eviction from their homes and theirland (over which they had customary or otherrights) by family members, traditional authoritiesand/or neighbours. 50 Property grabbing exacerbatesurbanisation trends, sending more womento informal settlements and slums from urbanareas. The problem is intertwined with that ofinheritance, as many widows are evicted fromland and property. Barriers exist de jure if statutesor regulations prohibit women from using,owing, or inheriting property. Enacting formallaws that provide a woman with property rightsdoes not necessarily mean that she will be able toexercise her rights. Often, barriers to the exerciseof property rights are found to exist de facto, inconsequence of poor enforcement of formal rightsor of social norms.Creating enforceable property rights is essentialto empower women in both ruraland urban settings. 51 Women who own propertyor otherwise control assets directly gain fromsuch benefits as use of the land and higher incomesas well as having a secure place to live. 52Empowering women with property rights does agreat deal to alleviate poverty and malnutrition,as women who earn more spend a higher proportionof their income to keep their children healthyand well-fed. 53 Providing women with the right touse, own, and transfer moveable and immovableproperty is important to promote entrepreneurialactivity and to provide women with a platform forbuilding strong families and strong businesses.Indigenous PeoplesDefinition of Indigenous Peoples Has Yet to ReachSatisfactory Maturation: Indigenous peoplesdistinguish themselves by being historically, socially,economically, institutionally and politicallymarginalized. That they are usually 54 a minority78

in their countries is added reason to take specialsteps to ensure that their interests are not ignored.Indigenous peoples are generally described asnumbering around 300-370 million people withinup to 5,000 distinctive groups. In June 2006, theUN Human Rights Council adopted The Declarationon the Rights of Indigenous Peoples, draftingof which had begun in the 1980s. The definitionof indigenous peoples has seen repeated amendment55 and remains contested, particularly on theAfrican continent. This was a factor in the failureof the Declaration to meet UN General Assemblyapproval in November 2006.Focus on Indigenous Tenure SystemsMany indigenous lands have been and still aredeclared public or unoccupied because they areheld collectively according to conceptions ofownership and access that do not fit well withimported property systems. This lack of statushas consequences for indigenous asset holdersand society at large and is a critical issue, globally,for property rights reform. In addressingproblems of land issues of indigenous peoplesaround the world, it is advantageous to focusupon indigenous land tenure systems rather thanon the identification of indigenous people per se.This sidesteps the troubled definition as to whois and who is not ‘indigenous’ and has the addedadvantage of zeroing in on the systemic issues ofindigenous or customary tenure regimes.Where ethnic and indigenous minorities areidentified and territorially placed, it maybe unnecessary to belabour distinctions betweenthe indigenous and their tenure systems. In suchcases, it is advisable to simply promote theirterritorial autonomy and sovereignty. It shouldinclude their stewardship over natural resources,and extend to matters of property — and all withoutside intervention kept to a minimum. Focus onindigenous or customary tenure systems is criticalin the two regions where the poor are most numerous— Sub-Saharan Africa and Central Asia— and where delimitation and identification ofindigenous peoples is difficult and contested.Important Numbers of Customary Land HoldersCustomary land holders comprise roughly two billionpeople in Africa, South East and South CentralAsia and Latin America and the Caribbean.Given that around 80 percent of these rural dwellersare defined as ‘poor’ — i.e., living onTable 3 Main Regions Where Customary Land Tenure Operates(Population figures are in millions)RegionsPopulation2005percentRuralNumberRuralpercentdefinedas poor*Numberof poor2005Number ofrural poorSub Saharan Africa 752 66 496 75 564 372North Africa 194 53 103 29 56 30South Central Asia 1615 70 1130 75 1211 848South East Asia 557 62 345 56 312 345Latin America and Caribbean 559 24 134 26 145 353,677 60 2,208 71 2,288 1,630Source of base fi gures: Population Census Bureau, 2005. 5679

under US$2 a day standard — then 1.6 billionpeople may be defined as ‘the customary poor’.Refugees, Internally DisplacedPersonsThe disorder of property relations created byinternal or interstate conflict deserves specialattention. 57 Putting property relations backin order or providing adequate compensation tovictims is at the heart of sustainable peace building.58 The situation becomes more dramatic whennatural disasters strike. In recent memory, thenumbers displaced by the three major disasterssince the end of 2004 (the tsunamis of 26 December2004, Hurricane Katrina of 29 August2005, and the earthquake of 8 October 2005 innorthern Pakistan and adjoining areas in Indiaand Afghanistan), is around 2 million, accordingto the Representative of the UN Secretary-Generalon the human rights of internally displacedpersons. 59 Given the fact of global warming, andthe increasing number of natural disasters, thenumber of displaced persons falling into uncertainproperty relations is likely to grow. Also,empowerment of the poor through property rightshas to be seen as most urgent for orderly reestablishmentof property relations after disastersand for the development of reliable insuranceschemes. 60 Hurricane Katrina victims had propertyrights and insurance schemes that mitigatedtheir losses. The poorest people of the world lackand desperately need such securities.3. Barriers versusFacilitators of ChangeThere is evidence of enormous social and economicpotential in the establishment of propertyrights systems for all societies. 61 This insightleads to the question as to what actors and structuralbarriers prevent societies from adopting generallybeneficial property rights systems and whatcan be done to overcome these barriers.Resistance of Powerful SocialActorsPrivate owners of illegally occupied propertyoften resist allocating land to squatters againstmarket value compensation. 62 Some businessactors profiting from monopoly-like positions wantto avoid competition. They resist legalisationand undermine good governance. 63 Lawyers andnotaries profit from the complexity of legal propertysystems excluding the poor. 64 State officialsprofit from bureaucratic complexity of the systemthrough gatekeeping and briberies. Entrepreneursin the informal sector refrain from registeringbusinesses and property to avoid taxes and costlyregulations. 65Structural Obstacles andFacilitators of ChangeActors tackling the task of reform also have tobe aware of structural causes of stagnation orchange. The distribution of power plays an importantrole in determining the likelihood of theemergence of fair property rights systems. Landand income distribution is another factor in thisregard. Indeed, it has been shown that the natureof the prevailing political regime and land andincome inequality are important determinants ofproperty rights structure. 66 When political power80

is concentrated in the hands of the few, and/orland and income distribution is skewed resultingin extreme inequality, political authorities areunlikely to implement and enforce property rightsin an equitable manner. 67 This indicates that theevolution of property rights systems is to a largeextent determined by historical conditions, suchas the distribution of factors of production. 68Realising TurnaroundUnderstanding the likely impact of reforms onnon-poor groups with significant influenceis critical to assess potential support and oppositionfor reforms. 69 Besides promoting pro-poorproperty rights it is therefore important to establishproperty rights systems that are beneficialfor middle classes and groups with significantassets and political influence. The message to allis that in the absence of generalised and equitableproperty rights systems much of economicactivity does not develop its full potential evenfor powerful actors 70 ; there is a high likelihood ofsocial unrest 71 ; there may be under-accumulationof human capital resulting in a low quality labourforce, and little demand for credit resulting in underdevelopedfinancial institutions and ultimatelyhindered growth. There is also less foreign investmentor flight of capital when property rights arenot guaranteed.scenario. The emergence of property rights andthe distribution of resources may have mutualcausal effect. 73 Examples of countries like Chinaand Singapore teach us that an alternative routeof political authorities consenting to reforms isa possibility where inequalities are less extreme.The issue of better understanding how to devisemechanisms for convincing the political authoritiesor circumventing their influence in orderto induce the reform constitutes an importantchallenge. An important implication of this viewis that a drastic one-time reform may have longlasting consequences, setting the process of everimproving distribution along side with more equitableproperty rights systems.Provided that inequalities are not too extreme,equitable property rights may emerge preciselybecause of their beneficial consequences forgroups with significant assets and political influence.They may also emerge out of the desireof elites to avoid adverse consequences fromexceeding numbers of poor people not havingaccess to property rights. 72 Indeed, several recentexamples in Asia, where political leadersinduced progressive reforms, including equitableproperty rights, are illustrative of precisely this81

4. Learning from the PastLearning from previous reforms in view of improvingpractices carries considerable burdens of judgmentas one tries to measure the possible applicabilityof particular lessons to future reforms in very differentcontexts. What is provided in this section isa compressed selection of lessons to give actors onthe ground better conditions to reach their own informedjudgment.Problematic Practices and OmissionsSix general lessons from past mistakes arepresented as follows:1) Disregarding that effective property rights forthe poor are the result of power relations andsystemic interaction. Many efforts to give thepoor effective and enforceable property rightshave focused on necessary technical and legalissues at the expense of paying attentionto how power relations influence the propertyrights system in its impact on the most vulnerablemembers of society. This has hinderedeffective realisation of theoretically anticipatedreform benefits for the poor. Associationalpower of the poor, more symmetric information,legal literacy, procedural assistance andinstitutional capacity building are as importantas the formal legal instruments of propertyrights. 742) Failing to assess the credit market environmentof the property system and assumingthat credit markets will evolve automaticallyfrom property rights. In general, rates of mortgagingremain very low in developing countries,partly due to low demand, partly due toavailability of less risky alternative sources ofloans than possible foreclosure threatens andin the past partly due to low values in a market.75 Given the reluctance of banks to destroythe entire livelihood of a poor family in theevent of foreclosure and the likelihood of localresistance to attempts to take or sell off thecollateralised property, there is limited accessto mortgages and credit, especially in ruralareas. 76 Understanding the role of credit marketsin relation to property rights formalisationhas led to some important shifts in donor landpolicies in recent years. It is now acceptedthat for markets to move land and real propertyto the poor in a sustainable manner targetedcredit must be provided.3) Assuming that the state is strong and trustworthyand that therefore property titles and registriesas well as the guarantee of transactionsare reliable and corruption proof. 77 In manycountries land administration is one of themost corrupt public services. The most egregiousexamples include irregularities and outrightfraud in allocating and managing publiclands. Even petty corruption in regular servicedelivery can involve large sums and have farreachingeconomic consequences. 784) Failure to include moveable property andshareholder schemes of ownership and valueaddition in policies promoting property rights.The asset base of the poor can be extended byinnovative forms of non-real estate and noncreditbased corporate shareholder ownershipand by using moveable property as collateral.Unlike land and housing, the reproductivepotential of non-tangible forms of property ispotentially unlimited.5) Repressing Opportunities alongside with Risk.Even a moderate increase in the liberties andentitlements that come with private property,be it owned by individuals or groups, can oftencreate considerable benefits. 79 Thin bundlesof property rights, reducing the fungibility of82

property, contribute to the exclusion of the poorfrom the chain of value addition in case of landdevelopment, compensation payments, andgeneral increase of property value. The risksof the land and financial market have invitedspecial policy measures which are supposedto protect the poor from predators and harmfulmarket forces. Such practices mainly includeconditionality of forming collectives in orderto register property under a single legal entity,restrictions on the right to transfer (moratoria)after land privatisation or titling, quantitativeceilings of ownership, special qualification toprofit from land and real estate redistribution.The incentives to form collectives are beneficialwhere they are related to and protectexisting communal structures. 80 They are oftendysfunctional in contexts where a majority or avery active minority of people wants to act asindividuals or small family groups and wherethe moratoria are too long and time is notused for capacity building. 816) Failure to conceive gender equitable propertyrights systems. In many countries, formalstatutory law operates in conjunction with customarylaw and cultural norms and practicesbased on patriarchal attitudes which makeit difficult to enforce women’s legal rights toland as wives and daughters. Individualisticstatutory law favouring the male householdhead and customary practices and hierarchiescombine into a mix that is harmful for women.Where customary law and more gender consciencestatutory law conflict, oftentimes thecustomary law trumps. In some instancesstatutory law has erased customary practicesfavouring widows or women in general. Legalreform does not improve the precarious propertyrights situation of women if there are noenforcement mechanisms, and if legal assistanceand support services are not affordableor accessible for women. 82Lessons from mistakes related to land and realproperty:1) Failure to address the problem of landlessnessand extremely unequal land distribution.Market based reforms are not the definitesolution to this problem, but land purchaseand redistribution of underused land by thestate, multilateral donors or land-banks byprivate foundations can avoid the social unrestand withdrawal of private investment usuallycaused by compulsory acquisition and expropriation.832) Retaining that customary tenure and interestsin commons does not represent private propertyrights in and of themselves and are thereforenot eligible for registration without conversioninto imported forms. 84 Sustaining versions ofcollective assets in particular as ‘un-ownedland’ or default state-owned, instead of registeringthese as the private, group-owned propertyof communities has deprived millions of poorof a secure asset and income base. Customarytenure systems were thought to provide insufficienttenure security. They were assumed toimpede farmers from making necessary investmentsin land and they were associated withthe ‘tragedy of the commons.’ 85 Research hasshown that such systems can be effective. Bydefault and notwithstanding important qualifications,customary tenure systems are to beconsidered as providing an adequate frameworkfor private group-owned property. They havebeen flexible and responsive to changing economiccircumstances. 86 They limit the propertyrights bundle to a specific group of people asthe bearers of those rights. The household, thevillage, and the kin group often provide insur-83

ance against risks, access to informal credit,and security. Lineage rules of inheritance helpenforce intergenerational transfers. The threatof social exclusion is a major instrument ofenforcement of the rules. In other words, essentialfunctions of the property rights systemare fulfilled by customary systems and ought tobe legally reinforced. 873) Assuming high demand for formal entitlement,i.e. assuming that rural and remote landholdersfelt their rights to their house and farmplots are threatened or that they explicitlywant to raise loans on the basis of formal titlesto these assets. 88 Paying insufficient attentionto the time and financial costs of titling,to both government and landholder. 89 In particularassuming that titling always has to becadastre-based and rest upon expensive surveyand mapping. 904) Assuming that titling is the precondition forproperty security when other measures offermore immediate and simpler ways of securingthe assets of the poor, especially in remote ruralareas. Even in rural African contexts, whereindividual titling of land may not be desirableor feasible and the use of land as collateral forcredit is only a remote possibility, providingpoor land owners or users with documentedrights can yield significant benefits. 915) Failing to pay attention to pro-poor land marketdevelopment and failing to assess the impactof the land market on the poor. 926) Failure to Simplify Land Administration forthe Least Advantaged Customer. In manycountries, land administration functions aredispersed among many Ministries (justice,environment, agriculture, urban, finance, landreform, forest, mining, etc.). This createsgrey zones of overlapping competencies as abreeding ground for non-transparent practices.Even if responsibilities are clearly assignedand overlaps avoided, this creates confusionamong users, prevents realisation of economiesof scale, and thus increases the cost ofproviding land administration services to thedetriment of the poor. 937) Failing to Restrict Eminent Domain. Thereshould be a strict focus on using eminentdomain as ultima ratio in providing essentialpublic services rather than as a means toimprove general public utility. The latter promotesillegitimate alliances of state ownershipand powerful particular interest and severelydamages the property rights of marginal landusers by excluding them from adequate compensationor inclusion in chains of value additionthrough property development.8) Insufficient Revenue Sharing in Gains fromNatural Resources. There has been lack of attentionto the possibility of community basednatural resource management in the case offorests, fishery, and water. There has beeninsufficient participation of citizens in therevenues from the extraction, treatment, anddistribution of natural resources.Experienced Consequences1) Enduring extra-legality of the majority of assetholders despite existing property systems andtitling programmes is a persisting phenomenon.It is due to imperfect implementationin some cases but in many other settings it isthe result of a mismatch of official institutionsand local practices.2) Disruption of Existing Tenurial Arrangements.Careless implementation of formal documentationmay have the effect of inadvertentlydisrupting existing tenurial arrangements.84

There may be sound policy reasons for seekingto modify or eliminate some existing tenurialpractices. It is important, however, that anysuch reforms are the result of informed andparticipatory decision-making, and not theinadvertent result of poorly designed or implementedtitling processes.3) Concentration and Discrimination. In manycountries, including the countries of the formerSoviet Union, it has been observed that somepeople may be less well positioned to participateeffectively in the documentation and registrationprocess than others, with the effect thattheir rights are poorly protected. Individualswho loose in such contexts are usually women,absentee right holders or mortgagees, and ingeneral people with less education and limitedaccess to information becoming victim to manipulationand fraud.4) Increase in Disputes. Registration of landis expected to reduce the incidence of landdisputes, by clarifying boundaries, by resolvingambiguities about rights over land and byputting in place a registration system that istransparent, reliable and accessible. In theshort term, however, the process of adjudicationand formalisation of rights may bringto the surface latent disputes that may haveotherwise remained below the surface. Suchpotential risk needs to be assessed in theplanning phase of a reform project.5) Capitalisation: Difficult for the Poor in Absenceof Adequate Land and Capital Markets.State of the art analysis reveals only a modestpositive effect of land titling on access tomortgage credit, and no impact on access toother forms of credit. It shows no effect on thelabour income of the households holding newtitles. However, it is shown that moving a poorhousehold from uncertain usufructuary rightsto a more complete bundle of property rightssubstantially increased investment in the familyhouses. Property registration and guaranteeof the homes reduced the size of families andthese smaller families invested more in theeducation of their children. Another study findsthat formal property rights lead to more availabletime for productive activities of propertyholders who do no longer need to defend theirassets. 94Property rights bring increased economic benefitswhen linked to a functional credit systemand market, but they do not, by themselves,cause the emergence of a functional and propoorcredit system. 95 Legal property rights effectivelylead to credit and investment whererobust financial markets exist and where thereare further incentives for investment. 96 Evenwhen in possession of titles and registeredproperty, small-scale farmers and the urbanpoor most often do not put their land or modestdwellings at risk by using them as collateralfor credit. 97 Tenure security and economicbenefits other than capitalisation via collateralof land property seem to be primordial forthe poor. Although they are efficient producers,small-scale farmers and business peopletend to lose out in land and financial marketswhich are regulated with provisions that privilegeconsolidation. Market based land reformstherefore now tend to be accompanied withtargeted credit for the poor.6) Costs and Benefits of Property Rights Protection.From the perspective of the poor andthe state, the costs of formal titles have tobe weighed against the costs of insecurity oftenure, or against informal costs (bribes) inobtaining titles which harm the poor and thestate. 98 In many unreformed contexts, only few85

households can afford the cost of a title. 99 Aswill be discussed, adapting laws and proceduresto the social context can considerablyreduce the costs of titling and registrationby reducing administrative inefficiencies andby the use of modern technology. Legally enforcedproperty rights systems are not necessarilycost ineffective and expensive. 1007) Fees and Taxes. The integration of irregularsettlements into legal property rights systemsincreases tax revenues to governments. 101 Onthe other hand it is obvious that inappropriatefees and taxes can push people back into extralegality.102 As far as the poor are concerned,registration fees and taxes have to be set atminimal levels. The key elements that have tobe in place for property tax reform: existence ofadequate technical expertise; appropriate landrecords and administration are required as thebasis for the property lists; sufficient flexibilityto allow the phasing in of major changes is essentialto forestall challenges and resistance tochanges; political understanding and will areperhaps the most critical preconditions if thesubstantial challenges of implementing a highlyvisible, difficult to evade, tax, are to be overcome.1035. Recommendations forReform and ImprovedActionThe diversity of contexts and stakeholders affectedby problems of faltering property rights,as well as the high complexity of the issue, doesnot indicate that there will be a one time, onesize-fits-allsolution. What is needed is a seriousand continuously monitored reform process andparallel interventions inducing far-reaching andsustainable reforms of the four building blocks ofthe property rights system; that is: (1) reformingthe property system as one of rules defining orenabling bundles and bearers of property rightsallowing the poor to access and secure propertyalone, as members of communities, or as communities;(2) reforming it as a system of governanceso that targeted actions securing the propertyrights of the poor can be taken effectively and legitimately;(3) reforming it as a functioning marketof assets to include the poor in the chains ofvalue addition enabling them to become capablemarket participants, and (4) reforming the propertysystem as one of social policy with targetedmeasures of capacity building, information, andaccess to property and housing. Parallel reformwork sustained by constant monitoring in all fourdimensions is advocated to achieve real progress.Common features of policy design and prioritisingare also dealt with in this section, and outlinesare presented of important subsidiary and stabilisingactions that either have or can be taken bydonor countries and multilateral organisations.86Reforming Rules Regarding Bearersand Bundles of Property RightsProperty rights stand for the bundle of libertiesand claim rights tied to the allocation of a resourceto a natural or legal person. The property

system as a system of rules regarding the bundlesand bearers of property rights determineswho can legally own property, what is recognisedas property and what can be done with property.Laws should promote rather than limit ordiscriminate against bearers of property rights;they should allow freedom to bestow sufficientlythick bundles of property rights on individuals orgroups and should not unduly limit the scope ofcreative activity that can be invested in property.Individual and common Private PropertyPromote Individual and Corporate Legal Identity;Limited Corporate Liability. Property law shouldoffer clear and simple options of legal personalityand corporate ownership for small businessesand corporative associations of the poor. Legalpersonality so designed opens a range of possibilitiesof ownership by individuals, membersof collectives, and by collectives. A legal personcan hold property as an individual, but the definitionof a legal person can also be extended toa collective or common property of a myriad ofmembers, who in turn may own some propertyrights individually. Pro-poor property rights systemsfacilitate the ability of people to pool andleverage modest resources and limit liabilities incase of business failure or exit of partners. Onekey to economic success for small entrepreneursin the developing world is the limited liability ofbusiness owners, allowing for controlled failurewithout disastrous consequences for the vulnerableindividuals involved. This legal instrument oflimited corporate liability has to be extended tothe poor micro entrepreneurs and rural producersin the developing world in a simple, straightforwardmanner. Its main advantage is formality ofbusiness ownership that trumps disadvantages offormality such as tariffs and taxes, provided theseare affordable.Promote Associational Property Structures. Housingand land associations prove how individualand common property can be combined to favourpeople with limited assets without disenfranchisingthem to a collectivity. The association, aslegal person, is owner of the real property andcollectively responsible for mortgage loans, givingthe association more leverage in negotiatingloans and public services. Members, however, gettradable rights to plots, houses or apartments,and contribute to repayment of the overall loanthrough monthly rent. Apartments or plots areincreasingly sold at open market prices, but associationmembers have pre-emption rights toenter into the agreement at an agreed price. 104The idea is to provide a form of ownership to balancethe interests of the individual or family withthose of a broader community. With this purpose,Australia introduced Strata Title in 1961 to bettercope with apartment blocks. Other countries haveadopted the Australian system of apartment ownership,including Canada, Singapore, Indonesia,Malaysia, Fiji and the Philippines, and still othershave successfully created their own schemes.Strata title is not only applicable to vertical livingbut also to cluster living in slums. In many developingcontexts, there has been a tendency forlaw to prescribe in too much detail the structureof local organisations and the rules by which theycan operate. At the same time, injecting greaterformality and accountability into local organisationsis obviously important.Simplified Property Rights Certification. Somecountries have adopted simple, locally administeredprocesses to confer legal land rights asalternatives to conventional land titling. They arepractical, inclusive, benefiting growing populationsof the rural poor, 105 and are being increasinglyused to enhance urban land tenure security.106 As many require no prior physical planning,87

Box 2 Acquiring property rights for the poorIn Pakistan, incremental expansion of urban servicesallowed conversion of informal settlements (katchiabadis) in Hyderabad into legal housing neighbourhoods.In Trinidad and Tobago these alternativeinstruments have the advantage of being part of anincremental process of acquiring secure tenure. There,the State Land (Regularisation of Tenure) Law of 1998paved the way for progressive issue of Certificates ofComfort, Statutory Leases and Deeds of Lease to informalsettlers on state land. A similar model has beenunder development in Namibia since the late 1990sand proposes a continuum comprising Starter, Landholdand Freehold titles. In Brazil, the usucapião is aform of adverse possession over private land, so thereis no need for authorities to issue a title: the judicialsentence declaring that a new real right over the landhas been constituted over time is the legal documentnecessary to promote land registration and ownershiptransfer. This can be done individually or collectively,and people get freehold rights either individually orin a form of co-ownership. It is a form of prescriptiveacquisition, a real right (in the legal sense), and nottemporary. It can be sold, inherited, etc., and there isno reason for banks not to accept it (Fernandes 2005).In India it is common practice to issue pattas givingrights to the poor over government land. The patta, adocument issued by the Land Revenue Department,may be freehold or leasehold (99/30/10/1yr), renewableor not. It specifies conditions for use, transfer andinheritance, and may be used to regularise occupationor assign new plots. The patta is usually given free ofcost, or with a small fee, and needs no registration toavail of rights specified. In states like Madhya Pradesh,Andhra Pradesh, Rajasthan and West Bengal, it canbe mortgaged against housing loans. If patta land isrequired for any ‘public purpose’, the holder has to beallotted alternate land. In Andhra Pradesh alone, morethan 10 million pattas have been issued since 1962.(Banerjee 2006)infrastructure, or surveying, they offer widespreadcoverage at low cost, affordable by the poor.Recognising Customary Tenure and Communitiesas Bearers of Property Rights to Land and NaturalResourcesIndividual titling and/or alternative measures forincremental consolidation of property claims areappropriate and beneficial in many urban contexts.107 In rural contexts, especially in Africa andparts of Asia, they need to be phased in from otherforms of tenure security or replaced by new approachesto securing tenure to more fully cover thespectrum of the local economic practices and conditions.The 1990s and early 2000s are repletewith examples of legal reforms in the direction ofrecognising customary land rights (mainly in Africa,and notably in Tanzania, Uganda, Mozambiqueand some West African countries), and indigenousland rights (Philippines, Cambodia, Australia, anda number of countries in Latin America). Theseinnovations come from different contexts that maylimit comparability; nevertheless, one can extractcommon threads and identify common problemsthat will require attention in the years ahead. 108Broadly speaking, these laws share some of thefollowing characteristics or aspirations:• They recognise that in many contexts thesocial and economic value of land is best realisedby allowing land relations to be governedby rules of the community in which the landis located, rather than by imposed systems ofproperty law.• They reflect a conviction that communitybasedtenure regimes are often better atproviding security of tenure to individual cultivators.Often, individual cultivators fear dis-88

Box 3 Namibian land reformIn Namibia, legal reforms in 1996 created a frameworkfor community-based natural resource management(CBNRM). Namibians who form conservanciesnow have legal rights to manage wildlife andto benefit from tourism. With these secured rights,rural Namibians have reduced levels of poaching,have seen wildlife numbers increase substantially,and are seeing their ecosystems rebounding. Arelated benefit is that rural Namibians now haveopportunities to pursue a new set of entrepreneurialventures. They are empowered to build businessesbased on eco-tourism and related activities. Thesebusinesses help to diversify livelihoods and providevaluable benefits for conservancy members.Namibia’s experience with CBNRM may provide astrong model for other countries: devolving securelegal rights to local people is promoting positiveoutcomes, both in terms of conservation and economicdevelopment. Source: Boudreaux 2007possession by government or outsiders, ratherthan by others within the community.• They acknowledge that community-basedsystems are also often better at reflecting thecomplex rights that individuals, families andgroups have over land, including secondaryrights of access and use — rights that mightbe distorted or lost by titling according to astandardise format that is not adapted to localrealities.• They recognise that a community’s relationshipwith land is more than an aggregate ofindividually occupied plots: it is a system thatincludes natural resources used in common.Communal lands and common natural resources.Including grazing lands, forests, water, fisheries,in many poor countries are a special case of customarytenure and crucial for the improvement ofthe legal and economic status of the poor. Theyare vulnerable to degradation and appropriationby powerful chiefs, outsiders, or state bureaucratsunless common property resource managementsystems are reinforced by legal sanction.Increasing access to, and the locally beneficialproductivity of land and natural resources, can beachieved by:• Reaffirming and codifying customary rules inparticipatory ways, reflecting diversity in theethnic, historical, and social construction ofland. Also setting legal boundaries, identifyingexisting rights that may overlap or be of a seasonalnature (e.g., between herders and sedentaryagriculturalists), and registering themas appropriate and orderly tradable.• Allowing communal land ownership as onelegal option and regular management decisionsin an accountable body that functionstransparently — for example, as an incorporateduser group — and having clear rules forconflict resolution that are respected by allinvolved. Arriving at culturally appropriate legalforms for such bodies is key.• Ensuring that customary forms of tenure canevolve towards more formal types of tenurethrough well-defined and transparent processes,if and when, in the judgment of thoseconcerned, the benefits from more individualownership exceed the cost. 109The status of informal rights has come strongly tothe fore. Most derive from, and are sustained by,community-based arrangements — i.e. indigenousor customary regimes. If inroads made thus farevolve and expand, some 400 million Africanscould benefit. No fewer than 40 million Indonesians,or 40 million South Americans — andmillions of others globally — could also benefit,should comparable tentative shifts mature. The89

implications promise socio-economic changesnever quite achieved in previous reforms towardsredistribution, collectivisation or conversionarytitling. Obviously, where states are too weak tocontrol local war and drug lords, devolving landownership or management to local communities isnot an option to empower the poor.Critical Issues in the Recognition of Customaryand Indigenous Tenure SystemsDrafting of laws that recognise customarytenure and that accommodate a numberof such tenure systems within a national legalframework is a complex task. It is possible toidentify a number of challenges that are likely torequire attention from both drafters and implementers:Identifying Communities and Evolving Practices.State recognition of customary or communitybasedtenure requires identifying, with some degreeof precision, the community whose propertyrights are being recognised, the area over whichit has legitimate claims and the institutions ordecision-making processes whose decisions andoutcomes are entitled to respect by formal legalinstitutions. If carelessly done, formal recognitionmay have the effect of unduly privileging one ofseveral competing local visions of what constitutesa community, and what rules or authoritiesare legitimate.Balancing Respect for Local Decision-makingwith Human Rights and Accountability. In somecontexts, custom may run contrary to a vision ofhuman rights enshrined in a national constitution,particularly where it comes to the treatmentof women and minorities. A similar dilemmaarises when it comes to ensuring minimum levelsof accountability and transparency within customarystructures. However, customs are not rigidand unchanging. It is thus possible to aim at aprocess in which customary practices evolve inresponse to social development and human rightsprinciples. 110Protecting Customary or Indigenous Rights whileEnhancing the Ability of Communities and IndividualHouseholds to Explore New EconomicOpportunities. There is no inherent contradictionbetween giving increased legal recognition to customaryor indigenous tenure systems and promotingeconomic growth — indeed, in some contextsit is argued that the former is a pre-requisite forthe latter. But the choice of legal techniques mayskew the balance between protection on the onehand and the ability to adapt to new opportunitiesor challenges on the other. Protecting theintegrity of local systems against the incursions ofricher and more sophisticated outsiders may, asa starting point, justify short-term restrictions onthe alienability of land. The question is whetheremphasis on protection reflects the needs and aspirationsof local people in rapidly changing economicenvironments. Some laws provide avenuesfor communities or individuals to attract outsideinvestment on their land, subject to an internalprocess of approval. There are in some cases opportunitiesfor individuals or groups to ‘opt out’ oflocal tenure systems in favour of acquiring individualisedtitles under a state-sponsored scheme.The Challenge of Capacity and Conflict. Devolvinggreater authority to local institutions — whethertraditional bodies or local governments — has itsjustifications. The question to be asked in eachcase, however, is whether specific reforms assumethe existence of greater capacities at variouspoints in the system than in fact exist, or canbe expected to exist in the near future. In manycontexts, conflict-ridden areas will not allowfor community based land and natural resourcemanagement and require tighter central control.The challenge of capacity and conflict extends90

Box 4 Focus AfricaCustomary rights may now be registered without conversioninto introduced forms in Uganda, Tanzaniaand Mozambique; the same is proposed in Lesotho,Malawi and Madagascar. Customary properties otherthan common properties may be registered in Namibiaand Botswana (since 1968). Although not defined ascustomary rights, given their abolition in 1975, existingoccupancy may also be registered ‘as is’ in Ethiopia.Customary rights in Mali, Niger, Burkina Faso, Benin,Côte d’Ivoire, Ghana and South Africa may be certificatedwith substantial effect, but with required or impliedconversion into existing statutory forms on final registration.Described incidents of customary rights reflect‘customary freehold’ and/or as customarily agreed bythe modern community. Most laws allow for customaryrights to be held in perpetuity, raising their statusabove that of leasehold or similar statutory formscommon to most of Africa. Freehold is available mainlyin Southern Africa. Only Tanzania and Mozambiqueendow customary interests with unequivocal equivalencywith imported tenure forms. Uganda proclaimsthis but also provides for conversion of customary certificates into freehold tenure. Lesotho and Malawi proposesomething similar. Mozambique does not practicewhat it preaches, giving investor interests in customarylands more support than customary interests.The status of unregistered customary rights — morethan 90 percent of all rural landholding — is oftenambivalent and remains permissive, pending registration.Customary rights not registered are explicitly protectedin Uganda, Tanzania Mozambique and in a differentmanner, in Ghana. Customary owners in Côte d’Ivoirehave a short time limit within which rights must beregistered to be sustained. The movement of customarilyheld land out of government land/public land classes isclearest in Uganda, where public land is abolished, andTanzania, where it becomes ‘village land’. More than individualtitle is recognised. Family title is widely providedfor, especially in Ethiopian law and Malawian policy.Adoption of procedures, limiting transfers of familyland without support of spouses, is provided in Ugandaand Rwanda and proposed in Malawi and Lesotho. Apresumption of spousal co-ownership exists in Tanzanialand law. Efforts to secure such a presumption failed inUganda. Ethiopia and Eritrea recognise male and femaleproperty rights distinctly.Sources: Alden Wily and Mbaya 2001; Alden Wily 2003cto education and awareness of property rightsamong the common people, which is discussed ina subsequent section.Measures to Make Property Systems More GenderEquitableThe UN Research Institute for Social Developmentnotes that there has been ‘both considerableprogress throughout the 1990s in makingformal laws pertaining to land more genderequitable, as well as repeated failures in actuallyputting statutes to work.’ 111 Developing countrieshave, in many cases, enacted laws and policies toprovide women with greater rights to control andmanage property. Promising practices combineinstitutional measures, legal prescriptions andsocial policy:Special Units to Monitor Gender Issues. Policymakersshould establish special units to constantlymonitor gender issues and follow up on enforcement.In some environments, police services andcourt systems fail to enforce women’s propertyrights. When property rights exist de jure but notde facto, policymakers face difficult choices:expend resources to better ensure enforcementor work to shift social norms. In countries withlimited capacity the former route is difficult. Inany country the latter is a major educational challenge.There is need for context-specific investigationof how best to shift social norms in ways that91

welcome women holding secure rights to property.This may well be a time-consuming process ofnorms evolving. It is an area in which much additionalresearch is needed.Joint Titling Efforts and Common Property. Governmentsshould register household propertyjointly in the name of both husband and wife. Byvirtue of marriage or sustained free union (domesticpartnership) real and moveable propertyheld or bought by the male partner should automaticallybe considered the co-property of thewoman. Women usually do not have the means tocontribute 50 percent to the purchase of propertyin marriage.Inheritance. The primary way the poor acquireland is through the family and by inheritance. 112Many formal or informal legal systems favour menin distributions made by inheritance. 113 In somecases, inheritance and succession laws providewidows with only temporary rights to use spousalproperty after their husbands die. These rulessubject women to the potential of property grabbing.Many countries have amended constitutionsor implemented legislation to guarantee the rightsof women to inherit property on an equitable basiswith men. However, in some countries may overridethese provisions by custom or family law,while a number still maintain discriminatory provisionsin their legal codes. 114 Thus, for women, theexistence of inheritance rules that call for maleand female heirs to receive equal consideration intestamentary distributions are an important stepon the path towards empowerment. There is someevidence that changing formal inheritance lawsmay have the unintended consequence of promptingmen to specifically disinherit female heirs toavoid passing property to them. 115Education and Information. Women may be unawareof their legally guaranteed property rights.This on-the-ground reality suggests that there is acontinued need to educate women and girls as totheir legal rights to own, use and transfer propertyand to communicate to society broadly the natureof these rights.Intellectual Property Rights and the Rightsof Indigenous Peoples: The Task AheadIn most cases intellectual property is only indirectlylinked to the economic activities of thepoor. However, in the case of indigenous peoplethe issue of intellectual property is often relatedto forms of dispossession and property misuse.Discussions have focused on a wide range ofissues, including moves to strengthen protectionof traditional cultural expressions (TCEs),traditional knowledge (TK) and genetic resources(GR) against misappropriation and misuse. 116 Inanalogy to this report’s focus on indigenous formsof tenure, rather than indigenous people as such,this section of the report pays attention to theseforms of intellectual property rights rather than tothe identification of their bearers. The UN HumanRights Council (Declaration on the Rights of IndigenousPeoples), the Convention on BiologicalDiversity 117 , the WTO TRIPS Council, UNCTAD,UNESCO, the FAO and WIPO have paid increasedattention to the protection of TCEs, TK, and GR.Some view intellectual property rights as a usefulinstrument for the conservation of TK, GRand TCEs and as a tool for implementing a benefit-sharing.Others are more critical and fear atrivialisation of traditional cultures and possiblemisappropriation. Others still point to a fundamentalconflict between the very notion of intellectualproperty and the cultural values and moralperception of many indigenous populations.While indigenous notions of collective ownershipand trans-generational custodianship might becompatible with the overall idea of (intellectual)92

property, some indigenous peoples aim to preventappropriation of natural and cultural resources.In such cases, there is a fundamental conflictbetween indigenous rights and (intellectual) property.In fundamental opposition to some indigenouscultures, many intellectual property systemsrecognise rights on inventions pertaining to livingmatter. In conventional patent systems, matterknown to the public belongs to the so-called publicdomain, thus preventing their protection andallowing their free use by anyone. Worse for someindigenous people, the concept of public domainassociated with traditional intellectual propertylaws has allowed for the appropriation of GR andTK for the development of inventions that aresubsequently patented.Intellectual Property Rights in Context. The rightsof indigenous peoples depend on and interactwith a wide range of other measures and policies,such as land tenure, environmental laws andprotection of endangered species, health, foodand agriculture, water quality, cultural heritageprotection, access to and exploitation of naturalresources, environmental management, and soilconservation. Within this broader horizon, intellectualproperty rights may play a positive role inencouraging creation or protection of indigenousrights. Such a role includes, for example, theprotection and disclosure of new intellectual creationsthrough the laws of patents and industrialdesigns or avoiding confusion and deception andpreventing unfair competition through the protectionof trademarks and geographical indications.Equally relevant are the safeguarding of the integrityof, and rights of attribution to, certain worksand creations through moral rights’ protection incopyright, and the protection of undisclosed informationfrom bad faith use or appropriation. Anexample of the use of intellectual property rightsin the protection of traditional knowledge relatesto traditional medicines in the People’s Republicof China, in respect of which several thousandpatents have been granted in past years. 118Way Forward. Notwithstanding useful aspects,many questions remain as well as importantconcerns:1. Conventional intellectual property rights mightnot offer indigenous peoples adequate protectionin situations where the resource, knowledgeor cultural expression is already publiclyknown. In this case, the creation of sui generissystems of protection is needed.2. The overall purpose of intellectual propertyrights for indigenous people in both positiveprotection and negative protection needs to befurther evaluated.3. Existing and future systems must ensure thatthey do not contribute to an undue misappropriationof certain intellectual assets of indigenouspeoples.International Dimension. In addition, because GR/TK and TCEs are often exploited in countries differentfrom the countries of origin, there are callsto establish international instruments that take accountof the intangible nature and cross-boundarynature of those components of indigenous life andheritage. This will require examination of complexissues, such as the question of ownership/custodianshipof rights, form of protection to be granted,ways for ensuring nationals of one country toenjoy rights in foreign countries, question of fairand equitable benefit-sharing in the internationalcontext, recognition of personal or moral rights ofindigenous people, ensuring that known resourcesor knowledge already in the public domain cannotbe subject to intellectual property rights, and theneed for enhanced international cooperation inareas such as mutual information, registration andmanagement of rights, among others.93

The Intergovernmental Committee on IntellectualProperty and Genetic Resources, Traditionalknowledge and folklore (IGC), established byWIPO Member States in 2000 has adopted an inclusiveapproach. The IGC has been exploring thepotential of protecting rights of indigenous peoplesthrough conventional intellectual propertyrights and through sui generis systems 119 , workingtowards an understanding of how best to protectTK and TCEs against misappropriation, clarifyingissues such as the positive and negative protectionand working on a better understanding of theinternational dimension of such protection. TheIGC process has resulted in draft objectives andprinciples for the legal protection of TK and TCEsagainst misappropriation and misuse. 120Reforming Property Governancein view of the Least AdvantagedCustomerThe property system is upheld by a system ofgovernance which includes the institutional orderof the state, procedural rules and relationshipsof interaction between state and stakeholders,ranging from property registration, spatial planning,zoning, taxing and other aspects of propertymanagement, and enforcement. Since a propertysystem with general deficits will not produce beneficialresults targeted to the poor, this sectionpresents broader reform combined with measuresthat particularly promote the inclusion of the poorin effective property rights protection. 121Changing LegislationReforming the property system to produce tangiblebenefits for the poor might imply the need tochange the law or introduce new legislation. 122Such procedures are time consuming and hard topredict in their final outcome due to political contingencies.It is thus advisable to first design themost urgent policy measures needed to improvethe property access and security for the poor, andthen to assess if the legal basis for the measuresis sufficient. If this is the case, it might be moreefficient to seek improvement within a given legalframework. In many cases, however, the implementationof pro-poor property rights, especiallyfor customary owners and women, requires legal(statutory or customary) or even constitutionalreform. 123Agovernment’s large-scale ownership of land,its ability to impose planning restrictionsand to expropriate without adequate compensation,contributes to tenure insecurity and oftendemands legal reform as well. Reform mightbe undertaken with clear goals of what the newpro-poor property law should look like: allowingprivate individual or group owned property of landunder customary tenure; allowing the franchisingof micro-enterprise with limited liability; allowingthe use of moveable property as collateral; creatinglegal figures of associational property whichallow the poor to pool and exit property; protectingwomen’s property in and outside the marriageand in inheritance; restricting eminent domain,and introducing protective pro-poor zoning laws,among others. However, the inclusive procedureof making, implementing, and monitoring theconsequences of the law by further regulations,as well as securing sustained support for the lawfrom different stakeholders and agents, are asimportant as the content of the law itself. Politicalconstellations might make sweeping andcomprehensive reforms possible and hence advisablein some contexts. If not, it is also possibleto approach the reform of property law in a moreprocess-oriented manner. The following guidingprinciples have been useful in endeavours in differentnational contexts, where a one-time sweepingreform was politically impossible:94

• Where consensus is hard to obtain and/ormedium-term effects hard to anticipate, apragmatic and incremental approach to legalreform is often the best approach.• Legal and regulatory reforms can be obtainedwith the support of beneficiaries. But theirshort-term benefits have to be assessed inlight of the provision of public goods and longterm effects. 124• Legal and regulatory obstacles can be identifiedwith the help of communities. 125• Applying a learning-by-doing approach to legaland regulatory change is beneficial for theprogress of the reform project. 126In efforts to merge legality and legitimacy to solidifyeffective impact and equity of property law,communication and consensus-building measureshave proven to be of vital importance. Given thepolitical sensitivity of property issues, securingand maintaining high-level consensus and commitmentto property reform is critical, especiallyas such support can falter during changes in thepolitical administration, for example. Therefore, aconsensus-building and communication strategymust be designed and implemented to sustainbroad support.Reform Priorities in Land and Real PropertyAdministrationA land and real property administration systemthat is generally dysfunctional will not all of asudden produce targeted measures that benefitthe poor. It is therefore advisable to make thesystem as a whole more efficient and friendly tothe least advantaged customer. The combinationof organisational simplicity and accessibility significantlyimproves the efficiency of registrationand administration, thereby increasing tenuresecurity of broad sectors of the population and,as a result, public support. Effectiveness of legalprovisions depends on availability of institutionsfor enforcement. In particular, many of the expectedeconomic benefits (especially exchangeand use of land as collateral) from secure landrights will not materialise unless a well-functioning,transparent, and accessible land administrationsystem is in place. 127Simplicity. Every political entity should only haveone or a strict minimum of well-coordinatedproperty administration agencies. The integrationof the cadastre, property, intellectual and commercialregistries contributes to improved outputlegitimacy and investment climate. Experienceworldwide shows that delays and tenure insecurity,due to rivalries and conflicting interests, areinevitable when a number of competing agenciesare simultaneously responsible for the implementationof property rights. 128Accessibility. Local Presence. The locations ofthe agency should be as decentralised as possibleand easily accessible for the poor who are unableto bear the costs of travelling long distances inorder to register or transfer property.Reduced Transaction Costs. Efforts to reduce thenumber of days it takes to formally register propertycan have a positive effect in terms of reducingtransaction costs. So too can reducing the numberof steps buyers and sellers must follow before formaltransfers take place. However, in addition tosuch changes, countries should be encouraged totake additional steps to reduce transactions costsin property markets, mainly in organising publicand private legal services in a pro-poor manner. 129A key reason for land sales to be driven into informality,which can over time threaten the integrityof the registry information, is the desire to avoidhigh levels of taxation, mainly in the form of stampduties, or the need to make informal payments. In95

addition to setting clear fee structures that are wellpublicized, reduction of stamp duties, possiblyby replacing them with a land tax to be assessedat the local level, would be desirable. Such a tax,complemented by a capital gains tax if necessary,could encourage productive land use and reduceincentives for speculative land accumulation, thusmaking productivity-enhancing outcomes fromland sales markets more likely. Moreover, adjudicationand dispute settlement can be embeddedin a cost-saving, community-based participatoryprocess. It is cost-effective for the state to investin the capacity of a pool of potential conciliatorsat a community or district level of government. 130For any first-time registration of land rights to havea lasting and pro-poor effect, it needs to be integratedwith systems to maintain registry records upto date in a cost-effective way that is in line withwhat users are able and willing to pay.Modern GPS and Information Technology. Inmany contexts of the developing world, the technicalcosts of titling and land registration havebeen considerably reduced by computerisationand GPS systems. 131 Modern technology can helpto improve transparency and at the same timemake administration more accessible. 132 As thepurpose of land registries is to give public noticeof land ownership and transactions, makingregistry information available publicly on the Internetand promoting Internet access can reducetransaction cost and by allowing independentcross-checks, greatly increase public confidencein them. The transition to an all-digital, internetenabledland registration system is not withoutpitfalls. Corruption can easily increase in theearly phase, because the opportunity for alteringthe records before digitisation is high. The introductionof all-digital and internet-based registrysystems has to be carefully prepared and preemptiveaction to the altering of records taken.Corruption is reduced dramatically once the systemsare operational. 133Financial Self-sustainability. Land administrationinstitutions will be viable in the long term andindependent from political pressure only if theycan sustain their recurrent operations financially,without charging more than the poor are able topay. This in turn is a precondition for all the otherbenefits from land administration to materialise.Separation of Powers of Land Registration andPublic Land Management. Land administration,i.e. all matters relating to land rights should beindependent from the authorities in charge ofstate land management and use. This reduces thepossibility of abusive practices where the state isonly the means through which individuals pursuetheir particular interests and of which the poorare usually the first victims.Increasing Transparency in Public Land Use andPlanningGovernments’ large-scale ownership of land,its ability to impose planning restrictionsand to expropriate without adequate compensationalso contributes to tenure insecurity of thepoor who have no government lobby. 134Define Government’s Land Rights and Duties andEstablish an Inventory of Government Land: Invirtually all countries, the government nominallyowns large amounts of land. However, the extentof such claims and associated rights and obligationsare often not well defined. At worst, thisencourages sell-offs of public assets to the wellconnectedleading to a speculative accumulationof large non-productive land holdings or concessions.Keeping public land at the necessary minimumand defining the responsibilities of differentlevels of government in terms of managing publicland would be a first step that should be followedby a inventorying and registering of state land96

and the establishment of transparent administrativeprocesses at all levels for granting, selling,and leasing of state lands.Strictly Circumscribe Conditions for Expropriationof Land: As transferring land from agricultureto non-agricultural or urban uses is a corollaryof economic development, an important issuethat undermines tenure security in much of thedeveloping world — and which has often causedgreat hardship to former land owners — is thegovernment’s far-reaching ability to expropriateland with real compensation often far below marketrates. The threat of expropriation has servedto undermine tenure security and investment andhas also led to informal sales in anticipation ofexpropriation that often invited corruption andshady property deals involving state agencies.Productivity was impaired as the state apparatushad often neither the means nor the incentivesto invest in or effectively use the land acquired,thereby often leaving the potentially most valuableland undeveloped. One reason for this is that,in many countries, even land for private uses willfirst have to be acquired by the state, somethingthat can greatly increase the transaction costfaced by private investors. Eliminating such rules,constraining expropriation to cases where a narrowlydefined public purpose is at stake, whileallowing land owners or users to negotiate directlywith interested parties in the remainder of thecases (with the possibility to draw on mediation ifneeded) can eliminate a key source of uncertaintyand corruption.Zoning and City PlanningZoning and planning is one of the main causes ofexclusion of the poor from legal and formal cityand peri-urban development processes. On theother hand, the right use of zoning and spatialplanning can become a formidable instrument oflegal empowerment. 135 Although this is perhapsmost commonly a feature of the rural-urban zoneof transition, it is also a feature within urban areas,and within rural areas. 136 Especially changesin use from agriculture to urban residential orcommercial purposes usually multiply the valueof land significantly, and consequently augmentthe potential for abuse. Peri-urban areas needto be better planned if they are to be more effectivein promoting sustainable pro-poor urbandevelopment. The ambit of interventions hasto expand beyond slum upgrading and tenureregularisation to defining the urban developmentframework within which access to land and landdevelopment rights for the poor becomes possible.137 Spatial and urban planning can be a majordriving force behind higher living standards andwealth generation. 138 The relevance for urbanplanning is heightened in the idea that responsibility,incentives and ownership should be alignedto maximise desired ends. 139Eliminate Inappropriate Planning Regulations.Overcoming extra-legality in urban areas will beimpossible without a careful review of planningregulations - some of which, such as minimumlot sizes, were designed with the explicit purposeof segregating property markets. While regulationsmay be introduced with more benevolentgoals, they may nonetheless affect the poor negativelyand, through their impacts on urban forms,be environmentally and socially harmful. Whileit will be dangerous to generalise, in practice theonly reason for the continued existence of harmfulregulations is either limited knowledge onalternatives or the fact that they benefit powerfulvested interest groups who are generally not thepoor.Establish Transparent and Participatory Land UsePlanning: Even if rules are well justified, in manycountries, land use planning follows non-transparentand highly centralised processes. This97

implies that rules often have little relevance forthe reality of the poor. Focusing central efforts ondefining clear performance criteria for land useand ways of enforcement while leaving detailedplanning to the local level are likely to result inplans that focus on relevant issues, have higherlocal acceptance, and thus stand a better chanceof actually being implemented.Avoiding Ghetto-formation by Mixed Neighbourhoods.New and ‘good old urbanism’ definesalternatives for urban growth and communitiesbased on concepts of mixed neighbourhoods,mixed land use, diversity and public identity.These concepts work towards integrating urbanismand environmentalism, and joining ratherthan segregating the poor and ethnic minoritiesin diverse communities. 140Special Social Interest Zones. Forming mixedneighbourhoods does not substitute for additionalzoning and planning measures that canwork to improve existing slums. Here, specialinterest zones can create protective and empoweringenvironments of residence and businessactivity for the urban and peri-urban poor.In Brazil several planning measures have beentaken to provide secure conditions of livingand livelihood for the poor. For instance, urbanzones which have favelas, corticos (collectivehousing, popular subdivisions), and other formsof housing and home-based economic activitieson vacant lands, can be declared as ZEIS orSpecial Social Interest Zones under municipallaw. Special rules are drafted and simplifiedprocedures adopted for each ZEIS by a localcommittee for regularisation of land occupationand use of land by the poor. ZEIS havenow been adopted relatively successfully by anumber of Brazilian cities. 141Conditionality for Private Developers. One importantprovision, for instance of the progressiveUrban Development and Housing Act of 1992 ofthe Philippines 142 , is Balanced Housing Developmentwhereby developers of proposed subdivisionsare required to develop 20 percent of theland for housing low income communities. Asimilar provision of the Government of the Indianstate of Madhya Pradesh enacted as part of theColonisers’ Act requires 15 percent of the land tobe reserved for without shelter households or paymentof a sum equivalent to the officially determinedprice of the land to be reserved. The policyhas made land available for housing more than6,000 poor households in central city locations inthe city of Bhopal alone and substantial funds forland procurement and development. 143Density Mixed Use Zones legitimise densely built,small plots and home based businesses. Thedraft Nation Slum Policy of India 144 proposes tointegrate informal settlements into city planningby designating them as high-density mixed usezones, to legitimise densely built, small plotsand home-based businesses. It also proposesthat only slums in environmental risk areas andland use zones for essential services and facilitiesshould be relocated. All others should beregularised and their land use zoning should bechanged to high-density mixed-use. The NationalHousing and Habitat Policy propose that landshould be zoned for housing the poor in city masterplans. 145Reversing the Development Sequence in SlumUpgrading. The strategy of reversing the developmentsequence by first allotting secured plotswith only bare minimum services, with provisionfor incremental improvement gives the poor sustainableownership and participation in the valueincrease of property. Such measures match theaffordability of allottees and assure that even thepoorest get access to secure land and housing,98

which develop into a fully serviced neighbourhoodin the longer term. 146Supporting Street Entrepreneurs. Many Indianstates have adopted the Central Government’sNational Street Vendors’ Policy of 2004, aimedat recognising and planning for the informalbut widespread activity of hawking and vendingin cities and to provide basic facilities such asspace, water and sanitation and access to credit.147 The policy itself was framed after more thana decade of lobbying by NGOs and street vendorsfederations. Under the policy local governmentsof cities such as Bhopal, Hyderabad, Kolkata andDelhi have delineated Hawkers’ Zones. Initialindications are that this has ended harassment ofthe poor and provided them with security to carryout income earning activities. 148Involving Stakeholders in Spatial Planning. Thestrategy of using a survey to make claims anddraw attention of the authorities to poor livingconditions was first used in Mumbai in 1987 bypavement dwellers supported by The Society forthe Promotion of Area Resource Centres (SPARC).This was followed by women pavement dwellersidentifying potential vacant lands in the cityfor their relocation, and forcing the city governmentto act. This strategy paved the way for civicauthorities to recognise the role of civil societyorganisations in developing responsive housingsolutions for the poor, and later participating inframing the relocation and rehabilitation policyfor the World Bank funded Mumbai Urban TransportProject. Similar initiatives are taking placein Thailand with the support of CODI (CommunityOrganisations Development Institute), which is agovernment organisation created to facilitate localhousing improvement and livelihood initiatives ofcommunity groups. 149Implementation and Dispute SettlementExpand Options for Conflict Resolution. Implementationis a decisive element of propertyrights governance. Where it fails, it can nullifyor considerably reduce the effectiveness of allother elements. Developing countries are oftenat loss of stable and predictable implementationand dispute settlement institutions. Traditionalinstitutions can resolve some forms of localiseddisputes. But they are not well equipped to addressdisputes that cut across groups from differentcommunities (e.g. nomads and sedentaryagriculturalists), across ethnic boundaries, or thatare between individuals and the state. Even so,expanding the range of options to resolve landconflicts systematically and out of court can havelarge benefits, especially for the poor and forwomen who otherwise are often unable to enforcetheir legal rights. 150 In many contexts, Third PartyArbitration Courts (TPACs) can be considered aneconomic and social success. These mechanismsoffer effective protection of property rights and/oreffective resolutions of disputes over contestedproperty arrangements, especially for disenfranchisedwomen.Alternative dispute resolution is very promisingbut has its pitfalls. In general, successof alternative dispute resolution depends oncertain standards and practices. An importantcondition is the right of poor people to appointjudges of their choice for dispute resolution. Butit is equally imperative that the alternative disputeresolution mechanism be linked to formalenforcement and not operate totally outside therealm of the legal system. Rules have to be craftedin accordance with the formal legal and informalsocial context. If supported by aid, financialsustainability should be guaranteed for the timeafter donor support has stopped. 15199Include Property Issues in Post-conflict Settle-

ments and Natural Disaster Management. In themany situations where land issues have oftenbeen at the root of broader civil strife, failure todevote proper attention to these issues, includingways of managing land access by returnees, caneasily undermine their sustainability of such settlementsand sow the seeds for violence. Learningfrom successful examples to address land-relatedgrievances and settle large numbers of people ina rapid and decentralised way together with waysthat will prevent limited conflicts from festeringand escalating into larger ones can help to avoidmuch broader clashes, often with very damaginghumanitarian and economic consequences. 152Reforming the Property System asa Market of Assets for the PoorA functional property system allows for the transformationof assets into fungible property rightsand for the exchange of those rights in open markets.In order to benefit the poor, real propertyand credit markets need to be developed andthey need to be regulated where they systematicallywork against the poor. In general, reformsshould aim at opening the door to the poor to abroadened asset base. Guaranteeing the poor theright to property and to leverage property in themarket is a multi-stakeholder task best achievedby close partnerships between the state, the privatesector and civil society.Market DevelopmentA Pro-poor Framework for Land Sale Markets.Historically, most land sales were due to distressthat required defaulting landowners to cede controlof their land to moneylenders, who amassedhuge amounts of lands. 153 However, data onland sales over 20 years in India illustrate theimportance of land sales markets and of beingin the land markets: First, they transferred landto better cultivators and from land-abundant toland-scarce households, allowing the land-scarceto improve their welfare 154 without making sellersworse off. Sales markets were indeed thinner,more affected by life-cycle events, and lessredistributive than those for rentals. Land salesmarkets helped purchasers, many of whom wereformerly landless, to accumulate non-land assetsand significantly enhance their welfare. 155 Effortsat redistributive land reform will need to aim atcomplementing what market forces are achieving.Market development with the poor in mind oughtto be pursued by:• Granting freedom of contract, definition ofobligations, remedies for failing to fulfil obligationsand for terminating obligations orderly,guidance on how to conclude a contract, definitionof forms of contract (oral or written);identification of invalid transactions.• Making land purchase and sale easier for thepoor by minimising conditions such as formaleducation or experience in agriculture. Providemodel sales contracts the poor can rely on.• Keeping leasing rules simple and clear.• Reducing transaction costs for the poor byavoiding overly precise mapping, avoiding repetitionof platting parcels, not covering initialplatting fees for the poor.• Avoiding notary fees for small transactions;keeping registration fees and transaction taxesvery low for small transactions and exemptingnew and small land owners from registrationfees and tax; putting to severe need testand cost-benefit analysis every administrativeintervention into land deals and eliminatinginterventions which do not stand the test.• Granting preferential rights to buy to co-owners,neighbours, or leaseholders of land.100

Box 5 Sale of land: examples oflegal issuesIn the collective certificate of land ownership award(CLOA) system of the Philippines not even a majorityof the collective can decide to sell, mortgage or usethe title as collateral to obtain formal credit. Underthe Comprehensive Agrarian Reform Program of thesame country, there was a prohibition on any formof transfer within 10 years of award. In addition, afive-hectare ceiling on ownership was set and onlyqualified farmers can buy awarded land. This didnot stop but increase transfers and pushed theminto extra-legality with adverse consequences forthe poor (NCLEP Philippines 2006). In Armenia,a three-year moratorium was imposed after landprivatisation in 1991. In Ukraine, a 6-year salesmoratorium will expire in 2005, but many exemptionshave circumvented this measure. A Kyrgyzmoratorium on the sale of agricultural land was putinto place when land was privatised and allocated,but it was subsequently lifted in September 2001.The Moldovan Land Code contained a 10-year moratoriumon sales that was declared unconstitutionaland lifted in late 1996. Some countries have attemptedto protect new landowners from the dangerof mortgage foreclosure by setting moratoria onmortgages; for example, a 1997 Russian law prohibitedmortgages on agricultural land (Russian LawOn Mortgage 1997).Ceilings of ownership work in some contexts forsome time but have adverse consequences forthe poor in the long run. 156 Sales moratoria areconsidered a successful practice, provided thetime is used for public education on land values,financial literacy, and participation in land markets.157 Where the moratoria extend over a longeramount of time, they install barriers which do notcorrespond to the needs and capabilities of thepoor. Notwithstanding prohibitions, land pawningtransactions, direct sales, sales through waiver ofrights, sales through pawning, and sales throughland conversion arrangements are sometimeswidespread. Ultimately, these transfers augmentthe risk of losing land rights.Bringing the Poor into the Market: Opportunitiesand Responsibilities of Medium and Large Companies.Large companies, regardless of their industry,can stimulate local markets and increase the valueof the real, moveable, and equity property of thepoor by enabling them to become active participantsin their chains of value addition. Inclusionof the poor in the value chain creates businessopportunities for the next decade. Designing businessmodels to address this challenge opens newopportunities for company growth as well as forbroadening the assets base for the poor. Manybusiness leaders now believe that the planet’s poormust become part of company growth strategy,and that the presence of their enterprise in a developingnation will be crucial to their long-termsuccess, with the advantage going to early movers.To be successful, however, such projects must bebased on the real needs, capabilities, and realitiesof low-income communities. 158The focus on business implies focus on profitability.If the projects realise the goal of profitability,this means that they have no limited, fixed budget.The new business can thus become replicable andlead to a remarkable empowering impact. Providingbusiness solutions for the poor and with thepoor can cover a multitude of activities. The guidingprinciple is that companies should engage thepoor in a business relationship that relates directlyto their core commercial operations.The poor may be customers and can profit frommore affordable products. 159 The poor may also bebusiness partners, suppliers, and/or distributors.The poor can be considered as partners creatingadded value at every stage of the delivery of aservice/product designed to serve their needs. 160By bringing small entrepreneurs and local small101

and medium enterprises (SMEs) into their valuechains, established international business canempower the poor and accelerate skill transfer. 161Companies addressing basic needs, such as utilitiesand health care providers, can contribute significantlyto local development by expanding theirservices to more low-income communities. 162Extractive companies often find themselves doingbusiness with low income governments andcommunities through their drilling and miningcontracts, licences, fees and royalties. They thushave a major influence on the paths of developmentof poor countries. 163Moveable and Intangible Property: A MissingPiece of the Development PuzzleAlthough many of the citizens of the developingworld lack secure rights to use and transfer realproperty, most of them actually do own some tangible(moveable) or intangible property (businessskills and informational schemes). 164 Peasantsand urban street entrepreneurs alike use moveableproperty as means of production. To the extentthat this type of property is held securely and canbe used to access credit to create and grow businesses,the poor will have increased opportunities.Collateralising moveable and intangible propertycan play an important role in a nation’s developmentstrategy. 165 In many parts of the developedworld, a broad array of personal property, bothtangible and intangible, can be used legally ascollateral to secure a loan, whereas in many partsof the developing world, only a small fraction ofthis property can be used as collateral. 166 Thereis evidence that expanding the number of itemsthat can be used legally as collateral reduces thecost of credit. And because more people can borrowif more types of property can be used as collateralcredit markets become more competitive.Lenders pass along their savings to customers,by reducing fees and offering lower interest ratesand competitive forces also help to keep the priceof credit lower than it otherwise would be. 167For small-scale enterprises, such cost savings canhave a major positive impact. SME entrepreneursof developing countries routinely list financingand access to credit as their major obstacle togrowth. 168 To the extent that collateral law reformmakes borrowing easier and less costly, it couldvery well serve to promote SME development inmany countries.Creating a public moveable and intangible propertyregistry (or, more simply, a registry listingstolen items), and enacting legal reforms thatmake it easier to use moveable and intangibleproperty as collateral, will expand access to creditfor the poor. Experience in a variety of developingcountries (one should include here Georgia,Madagascar, Colombia, Albania, and Bosnia,among others) suggests that there are at leastthree important legal reforms that would serve toallow the poor to leverage movable and intangibleproperty. These are:• Allowing for freedom of contract in loan agreementsso that borrowers are free to use moveableand intangible property as collateral.Lenders and borrowers should be free to determine,between themselves, which property willbe used as collateral for a loan.• Provide secured creditors with first prioritywith pledged collateral. Evidence that a creditoris secured may be obtained from a collateralregistry.• Creditors should be empowered to enforce collateralagreements quickly by means of summaryproceedings.If developing nations allowed borrowers greaterfreedom to use moveable and intangible property102

as collateral more of the poor would be able tocreate credit histories. For borrowers, the greatestrisk is losing real property. With moveableproperty, the loss is proportionate and collateralcan be better matched to the size of the loan. 169The poor may be understandably hesitant to usethe title to their home as collateral for a loan, butif they can use a refrigerator as collateral, theymay be able to borrow smaller sums that will helpthem start or build a business or send a child toschool.Creating a moveable and intangible registry isless expensive than the creation of land registries— it may take as little as $500,000 and no morethan two years of time to create a self-financingmoveable and intangible property registry. 170 Fordeveloping countries, amending laws and regulationson collateral, in conjunction with the establishmentof registry may be a feasible, cost-effectiveand pro-poor development strategy.When conditions of instability and conflict exist,when the rule of law is absent, and when otherinstitutional structures do not appear to be functioning,one should expect that reform aimed atimproving the security and usefulness of moveableand intangible property would not, by itself,create economic growth.Equity Based Asset-Building for the PoorCreating Property Value for the Poor by ShareholderSystemsInnovative forms of non-real estate can extendthe asset base of the poor and non-credit basedshareholder ownership, enabled by the fungiblenature of property rights. Unlike land and housing,the reproductive potential of non-tangibleobjects of property is potentially unlimited. Whilethe private sector is at the heart of this enterprise,the state has an important role to play inguaranteeing contracts and transactions and increating an overarching enabling framework forequity based pro-poor business and banking practices.Natural Resources Requiring Capital IntensiveExtraction, Treatment and Distribution. In the caseof state co-ownership of fossil energy reserves, thelocal populations should be included in the chainof value addition by tradable shares in generalpublic funds. Many of the poor people of the worldlive in lands rich in natural resources that are controlledthrough government ownership. Distributingshares to populations or other form of ownershipparticipation in state owned companies exploitingnatural resources will provide the poor with capitalthat can, among other things, propel the expansionof small businesses. An alternative option is distributingtitles to special funds created by governmentsto invest profits yielded by commodities.Recent experience in Kenya is illustrative of howthe poor are willing to convert their rights intocapital, given the right framework. The offeringof Ken Gen State Owned Corporation intendedto raise 8 billion Kenyan Schillings, but insteadraised 26 billion Schillings and drew three timesthe number of anticipated investors, many ofwho immediately tripled their money. As a resultinvestments in the stock market have grownsince 2002 from 50,000 investors to more than750,000 with much of the growth coming fromrural areas. The exchange’s total value jumpedfrom 1 billion Schillings to 12 billion Schillings,an amount that is predicted to grow following thebiggest initial public offering in Kenyan historyof cell phone giant Safaricom. Natural resourcesrich countries such as Iraq, Venezuela, Chile,Peru, Congo and South Africa could easily empowertheir poor people by directly transferringproperty of their oil or minerals. 175103

Box 6 The Grameen BankStill the 7.06 million poor borrowers of the bank, ofwhich 97 per cent are women, own the most illustriousexample of a broadening of the asset base of the poorby shareholder strategies. Borrowers of Grameen Bankat present own 94 per cent of the total equity of thebank. The government owns the remaining 6 percent.The Grameen Bank is impressive in size and impact.It has 2,399 branches. It works in 76,848 villages.Total staff is 22,169. 171 Loan recovery rate is 98.28per cent. 172 Grameen Bank finances 100 per cent of itsoutstanding loan from deposits of which over 60 percent come from the bank’s own borrowers. Many borrowersare moving ahead in businesses faster thanothers. Grameen Bank provides larger loans, calledmicro-enterprise loans, for these fast moving members.There is no restriction on the loan size. So far 1,085,959members took micro-enterprise loans. A total of Tk23.42 billion (US$364.91 million) has been disbursedunder this category of loans. Average loan size is Tk21,566 (US$313), maximum loan taken so far is Tk 1.2million (US$19,897).Scholarships: Scholarships are given to the high performingchildren of Grameen borrowers, with priority ongirl children. Up to March 2007, scholarships amountingto US$550,000 have been awarded to 48,974children. During 2007, US$775,000 will be awardedto about 30,000 children, at various levels of education.By March 2007, 15,754 students received highereducation loans, of them 14,739 at various universities;176 are studying in medical schools, 335 are studyingto become engineers, and 504 are studying in otherprofessional institutions.Grameen Bank-Created Companies: A number ofcompanies were created by Grameen Bank, asseparate legal entities, to spin off some projectswithin Grameen Bank funded by donors. Donor fundstransferred to Grameen Fund were given as a loan fromGrameen Bank. 173 Grameen Bank created an internalfund called Social Advancement Fund (SAF) by imputinginterest on all the grant money it received fromvarious donors. SAF has been converted into a separatecompany to carry out its mandate to undertake socialadvance activities among the Grameen borrowers, suchas, education, health, technology, etc. 174Banking for the Poor. As often mentioned, thepoor still make relatively little use of titles ascommercial credit. This is due to the perceivedrisks involved, as well as the difficulty or impossibilityof accessing credit. One effort to begin toaddress the problem associated with low levelsof banking activity among low-income earnersare Mzansi accounts, low-fee bank accounts designedfor people working in the informal sector.These accounts are offered by a group of SouthAfrican commercial banks in conjunction with theSouth African Post Office, and they have beenquite successful. They allow people to become‘banked’, providing a means to establish a credithistory while risking less than the title to realproperty.Reforming the Property System as anInstrument of Social PolicyProperty reform with the poor in mind can be anefficient instrument of social policy with benefits forsociety at large. The state can foster the social fabricthrough property rights, such as in housing andneighbourhood development, low interest loans andthe low priced sale of state land tied to conditionsof productivity and market based redistribution ofprivate land. Local political authorities can also seethe reform path towards more equitable propertyregimes as an opportunity to install participatoryprocesses and broader social dialogue in order topromote self-responsibility and social cohesion viaownership not only of property but also of the policyprocesses that establish property rules.104

Enhancing Access to Land and Real PropertyLandlessness is one of the greatest predictorsof poverty. Increasing security of propertyrights will have limited direct benefits for thosewho do not have any real assets at all. Whileland rental markets can, in rural areas, providean important avenue for greater land access bythe poor and landless, they need to be complementedby other measures to increase the assetendowment of the poor in situations where hugeinequalities persist.Create an Enabling Environment for Rental Markets.In most developing countries land and realproperty rental markets are underdeveloped. Butland and real property rentals are increasing. Productivity-enhancingrental transactions will notfully materialise or the poor may be excluded, ifleasehold tenure is insecure or restrictions constrainland leasing. 176 Replacing them with policiesthat facilitate renting will improve access to land bythose remaining in the rural sector. 177 More robustand transparent guarantees should strengthen theposition of slum dwellers in rental arrangementsand protect them from arbitrary eviction.Legal Recognition of Informal Settlements.Ensure the property rights of urban shantydwellersand rural state land squatters by grantingthem title to their already occupied landsor suitable alternatives (see Section 5 of thisChapter), and introduce anti-eviction rights, limitationsof compulsory acquisitions, resettlementpolicies, adverse possession rights and family/group rights. 178Making Land Reform Effective for IncreasingProductive Assets by the Poor. Land markets,or formalisation of existing land rights, are nota panacea for addressing structural inequalitieswhich reduce productivity of land use and holdback development. 179 To overcome the legacy ofBox 7 Mexico: the poor rely onpawnshops instead ofbanksMost Mexican citizens do not have access to bankingand only 13 percent hold mortgage debt. In theabsence of financial institutions, the poor and lowermiddle classes rely on pawn shops. As movablecollateral valuation of consumer goods is difficult toestablish, the value of the collateral typically shortchangesthe consumer. The annualised rate chargedby these pawnshops ranges from 48 percentcharged by a non-profit pawnshop to 160 percent bya for-profit pawnshop. Some pawnshops will accepthouses as collateral (whether the underlying landis legally owned or not) in exchange for three yearloans.(La Crónica de Hoy, El top ten de la usura: la casade empeño Mister Money cobra 159.6 percent deinterés anual; Prenda Fácil, 146 percent; Montepío48 percent. Mexico City, October 9, 2006.)such inequality, ways of redistributing assets suchas land reform will be needed. While the post-warexperiences of China, Japan, Korea and Taiwanshow that land reform can improve equity andeconomic performance, many other cases whereland reform could not be fully implemented oreven had negative consequences illustrate the difficultiesinvolved. Where redistributive land reformis found to be more cost-effective in overcomingstructural inequalities than alternatives, it needs tobe complemented by access to managerial ability,technology, credit, and markets for the new ownersto become competitive. A possible alternative, theimpact of which needs to be explored more systematically,is the distribution of small house andgarden plots to the destitute to increase their foodsecurity and social status while at the same timeallowing them to climb at least the first rung onthe property rights ladder.Community-Based Land Reform. As an alterna-105

tive to authoritative reallocation of land, community-basedland reform projects provide fundsto groups of beneficiaries to purchase land. Whilebeing market-based, the idea behind such measuresis that land sale markets often do not moveland to those who have none or to small efficientproducers. The provision of funds is made availableunder the condition of a productive purposeand when land markets are sufficiently developed.The procedure is legally less complicatedand politically less sensitive than in compulsoryacquisition programmes. Legal reform might berequired in the determination of legal personalityof associations or incorporations for the groupseligible for funding, but it is probably best to letbeneficiaries experiment with a number of possibleassociational forms. Legal conditionality regardingthe groups of beneficiaries does, however,leave room for the pursuit of other social purposes.In Andhra Pradesh, for instance, purchasedland is given in the name of women only. 180Limit Administrative Controls on Sales. Oftenthere is little justification for policy measures torestrict land sales which drive land sales undergroundand undermine access to formal credit.If there is an issue of asymmetries in power, accessto insurance, and information leading toundesirable land market outcomes or speculativeland accumulation, safety nets and other measures,including ways of redistributing land, willbe more appropriate to prevent distress sales.Moreover, land taxes with temporal and user-orientedconditionality can curb speculative demandand encourage better land use, while providingrevenue for local governments. 181Make benefits from past land reform permanent:There are also many situations where those whohave received land rights in the past are unableto enjoy the full benefits because they have notreceived full ownership rights or because transferabilityof their rights was restricted. As secondgeneration problems can threaten to undermineearlier successes, it will be important to providefull ownership rights to those affected, if needbe by identifying innovative approaches — e.g.,a credit-financed purchase of residual ownershiprights by one of the parties involved.The Benefi cial Effects of Property RelatedEducation and Relevant Information.Households’ awareness and information ofrights has a significant and large impacton the positive outcomes of property regimes. 182There is evidence of a strong and positive relationshipbetween households’ objective knowledgeof the law and land-related investmentsand, through such investments, on productivityand land values. The fact that often only a minorityof land users is aware of relevant legal provisionsimplies that the lion’s share of the associatedproductivity gains remains to be realised.Given their low cost, especially if compared toefforts to demarcate lands, programmes to disseminatethe law and make households awareof their rights could thus have very high returnsand should accompany any property rights reformpolicy. Scientific evidence as well as grass-rootsconsultations by the Commission on Legal Empowermentof the Poor demonstrates that socialpolicy should promote legal literacy and proceduralassistance to close the discrepancy betweenlegal provisions and ground realities, and to helpthose who are given rights through the law to exercisethem. 183Promoting Access to HousingUrban Infrastructure projects, housing and propertyrights creation can be pursued together andare mutually reinforcing. 184 As a sector, housingis a local economic activity, generating income,106

Box 8 Example of Singapore:public housing aseconomic stimulantSingapore’s experience has shown that public housingconstruction expenditure can have a multipliereffect that stimulates the economy and contributesemployment growth in the building and constructionindustry. The ratio of construction to the country’sGDP has increased both absolutely and relativelyover the past three decades, about 40 percent ofGDP. The construction industry has a labour absorptioncapacity for skilled and unskilled workers.Estimates indicate that the construction of oneunit of public housing at the time of the Housingand Development Board’s (HDB) first building programme(1960-65) would generate employment fora person for nine months directly at the constructionsite, while a HDB building programme of 10,000units per year would create 15,000 jobs. In additionwith the policy of reserving about 10 percent of newtown land for industrial development public housinginvestment has generated a significant numberof new jobs near the homes of new town residents,especially for women who otherwise might not haveentered the labour force. Over the 10-year period1970-80 female participation rates increased from29.5 percent to 44.3 percent. Thus, housing shouldnot be viewed simply as a means of resolving shelterproblems but also as a potentially leading sector ofgrowth in national economy. Source: Yuen 2002.employing local labour, and re-circulating incomeinto the local economy. Housing production producesspill over effects such as the developmentof skilled labour, and production of householdgoods. 185 Further, from a macroeconomic perspective,the housing sector has a broad impacton economic performance affecting prices, investmentand employment, strengthening thefinancial sector and fiscal budget, and having apervasive impact on the economy. 186Access to Housing as a Poverty Alleviation Strategy.187 Decent and safe housing provides a stableplace for family activities; it enables the storage,preservation, and preparation of food; it is a fixedlocation for delivery of services such as waterand collection of household refuse for orderlydisposal; and, it serves as a protected place toguard possessions from environmental damage ortheft. 188 Loss of housing, tragic anywhere, can becatastrophic in the developing world. 189 Housingstability is a particularly important poverty alleviationstrategy for women. In developing economiesthe home not only serves as shelter but alsois frequently a place for business.Housing Finance. Analysis by UN-Habitat revealsthat the global housing needs cannot be met byaid or state subsidies alone. Meeting the housingneeds of the world’s poor will require economicgrowth (job and income generation) and housingfinance. However, stimulating housing productionand catalysing financial markets have other positiveeffects, that go beyond the development of thehousing itself. In markets where financial institutionsare not active because a market is untested,governments can leverage private sector financingby providing credit enhancement to support borrowers,developers or lenders; using subsidies judiciouslyto leverage financing, assuring transparency;and facilitating information. There are manymodels of specialized programs that provide incentivesto financial institutions to lend to the poor aswell as to those who serve them. The governmentcan play a catalytic role in bringing together theprivate sector and other institutions. 190Despite the obvious importance of housing productionand its reliance on finance, the existingfinancing instruments to address the shelter needsof the poor are at a nascent stage. Existing instrumentsdo not fully respond to the reality of povertyor the need. 191 To meet the need, many countriesadopt housing policies, known as ‘filtering’ strate-107

Box 9 Singapore: importanceof workers’ CentralProvident FundUnder the scheme first instituted in 1955, employeesin Singapore are required by law to save a proportionof their monthly income in a central providentfund (CPF) account. Employers also make monthlycontributions to their employees’ CPF account. Muchof these savings are invested in government securities,providing a cheap and ready source of financeto the government for public housing constructionand national capital formation. They also provide asource of mortgage financing at the individual levelto help home buyers meet their mortgage paymentswithout the need to dip into their cash reserves. Forthe average worker the monthly repayment for thefl at is less than half of the CPF savings deposit.Sources: Yuen 2002, 2005.gies. 192 However, a key limitation of a mortgagebasedfiltering strategy is that it has a long timehorizon at best; and, a market-based filteringstrategy that is not matched with housing policiestargeted to the poor, will result in inequalities andleave the poor behind.Some countries have been extensively involved insetting housing goals and directly financing housing.Singapore, once characterised by vast squattersettlements, established a Housing and DevelopmentBoard (HDB) to finance and subsidisehousing developed by the state but constructedby the private sector and then sold to homebuyers.Over 85 percent of Singaporeans live ingovernment-built housing. Singapore has emphasiseda homeownership strategy that has playeda key part in raising residents’ sense of belongingto the new living environment.There are also many examples of developing nationscommitted to meet their housing challengesand testing and developing a broad variety ofhousing policies. South Africa quickly startedoff with an impressive array of housing policyresponses, such as housing plans, fixed interestloan products, micro-loan financing, a securitisationconduit, and partnerships with financialinstitutions. The country is still in the process ofexperimentation and evaluation, but the commitmentto its housing sector is clear. 193Public Private PartnershipsSeveral forms of public private partnerships(PPPs) were developed in the last two decadeswith built-in provisions of housing for thepoor. This period saw the economies of severaldeveloping countries booming and globalising,with a direct impact on cities like Sao Paolo,Mumbai, Delhi, Seoul, Kuala Lumpur, Manila andJakarta. Economic opportunities created a hugedemand for space for businesses and housing, inturn creating business opportunities for the realestate sector, for which it needed land in primelocations and land with trunk services in peripheralareas, both of which were scarce. The sameeconomic opportunities meant a growing populationof the poor who could afford only informalaccess to space in the city, with all its legal andenvironmental insecurities. Pressures placedupon city development institutions, therefore,gave birth to public-private partnerships as oneapproach to solving problems affecting both thereal estate sector and the poor.Successful PPPs from which the poor have benefitedhave tended to rely on instruments of thestate for trunk infrastructure that would ensureadequate timing of project development, and forenforcement of new regulations and laws. Thereare several examples where a combination of theseinstruments has been used to ensure legal/formalaccess to land and housing for the poor. GuidedLand Development has been implemented in the108

Box 10 Slum upgradinginitiative in Dalifort,SenegalUpgrading of slums in Dalifort has provided dwellersthere with new opportunities and better livingenvironment. A formal land title has been granted tomore than 500 head of households including womenand their houses have been connected to the basicservices. Because of its proximity to the city centre,rent and land price have steadily risen, and thesettlement has seen rapid development of high-risehousing of good quality. Noticeable growth of neweconomic activities favoured by land security andmicrocredit facilities that have helped slum dwellersaccess start-up funding to initiate income generatingactivities that contributed to their economicempowerment. Source: Diop 2007.periphery of cities like Seoul, Jakarta, Chennai,and Delhi, under conditions obliging private landownersto provide a certain percentage of smallplots which poor families can afford. 194Transfer of Development Rights (TDR) is an effectiveinstrument applied in such projects to generatelow income housing on high value city landthrough the participation of private landownersand developers. Private landowners, or developerswilling to build houses for existing informaldwellers, are given the right to build more thanthe permissible floor space index or floor arearatio specified in zoning regulations for the plot.If possible, they can build additional space onthe same plot or be allowed to transfer the developmentright to other plots in specified zones. 195TDR works where there is a high premium onland and where the permissible density is highenough to leave surplus land after building lowincomehousing.Government as intermediary and facilitator betweenowners and low-income occupiers. In thecase of Land Sharing as used extensively in theIndian city of Hyderabad and to some extent inBangkok, Thailand, the Municipal Corporation ofHyderabad and the national Housing Authorityof Thailand largely play the role of intermediaries.Government authorities in those places helpto negotiate deals between owners of the landand its low-income occupiers. Once agreement isreached to share the land, the governments thenhelp the occupants to gain access to finance forrebuilding housing in the portion of land they areto occupy under the shared arrangement. The feefor registering the new ownership and transfer ofproperty is exempted by the government. 196 Thearrangement works in situations where the originallandowners have little hope of recovering theiroccupied property without prolonged litigation,and where getting even a part of the land backhas major advantages.Fostering Citizenship and Legal Empowermentthrough Consultation, Information andParticipatory Property ReformOffering public education and legal aid regardingmarket structures to the poor is of critical importance,otherwise the effectiveness for the poor ofthe above mentioned measures of legal reform,governance reform and market development canbe nullified. Multiple consultations, involvement ofsocial organisations in the contacting of propertyholders, well-publicised displays and provision ofmaterials to communities all contribute to satisfactionand improved efficiency of property reform.In particular, active communication toward andparticipation by civil society are important to ensurethe quality of systemic change in the propertyrights regime.These mechanisms allow beneficiaries to haveinformation about the reform’s framework, strategies,implementation and targets as well as to109

Box 11 Peru regularises the process of titling propertywithin settlementsTo initiate the regularisation process of property in eachsettlement, an informational assembly was held toexplain details of the procedure, obtain approval of theassembly. Each assembly was required to designate itsown representatives. At this stage, problems such asmultiple or questionable leadership groups were resolved.These problems generally arose when there wasevidence of lack of representation or when those havingdeveloped clientelistic links with municipal authoritiesassumed questionable leadership. The strategyemployed by Peru’s Commission for the Formalisationof Informal Property (COFOPRI) in breaking this patternwas to establish a direct link with the settler assembliesthemselves. The assembly made it possible forthe majority of the settlers to link directly with COFOPRIand to decide the best way to initiate the titling processand exercise their representation. To this end, 3,500informative assemblies were held in 3,500 settlementsbetween 1996 and 2000.Between 1996 and 2001, some 2,274 settlements wereregularised in all of Peru, which represented one milliontitled families. The 6,000 informative and preparatoryassemblies held in this period are the clearest proofof the high level of citizen participation in the process.The meetings informed settlers of the kind of documentationneeded by officials charged with creating the listof legal occupants. The officials would visit the homesof settlers to explain how conflicts and the lack of evidentiarydocuments might be resolved.To promote responsibility among officials in charge oftitling services, the parties responsible for deliveringservices to each settlement were clearly identified, soresidents knew which officials were in charge. Unlikethe previous titling process, when only certain directorshad access to information such as changes in titlingprocedures and the identity of the officials responsible,COFOPRI guaranteed the right of any person to receiveinformation about the titling process and to know theofficials in charge. Studies developed in 2000 to evaluatethe performance of the Peruvian project confirmedthat these participatory mechanisms raised the communitysupport and satisfaction with the project.Source: Mosquiera, 2007.participate in specific stages of the planningand implementation of reform. They expand thebeneficiaries’ capacity to participate, negotiate,influence, control and hold accountable thepublic institutions in charge of property rightsreform and administration. On a broader scale,such measures integrate the positive elements ofproperty rules, such as allocation of responsibilityand liability with the fostering of citizenship andsocial cohesion. 197Recommendations for Policy Designand SequencingIt is advisable to integrate action projects regardingthe four building blocks of the propertysystem into a design that pays attention to additionalelements:1. Build-in Research and Policy Analysis as wellas Piloting and Evaluation Schemes ahead ofFull-scale Implementation. A policy projectwith little policy analysis and research tocompare methodologies, prioritise areas andspecial measures, pilot innovations or evaluateitself will suffer from a slow institutionallearning process and will risk to detect dysfunctionslate. The long-term sustainabilityof property reforms must be addressed early,alongside with potential for conflicts causedby reform processes.110

2. Pay Attention to Sequencing. The contentand sequence of a set of reform actions andthe setting of priorities will have to be left tocontext-based analysis in national and localsettings. Formally however, it is important topoint to the fact that success of the reforms ineach of the four building blocks of the propertysystem will depend not only on the qualityof the individual measures taken but on thesequence in which they are taken. Getting thephasing right is as important as the content ofthe individual measures. 1983. Issues of Sovereignty and Territorial Autonomy,e.g. regarding indigenous people, must be assessedand tackled prior to reform of propertyrights regimes, or restitution or privatisation insensitive areas. Otherwise the envisioned processwill be affected negatively, delayed or evennullified. 1994. On-the-Ground Assessments. Even if reformmeasures are carried out diligently they maybe perceived as interventionist and top-downoriented by the poor. Property rights reformprogrammes have often been successful wherealso based on the ground assessment of ownershipand family relations. Differences infamily and community structures and spatialorganisation have to be identified at the fieldlevel (informal marriages, de-facto headships,spontaneous organisation of public spaces,etc). In most contexts this planning measurefacilitates the collection of reliable data aboutpossessions and functioning customs, it givesthe poor a sense of being taken seriously duringthe reform process, produces transparency inthe property rights’ definition processes, makesofficials more accountable to the process, contributesto the reduction of conflicts amongbeneficiaries, and might even create bottom-uppressure for more legal and regulatory reforms.5. The Art of the Long Breath. A full scale reform,including legal reform and parallel interventionsin all four building blocks of the propertyrights system, cannot be carried out within thenormal cycle of democratic elections and hasto be sustained over several legislatures. Someindividual reform benefits might be visiblerapidly, but sustained beneficial effects onlytake hold if property rights reform is sustainedand carried out over a long period of time. Onthe macro level, beneficial effects of propertyrights reform will take hold over 10-15 years.Given this need for long breath, enlightenedauthoritarian regimes seem to have an easiertask in property reform than emerging ordeficient democracies. However, there areseveral ways in which property rights reformcan be sustained over the normal life cycle ofa democratic government. One possibility isto promote reforms with broad support fromseveral parties and to make property reform ageneral interest grounded in the constitution.In order to overcome formidable oppositionfrom powerful social actors against propertyreform, broad popular demand for reform fromcivil society and the private sector and strongcoalitions of change are needed. Need assessment,awareness and information campaignsamong civil society and grass-roots movementsneed to be fostered to marginalize thepowerful gatekeepers of the status quo of vastextra-legality. This ought to be conceived asa multi-stakeholder effort including media,business groups and associations of the poor,academia, and government agencies favourableto change.111

What can Donor Countries andMultilateralism do for the Promotionof Property Rights of the Global Poor?The establishment of fully functional propertysystems and pro-poor reform is first and foremosta national and local issue. It demands the renegotiationof institutional, legal and social relationsat national and local levels. Assisting countriesand multilateral organisations are obligatednot to disrupt ongoing processes of renegotiation.Further efforts of donor countries are required todesign their own laws so that they do not aggravatethe problems of the world’s poorest. Donorcountries, for example, need to deny giving safehaven to bank deposits by elites having lootedresources from the world’s poorest societies, andthey should actively work to prevent payment ofdomestic company bribes to public officials ofdeveloping countries. 200 Some advocate for anactive role of international organisations in domesticgovernance, circumventing domestic elitesand institutionalising the necessary governancereforms. 201 To date, there is little evidence tosuggest that it can make a noticeable difference.A better option is to make reforms more sustainableby coordinating and supporting broad reformmeasures multilaterally. Concern for longer-termendurance of reforms is an important consideration,given that the concerns of individual governmentsmay be short-lived due to the fact thatthey are limited to short cycles of legislation. Thisshould help to ensure that the reforms will endureover the long term, something that individualgovernments, limited to short cycles of legislation,may not normally be able to accomplish.A System of Multilateral Charters. One of themost important development economists hasproposed a system of charters to legally empowerthe world’s poor. The charters would set minimumstandards for natural resource revenues to states,for checks and balances in governance, budgettransparency, post conflict management, and forinvestment. 202 Property rights are present anddeserve central attention in all these charters,since they could be decisive in making systemicproperty reform sustainable.The charter for natural resource revenue, forexample, would set minimum standards oftransparency and fair competition for the auctioningof extraction rights, diminish the price riskfor government of poor countries, honestly brokerinformation about money flows to government byextraction companies, and set standards for publicexpenditure of natural resource revenue — channellingit to domestic market development andcitizen-owned equity funds. The charter for checksand balances would set limits to government and/or private monopolies in the ownership and controlof media companies and regulate financing andspending in election campaigns. The charter forbudget transparency would commit governmentsto the monthly publication of allocation of assetsto government institutions in order to allow scrutinyfrom below and install intergovernmental peerreview mechanisms. The charter for post-conflictsituations would commit external security andlegal enforcement forces for the long haul, set uptransparent budgetary processes and participatorygovernment, regulate property restitution and thework reconciliation commissions. The investmentcharter would establish credibility by precludinggovernments from strategies of confiscation andlimit extreme manipulation of exchange rates, prices,and public utility charges. Instead of pushingreform processes individually, like minded countriesmight also agree on some essential points ofa property systems reform listed in this report andcommit to such reform in a charter, complementingthe other charters needed to link the world’smost poor to the chains of value addition.112

Foster Coalitions of Change in Favour of EquitableProperty Systems. Donors and international organisationscan engage with domestic groups — suchas businesses, NGOs and grassroots movements ofpeasants and small-business owners — and enlisttheir support for property rights reforms in contactwith governments. Depending on the circumstances,fostering coalitions of change by such practicesmay potentially bear fruit. Success requireslong-term commitment by the parties, a stronglocal ownership, wide stakeholder participationand good local management capacity. Donorcountries and multilateral institutions have animportant subsidiary role to play in areas of transnationalinformation gathering and distribution,education, and technical assistance. Multilateralorganisations have an important role to playin making the engagements of donor countriesmore coherent and coordinated and in providingstandards for intergovernmental peer review.Although there is now considerable awarenessof the importance of property rights for the poor,failure to appreciate the historical roots, complexity,and political nature of the underlying issuescan give rise to recommendations that maynot only fail to do justice to the topic but couldalso prove to be unsustainable.Capacity Building and Technical Assistance.Given the context-specificity and politicallysensitive nature of property issues and to makeservices in this area accessible to a majority ofthe population, there is a significant need forbuilding capacity on both the technical andanalytical levels within the public sector as wellas among other agents who can be mobilised. Inthis domain, the international community anddonor countries can provide trans-governmentalor multilaterally coordinated assistance in capacitybuilding leading to greater sustainabilityof reform programmes.Seed-financing of Property Reform. Functionalproperty systems are self-sustainable. Longstanding injection of aid from abroad would beseen as harmful to this goal or a symptom ofsystemic inadequacy. However, in the early stages,and depending on the context, many of theabove mentioned reforms might be triggered bya combination of technical assistance and seedfinancingfrom abroad. Such projects should beaccompanied by clear terms of reference as tothe timetable and phases on the path to selfsustainability.Cross-country Land Policy Indicators. Althoughthe importance is widely recognised, it is oftendifficult to integrate land rights into policy dialogueor to demonstrate the seriousness of anissue due to the lack of comparable indicators.Experience in other sectors has shown that defininga simple set of indicators, some of whichcould be generated by the land administrationsystem on a routine basis, could make it mucheasier to steer the policy dialogue towards criticalissues and at the same time to measureprogress over time. Such indicators should include:(1) coverage and accessibility of the system,potential and actual; (2) cost-effectivenessof service provision; (3) extent to which governmentholds or acquires land rights and the wayin which they are exercised, and (4) ways toaccess property through market and non-marketchannels.Ranking Systems of Property Rights Afforded toWomen. In the multilateral sphere, one possibleapproach to addressing the problem of discriminationof women in property matters would be toformulate a rigorous ranking system of propertyrights protection afforded to women. Such anindex/ranking may focus attention on how differentcountries score in terms of enforcement,protection, scope and depth of rights. Ranking113

efforts have proved useful in the ‘doing business’environment. Property rights are a componentof World Bank rankings, but the propertyrights’ components are not gender-specific. Aseparate ranking may draw more attention to theissue and prompt improvement in the propertyrightsenvironment for women.6. Concluding MessageThe relevance of fair access to property rightsgoes way beyond their role as economic assets.Secure and accessible property rights provide asense of identity, dignity, and belonging to peopleof very different economic means. They createreliable ties of rights and obligations among communitymembers as well as a system of mutualrecognition of rights and responsibilities beyondthe local community. For many poor individualsand the communities in which they live, therelationship with property is more than just anaggregate of occupied and used plots. It is thevery expression of a way of life, and one that theyshould have the opportunity to improve by virtueof their own efforts.114

Chapter 2 EndnotesUniversal Declaration of Human Rights, Article 17, Provisions (1) and(2). Securing agreement on this formulation required omitting the wordprivate before property. See Glendon 2001: 182-3.2 See Cheneval 2006.3 See Locke 1988; Wheeler 1980.4 See Cavallar 2002. This report understands private property rightsas a spectrum of ownership and usufruct rights that are not held by thestate and allocated to a an individual bearer or a corporate group ofbearers. In customary as well as advanced capitalist systems, privateproperty rights can be owned individually and in common by individualand corporative legal persons. The working group for this Chapter isaware that this understanding runs contrary to a notion restricting theuse of the term ‘private property’ to individual freehold.5 Sachs (2006: 18) estimates that 2.5 billion people currently live inpoverty in developing countries.6 These countries were Dominica, Grenada, Samoa, St. Lucia and St.Vincent and the Grenadines, all tiny island states in which issues ofproperty rights are signifi cantly smaller in scale than those in muchlarger countries. Of the 76 countries measured within the CPIA, onlySamoa scored an aggregate 4 out of 6 over the total 16 governanceindicators. 2005 IDA Resource Allocation Index, Available at www.worldbank.org.7 World Bank, CPIA 2005 Assessment Questionnaire: 33, available atwww.worldbank.org.8 United Nations 1980.9 Woolf 1938.10 IFAD 2001: 86.11 Nielsen 2006: 204-219.12 Ravna 2006: 77.13 Estimates by the UN Human Settlements Program indicate that overthe next 25 years this fi gure will increase by more than 2 billion people.14 Sachs 2006: 27.15 Building on a body of recent literature, the 2005 IFAD report onrural development defi nes an asset (also called ‘capital’, ‘stock’, or ‘endowment’)as ‘anything that can be used, without being used up, toincrease regular returns above receipts from labour, whether hired orself-employed, and thus enhance producers’ income of consumers’ welfare.Typical assets are land, wells, cattle, tools, houses, shares, skills,health and roads.’16 de Soto 2000.17 Detailed in Alden Wily and Mbaya 2001.18 Alden Wily and Mbaya 2001.19 Even in countries where government may be relied upon to stay withinthe boundaries of the law, overly flexible terminology leads to opportunityfor public purpose to turn into private purpose as recent cases in the USSupreme Court illustrate. This is even more important for the global poorwho often live where there is limited residual faith in governments keepingto the spirit of the law.20 Hart 1961.21 European Commission 2007: 4.22 Mosqueira 2007: 7.23 IFAD 2001: 88.24 IFAD 2001: 88.25 UN-HABITAT 2005a: 107.26 CLEP Informal Businesses India: 10.27 See Collier 2007: 140-146.28 See Garcia-Bolivar 2007.29 See Prahalda 2005: 87-88.30 See Mendoza 2006: 17.31 South African Institute of International Affairs 2005.32 USAID 2007 terms it the ‘substantive dimensions of legal empowerment’.33 Terminology is never unifi ed. Defi nitional guidance, also beyond Africa,is given in: Land Tenure Lexicon 2000.34 See Cotula 2007.35 See World Development Report 2002: 9.36 Population Reference Bureau 2005.37 UN-HABITAT 2005b: Chapter 1.38 Alden Wily 2006c: 1739 FAO 2007.40 This has been largely the case for the thirty or so wars of the lastseveral decades from Cambodia to Chile, Bosnia to Zimbabwe, Afghanistanto Peru. It has been uniformly the case in the region where civil warshave been most numerous over the last two decades, Sub-Saharan Africa.(Richards 2005; Currey 2004)41 Sudan Comprehensive Peace Agreement, January 2005 and InterimNational Constitution, Sudan, 2005. Alden Wily 2007.42 Hurwitz et al. 200543 The land and product values of forest resources is immense, mildlyindicative in only the recorded global timber trading values of US$354billion in 2000, the US$5.56 trillion import value of non-timber forestproducts in 2002 (from brazil nuts to gum arabica) and the already millionsof dollars being expended that year in trading carbon credits fromforest stocks. FAO 2005.44 Their share of income capture from commercial logging and paperproduction for example has been minimal to non-existent to date (e.g.Liberia, Papua New Guinea, Nepal, Brazil). FAO 2005; Colchester et al.2001.45 Conditions are particularly severe in Africa, the Middle East andSouth Asia. See World Bank 2004a: 1.46 See Hodgson 2004.47 United Nations 1980: 8. This old fi gure is not based on rigorousmeasurement. In some more recent studies even lower percentages areindicated. See FAO 1999. Women’s right to land and natural resources:some implications for a human-rights based approach. SD Dimensions115

(on fi le at FAO: http://www.fao.org/sd/LTdirect/LTan0025.htm).48 Nielsen 2006: 206; CLEP Uganda: 21, CLEP Indonesia, CLEP Philippines,CLEP Sri Lanka: 13.49 Ann Whitehead and Dzodzi Tsikata 2003: 77.50 Izumi 2007.51 Agarwal 1994.52 ICRW 2005: 3.53 Quisumbing and Maluccio 2000.54 Not always, for example, Inuit are 85 percent of the semi-autonomousGreenland region of Denmark. Indigenous people represent half or morecitizens of Guatemala, Peru and especially Bolivia.55 In 1972 the UN Working Group on Indigenous Populations accepteda defi nition, amended in 1983 and 1986. The ILO Convention No. 169 in1989 accepted a broader defi nition, embodied in the UN Declaration onthe Rights of Indigenous Peoples.56 There are people in other regions regulating their land relationsthrough indigenous norms. They are mainly members of indigenous minorities,such as Native Americans in North America, Sami in the northernpolar areas of Europe and Russia and native peoples of Australiaand New Zealand. They are excluded here mainly because comparativelyextremely few of their number are defi nitively ‘poor’.57 Kaelin 2006: 175.58 An estimated 25 million persons have been displaced by armedconfl ict in more than 40 countries. In Africa, the number of IDPs reaches13.2 million, in Central and South America 3.7 million, in Asia 3.3 million,in Europe 3 million, and in the Middle East 2.1 million. In 2004, thelargest internal displacement situations were Sudan (5-6 million IDPs),Colombia (2 - 3 million), DRC (2.3 million), Uganda (up to 2 million),and Iraq (over 1 million). Sudan, Uganda, Colombia, Iraq, Somalia, andNepal were the scene of major new displacement during the same year,whereas DRC, Angola, Southern Sudan, Liberia, Burundi, and CentralAfrican Republic saw major return movements. (Norwegian RefugeeCouncil, Global IDP Project, Internal Displacement — Global Overviewof Trends and Developments in 2004, Geneva March 2005: 5-6, 10.)59 Drawn from Kaelin 2006.60 See Handbook on Housing and Property Restitution for Refugees andDisplaced Persons 2007.61 Acemoglu et al. 2004; Acemoglu and Johnson 2005; de Soto 1989,2000; Roll and Talbott 2001.62 The proportion of owners resisting expropriation against marketvalue compensation is high. In a case reported by Galiani and Schargrodsky(2004: 5) the proportion is 5 resisting to 8 agreeing.63 See Chapter 1, Section 2; de Soto 1989: 201-230.64 See de Soto 2000: 200-202.65 See USAID 2007: 21-23.66 Gradstein 2006.67 Chong and Gradstein 2007b show that inequality subverts egalitarianproperty rights systems.68 ‘…the initial conditions had lingering effects, not only becausecertain fundamental characteristics of New World economies were difficult to change, but also because government policies and institutionstended to reproduce them. Specifi cally, in those societies that beganwith extreme inequality, elites were better able to establish a legalframework that insured them disproportionate shares of political power,and to use that greater infl uence to establish rules, laws, and othergovernment policies that advantaged members of the elites relative tonon-members — contributing to persistence over time of the high degreeof inequality.’ (Sokoloff and Engerman 2000).69 Coudouel et al. 2007: 6.70 Chong and Gradstein 2007a; Dabla-Norris et al. 2007.71 Acemoglu and Robinson 2005.72 Gradstein 2006; Deininger and Squire 1998.73 Chong and Gradstein 2007.74 USAID 2007.75 Jacoby and Minten 2005.76 Major comparative reviews of evidence of impacts on investmentand access to credit suggest that titling and registration of land is mostlikely to be effective where robust formal fi nancial markets already existand where there are incentives for investment created by factorssuch as proximity to urban markets and good quality land (Bruce andMigot-Adholla 1994; Feder and Nishio (1996). Studies that particularlyfocus on the poor suggest that credit and other benefi ts may be heavilyskewed toward large landholders (Carter and Olinto 2003).77 Almost never occurs outside developed countries: Okoth Ogendo1999; Alden Wily and Mbaya 2001; Hunt 2004.78 For example, in India, the amount of bribes paid every year by usersof land administration services is estimated at US$700 million (TransparencyInternational India 2005), three-quarters of the public spendingon science, technology, and environment.79 China was the fi rst centrally planned economy to link the collectivesystem to household size farms. Households were allowed to contracttheir share of the collective land and cultivate it individually, inreturn paying to the collective a fi xed amount of produce, taxes andfees (Household Responsibility System). In a fi rst stage, results wereimpressive as China’s grain production increased from 321.2 milliontons in 1979 to 407.1 million tons in 1984 (a fi ve-year increase of 27percent, or 5.4 percent a year). The increase slowed down afterwards to469.5 million tons in 2004. Further gains seem more diffi cult to achieve.More investment and access to credit is required in order to improve irrigation,drainage, land terracing, soil upgrades, etc. Today, the Chinesefarmers’ use rights suffer from land grabbing by offi cials or by frequentand unpredictable readjustments of land rights. The number of sticksin farmer’s property rights bundle is still insuffi cient; the practice ofland readjustment has been the main source of land tenure insecurityin China since the decollectivisation of agriculture. Farmers are thereforeunwilling to make productivity-enhancing investments that wouldrequire several years to recover, such as irrigation, drainage, or landterracing. See Prosterman 2006: 113. In 1998 the Government of Tajikistan,with the support of the World Bank, began the implementationof the Farm Privatization Support Project (FPSP). Ten farms covering anarea of 17,000 hectares were privatised to individual families. First,farms were divided into their constituent brigades and per capita landwas divided among farmers. Inheritable but not tradable land use certificates were provided by the state land committee to individual farm-116

ers, refl ecting the allocation of lands. Second, water user associationswere formed and a community-managed water provision system, a watercharge collection mechanism, and maintenance of the intra-farmwater distribution system were established. Third, a grant of US$300per hectare was provided to farmers to obtain crop inputs or any farmneeds to start farming as an independent family farmer. Fourth, technicalassistance was provided to farmers by using demonstration plots.In Tajikistan the government owns the land, but its use right is vestedwith the Tajik citizen, family, individual, or group of individuals. Theland use right is inheritable but this right cannot be rented, leased,transferred to non-family members, mortgaged, or sold. The land useright is registered and is backed by the government. In the case of theFPSP, land tenure rights are now vested with the farmer; in case of formerprivatisation programmes, land use rights are collective, with thefarm manager making decisions on behalf of the members. This differenceresults in different incentive structures and differential impacts ofindividual land tenure and collective land tenure on the incentives forand incomes of farmers. Sattar and Mohib 2007: 463-465.80 Alden Wily 2006.81 See Mendoza 2006.82 Izumi 2007: 14.83 Bruce et al. 2006: 47-51.84 Alden Wily and Mbaya 2001; Alden Wily 2003; Alden Wily 2006 passim.85 Hardin 1968.86 Bruce and Migot-Adholla 1994; Mighot-Adholla et al. 1994a; Collierand Gunning 1999.87 Alden Wily 2006.88 Alden Wily 2002.89 Bruce and Migto-Adholla 1994; Deininger 2003; Augustinus 2003.90 Alden Wily 2002, 2006b, 2006c.91 Deininger et al. 2007.92 See Bruce et al. 2006: 107-142.93 CLEP Kenya; CLEP Pakistan; CLEP Philippines; CLEP Uganda.94 Field 2004.95 Deininger and Chamorro 2004; Bruce and Migot-Adholla 1994; Jacobyand Minten 2005.96 Bruce and Migot-Adholla 1994; Feder and Nishio 1996.97 Feder, Onchan and Raparia 1988; Galiani and Schargrodsky 200498 In Cambodia, people pay US$200 to $300 and more in informalfees for title to land in urban areas. See World Bank 2002: 7.99 Augustinus 2003: 25.100 Palmer 1998: 87.101 Burns 2006: 3.102 In Mexico, ‘some ejidos prefer not to regularize the land for humansettlements to evade paying the land tax, which obviously promotes informalityin land markets’ (UN-Habitat 2005a: 107). A similar outcomeis reported from Pakistan, reinforcing the need for taxes to be set ataffordable levels and for the revenue to fi nance services people wantand are willing to pay for (Payne 1997: 8).103 In Indonesia, property tax reform increased revenues under reducedadministrative and compliance costs. Careful introduction of thechanges minimized resistance. Political will was a paramount requirement.Although there were pre-existing property taxes, dramatic adjustmentswere required to deliver the changes. These were carefully pilotedto test and improve procedures, to train staff and identify taxpayerresponses to the changes. Indonesia’s tertiary educational institutionsnow train about 600 property tax administrators a year. Colombia’s useof the self-assessment method has resulted in an increased tax baseand revenues and has allowed the cadastre to be updated. In Kenya, theprimary obstacles to property tax reform have been lack of political willand weak administration. Taxpayers need to perceive the linkage withimproved local services and also need to be confi dent of fair administration.For an overview see Bird and Slack 2002104 Condominium is another form of housing tenure. It is the legalterm used in the United States and in most provinces of Canada for atype of joint ownership of real property in which portions of the propertyare commonly owned and other portions are individually owned. In Australiaand the Canadian province of British Columbia, the legal term forthis is ‘strata title’. In Quebec, it is known as syndicates of co-ownership.In the United Kingdom, the equivalent is commonhold, but thisform of ownership was only introduced in 2004.105 See Deininger et al. 2007.106 See e.g. Payne 2002; Durand-Lasserve 2003.107 See Galiani and Schargrodsky 2004. The authors study a naturalexperiment whereby land titling was ex post granted to a large group ofindividual squatters. The analysis reveals marked changes in economicresponses of this group relatively to the controlled group of squatters.The study shows only modest positive effect of land titling on accessto mortgage credit, and no impact on access to other forms of credit.It shows no effect on the labour income of the households holding newtitles. However, it is shown that moving a poor household from uncertainusufructuary rights to a more complete bundle of property rightssubstantially increased investment in the family houses. Land titlingreduced the size of families. These smaller families invested more inthe education of their children. In sum, entitling the poor increases theirinvestment both in the house and in the human capital of their children.This is a very concrete example of legal empowerment with positive longterm effects. Property rights contribute to human development under anintergenerational and behavioural perspective.108 On Africa see a series of reports by IIED at: http://www.iied.org/NR/drylands/projects/landregistration.html109 Ejido land in Mexico, which can be transformed into fully alienablefreehold land based on a qualifi ed vote by the assembly, is a goodexample. The fact that only about a tenth of ejidos chose to go this routeillustrates that, even at high levels of per capita income, many userssee benefi ts from maintaining communal relations to be greater thanthose from full individualisation of rights.110 Cotula 2007111 ‘Land Tenure Reform and Gender Equality,’ UNRISD Researchand Policy Brief 4 (January, 2006) 1. In most Indian states the patta,or leasehold right over government land occupied by the poor is givenjointly in the name of the husband and wife. In Andhra Pradesh, thepatta is in the name of women only. There have not been any studies on117

the outcomes or impacts of this practice. Banerjee 1999..112 UN-HABITAT 2006; Strickland 2004.113 Deere and Leon 2003.114 UN-HABITAT 2006.115 Agarwal 1994: 272.116 Drawn from Baechtold 2006.117 Convention on Biological Diversity (CBD) of June 5, 1992, http://www.biodiv.org/convention/articles.asp118 http://www.wipo.int/freepublications/en/tk/920/wipo_pub_920.pdf119 http://www.wipo.int/tk/en/laws/pdf/suigeneris_folklore.pdf120 http://www.wipo.int/edocs/mdocs/tk/en/wipo_grtkf_ic_9/wipo_grtkf_ic_9_inf_4.pdf121 For related aspects of bureaucratic justice for the poor see Chapter1, Section 3.122 Ibid.123 CLEP Indonesia; CLEP Sri Lanka: 27; CLEP Philippines.124 In Peru, reforms, particularly those that required congressionalapproval of laws, were promoted with the active participation of beneficiaries.The proposal to modify the Civil Code to permit the administrative,rather than judicial, declaration of adverse possession wasmet with a political debate based on different academic positions. Tothe extent to which the defi nition depended on a legislative option andrequired political support, COFOPRI disseminated the reform proposalamong the leaders of the settlements who would benefit from it and facilitatedthe organisation of the leadership to defend the reform proposalsbefore Congress. A group of leaders lobbied members of Congress ofdiverse political sectors in order to demonstrate that the reforms wouldbenefi t more than 100,000 families only in Lima, which was incentiveenough to obtain congressional approval.125 Through the intervention of COFOPRI it was determined that theleaders would work with the technical staff of the institution to obtainthe technical and legal information needed to carry out the requiredactions. In this stage legal obstacles to the regularisation of propertyin favour of its occupants would be identifi ed, such as cases of privateproperty, archaeological land, or in a risk zone. The participationof leaders enabled the settlers to appreciate the diffi culties that COFO-PRI confronted in regularising properties, made their expectations morerealistic regarding the time required to conclude the delivery of titlingservices, and made them aware about the need for reforms and complementaryactions.126 In Peru, COFOPRI developed the capacity to continuously improvereforms through a series of incremental changes based on a learningby-doingapproach. The drafting of new laws was linked to formalisationprocesses (0, 1 and 2) which ensured that experiences and lessonslearned at the fi eld level were incorporated into the normative framework.For example, as the formalisation process advanced, COFOPRI,through inputs from fi eld staff and community representatives, uncoverednew forms of informality that were not identifi ed in the pilot project,like ‘pueblos tradicionales’ (ancient informal settlements in Arequipa).COFOPRI and RPU worked together to develop legally sound and effi cientsolutions to these problems. New procedures were developed and testedat the organisational level and once validated, incorporated into thelegal framework.127 See FAO 2007. For general issues of public administration reformsee Chapter 1, Section 3.128 Also recommended in CLEP Philippines, Ethiopia, Kenya, Uganda,Indonesia, Tanzania, Sri Lanka.129 See Chapter 1, passim.130 Center of Advanced Study 2007: 122.131 World Bank, World Development Report 2002: 14.132 Computerising records in the Indian state of Karnataka undera PPP model is estimated to have saved users US$16 million in bribes(Lobo and Balakrishnan 2002). Automating registration and the associatedland valuation allowed outsourcing to the private sector whichsignifi cantly improved access and resulted in cuts in stamp duty from14 percent to 8 percent while quadrupling tax revenue from US$120 toUS$480 million.133 See Prahalad 2005: 87-88.134 See FAO 2007: 25. See e.g. CLEP Uganda, Grassroots Academy,Property Section; CLEP Ethiopia (p.11 ss.) analyses how the current landsystem with state ownership gives the state (i.e. the individuals controllingthe state) immense power over peasants.135 Fernandes 2006.136 FAO 2007: 50.137 The Singapore urban planning experience demonstrates that giventhe will and effi ciency of implementation, it is possible to plan aheadand promote organised growth. The unauthorized settlements of Delhi,India, that are regularised in the late 1970s offer another example.These settlements have seen signifi cant improvement following regularisationdue to implementation of layout plans and extension of civicservices by government agencies. Residents there have come to acquirefull tenurial security, resulting in their making further investments atindividual and community levels and improving the quality of the microenvironment.In Malaysia, the government sets a ceiling price for lowcost housing, at RM25,000 per unit for people with household income ofless than RM750 per month and requires the private sector to constructlow cost housing (30 percent quota provision) in every residential development.These urban planning efforts need to be made more widelyreplicated at the community and city level. Yuen 2002, 2004, 2005.138 Jacobs 1961; Newman 1972.139 Barzel 1997; Alexander 2001.140 Steuteville 2005; Congress for the New Urbanism 1999.141 CLEP Report from South America (Brazil).142 Santiago 2004.143 Banerjee 2005.144 Government of India 1998.145 Government of India 1998.146 An external evaluation of the scheme showed that the 2,800families have improved their housing situation considerably and haveorganised themselves to procure infrastructure incrementally. 600families have been gainfully employed in the home-based carpet weav-118

ing industry through the scheme. (Siddiqui and Khan 1994; UN-HABITAT1991).147 Govt. of India 2004.148 See Chapter 4, which covers this topic.149 For instance, in the city of Uttaradit, the initiative started withsurvey mapping of all the slums and small pockets of squatters, identifyinglandowners and those slums that could stay and that neededto be relocated. This helped link community organisations and beganbuilding a community network supported by young architects, a groupof monks and the mayor. Together, they sought to fi nd housing solutionsfor 1000 families within the existing city fabric through differenttechniques such as land sharing, re-blocking, in-situ upgrading andrelocation. Their city-wide housing plan became the basis for the cityupgrading programme under Baan Mankong and now includes infrastructureimprovements, urban regeneration, canal cleaning, wastelandreclamation and park development. Boonyabancha 2005.150 For a broader discussion of this issue see Chapter 1, section 4.151 Brustinow 2006.152 Handbook on Housing and Property Restitution for Refugees andDisplaced Persons 2007.153 Kranton and Swamy 1999; World Bank 2003.154 Although their initial level of income and assets was not significantly different from the average, their level of assets and incomein 1999 was more than 50 percent above the mean while their level ofconsumption was about 20 percent above the average.155 Deininger et al. 2007b.156 Rolfes 2006: 127-128.157 Bledsoe 2006.158 See Prahalad 2005; Kasturi Rangan et al. 2007.159 Apasco, a Mexican subsidiary of Holcim, realised that sellingcement through a chain of middlemen dramatically raises prices. Byopening new distribution centres in remote areas where cement couldbe purchased bag-by-bag and providing technical and safety advice tobuilders, Apasco was able to sell responsibly to the poor. The benefi ts tothe local communities included a facilitated access to building materialsat affordable prices. Apasco staff also offered consulting serviceson do-it-yourself building techniques. Lessons learned in Mexico arebeing studied at headquarters to see if this model can be replicatedelsewhere. (Source: WBCSD 2005: 47)160 WBCSD 2005.161 Delta Café buys raw materials from poor communities in EastTimor, creating sustainable livelihoods and gaining market rewards forproducing a socially responsible product. Delta Café is part of the NabeiroGroup of food companies, and is the market leader for coffee inPortugal, with a market share of 38 percent. The company developedthe Delta Timor brand and marketed it as socially responsible coffeeafter getting involved with the growing communities in the remotehills of East Timor, a former Portuguese colony. This project is alreadyturning a profi t, thanks to the popularity of the new Delta Timor brandamong Portuguese consumers, promoted strongly by its partner Sonae,the country’s biggest retailer. Delta welcomes competition in the regionfrom other coffee-producing companies, as this will improve the coffeeproducing techniques of all farmers. (Source: WBCSD 2005: 50.)162 Through its Solar Rural Operations, Shell Solar is bringing solarelectricity and equipment directly to remote households in six developingcountries (India, Sri Lanka, Philippines, South Africa, China, andMorocco). In Sri Lanka a typical solar electricity system powers sevenlights and sells for around $550-600. With 10,000 units sold by ShellSolar, benefi ts have included: 300 new jobs, mostly in rural areas;signifi cant reduction in undesirable emissions by replacing kerosenelamps and diesel generators; bright light, making reading, cooking, andeducation easier; and convenient power to connect with the world viatelevision and radio. This distribution model works, reaching break-evenin 2001. Two barriers were overcome: availability of systems and theability of householders to pay. (Source: WBCSD 2005: 58.)163 BP: Focusing on the macroeconomic impact of its operations, BPis working with the government in Trinidad and Tobago to encouragewider business ownership. The aim is both to promote good governanceand to create a pool of businesses that can not only supply BP’s operationsthere but also compete on a world scale, beyond the present gasboom. Trinidad and Tobago is the largest liquefi ed natural gas (LNG)exporter to the United States, and BP aims to double its share of globalLNG business by 2010. Helping locally-owned contractors develop globalscale capabilities and become signifi cant part of BP’s current supplychain contributes to the government’s aim of achieving a dynamic andsustainable economy through the building of knowledge-based skills.This will in turn allow the overall economy to continually evolve and recreateitself beyond oil and gas. Success will also allow the governmentand people to see themselves, perhaps for the fi rst time, not merely asexporters of gas, but exporters of intellectual capital. This could becomereality as a result of local learning institutions, workforce and companiesbecoming global experts in the industry. Source: WBCSD 2005: 53.164 CLEP Informal Businesses India: 10.165 See also CLEP Uganda: 22; Guyers 2005; Chanell 2006.166 USAID 2006. In Nigeria, for instance, only 10 percent of whatcan be used as collateral in the US can legally be used as collateral.This means that Nigerians have a thinner and less valuable bundle ofproperty rights in moveable and intangible property. A poor woman inCambodia may well have a crop in the fi eld or a pig or cow in a pasture.If she is able to use these to obtain a lawful loan she has one additionalcredit option. If she can use the moveable property she owns as collateralshe is likely to be offered a lower interest rate and better terms fromthe lender than if the loan was unsecured. If lenders are legally able toaccept such property as collateral she is also less likely to have to resortto an informal moneylender when she needs credit.167 Savafi an, Fleisig and Steinbuks 2006. For example, in Bolivia,Bancosol offers borrowers who use collateral larger loans, longer loanterms, and lower interest rates than they do borrowers without collateral.In Romania, after a new collateral law was enacted in 2000the interest rate dropped by 6 percent and the interest rate on lendingdropped by 20 percent.168 IADB 2005, Unlocking Credit.169 USAID 2006: 4.170 USAID 2006: 5.171 Source: Grameen Bank.172 Critics are sceptical about the repayment fi gure and charge that119

the system leads to the borrower becoming dependent on the loans. Thebank has also been criticised for the level of interest rates that climb ashigh as 20 percent for loans to businesses that generate income. (InternationalHerald Tribune, Asia-Pacifi c, Oct 13, 2006). Current amountof outstanding loans stands at TK 33.42 billion (US$484.29 million).During the past 12 months (April 06 to March 07) Grameen Bank disbursedTk. 50.42billion (US$727.85 million). Projected disbursement for2007 is Tk 65.00 billion (US$930 million), i.e. monthly disbursement ofTk 5.42 billion (US$77.50 million). End of the year outstanding loan isprojected to be at Tk. 40.00 billion (US$572 million).173 These companies have the following loan liability to GrameenBank :Grameen Fund : Tk 373.2 million (US$6.38 million); GrameenKrishi Foundation : Tk 19 million (US$.33 million); Grameen Motsho(Fisheries) Foundation : Tk 15 million (US$.26 million); Grameen Bankprovided guarantees in favour of the following organisations while theywere receiving loans from the government and the fi nancial organisations.These guarantees are still in effect. Grameen Shakti : Tk 9 million(US$0.12 million); Grameen Motsho (Fisheries) Foundation : Tk 8 million(US$0.11 million); Grameen Kalyan; Grameen Kalyan (well-being) is aspin off company created by Grameen Bank.174 Source: Grameen Bank.175 Drawn from Garcia-Bolivar 2007.176 Studies in the Dominican Republic, Nicaragua, and Vietnam showthat insecure land ownership reduced the propensity to rent and limitedtransactions to pre-existing social networks, despite the associatedineffi ciency. See Macours/de Janvry and Sadoulet 2005; Deininger andChamorro 2004; Deininger and Jin 2003. Fear of losing the land, togetherwith explicit rental restrictions, was the main reason for suboptimalperformance of rental markets in Ethiopia (Deininger, Ayalew and Alemu2006).177 The case of China illustrates that, in the context of broad-basedland access, guaranteed long term rent can provide greatly enhanceefficiency while at the same time providing a basic social safety net ata cost that is much below alternative government programems, therebyallowing government to spend scarce resources on provision of productiveinfrastructure instead of safety nets. Also, having their basic subsistenceensured allows Chinese households to take on greater risks innon-agricultural businesses and, with policies to foster lease marketsfor land, contributes signifi cantly to the emergence of a vibrant nonfarmeconomy.178 See also CLEP Sri Lanka: 27-28; CLEP Tanzania.179 Banerjee and Iyer 2005; Nugent and Robinson 2002.180 Bruce 2006: 47-51.181 Bird and Slack 2006.182 CLEP Kenya, CLEP Uganda, CLEP Indonesia, CLEP Philippines;Deininger et al. 2006.183 For a more detailed analysis and recommendations see Chapter1, Section 2 of this report. Evidence from Uganda suggests that greaterknowledge of laws providing tenure security to customary tenure leadsto higher land-related investment but that, with less than a third ofhouseholds — normally the better off — being well-informed, effortsto disseminate information could signifi cantly impact productivity andequity (Deininger et al. 2006.)184 Eighty-nine neighbourhoods were upgraded or created under theprogram in Ceara, Brazil, to the benefi t of 25,300 families (more than100,000 people) using an intergovernmental/community partnership ofself-help housing, whereby the state fi nanced infrastructure and housingmaterials, the municipality furnished the land and the benefi ciariesconstructed their own housing, with technical assistance. 100,000people got access to housing and property rights. Importantly, theseinvestments were achieved with a per-family investment of US$2,100,including project, works, land and social mobilisation. The main lessonsfrom this programme are that Government programmes for housing canbecome a mechanism for property rights creation or regularization, raisingstrong incentives for communities’ contribution to the upgrade ofliving conditions through investments in services and houses construction.(Ceara, Brazil: Urban Development and Water Resources ManagementProject).185 In the 1960s, Singapore faced a serious problem of housingshortage. In response, the government set clear targets for housingprovision and reorganised the housing industry. It passed the Housingand Development ordinance in 1960 which created the Housing andDevelopment Board (HDB) with a strong mandate and resources to deliverhousing units. The fi rst priority of the agency was to build as manylow-cost housing units as quickly as possible. The housing that wasinitially built was largely for rental by low-income groups. Forty yearson, approximately 85 percent of Singapore’s 3.4m resident population iscurrently living in HDB housing. The majority of these people own theirhomes. In 1964 the government introduced the Home Ownership for thePeople scheme to help all citizens to buy homes up to their capabilityas consumers. The aim is to give citizens including the poor an assetin the country. The lowest income citizens are not excluded from thehousing system. This has encouraged the formulation of policies aimedat reducing the cost of housing and easing access to owner occupationin public housing for all including the lower income residents. Theconsequence of formal housing titles is increased housing investment,a greater sense of stakeholding and interest in the maintenance, qualityand design of the public housing. After more than 4 decades of publichousing development, an increasing number of people have personallychosen high-rise living and 82.5 percent of households in public housinghave expressed contentment at the idea of always living in publichousing fl ats.186 World Bank 2003a.187 For the most part of the following passages see Martinez 2007.188 Satterthwaite 2005.189 McKeon 1962; Harris 2004; Krieger and Higgins 2002; Von Hoffman1998.190 Since 1984, Grameen Bank is giving housing loans, the maximumbeing fi xed at Tk 15,000 (US$217) at an interest rate of 8 percent. It isto be repaid over a period of 5 years in weekly installments. 644,965houses have been constructed with the housing loans averaging Tk13,194 (US$191). A total amount of Tk 8.51 billion (US$203.98 million)has been disbursed for housing loans. During the past 12 months (fromApril’06 to March’07) 13,590 houses have been built with housing loansamounting to Tk 143.86 million (US$2.07 million) (Grameen Bank).191 Buckley and Kalarichal 2006.192 For Eastern European countries see Palacin and Shelbourne,2005: 7. Struyk and Turner, 1986, the study of South Korea and thePhilippines, noted that occupants with formal sector titles, across allincome categories, enjoyed better quality housing in both countries.120

193 See Tomlinson 2007.194 UN-ESCAP 1994; Banerjee, 1995. Haryana Urban DevelopmentAuthority (HUDA) in India enters into partnership with private developersto develop townships in the highly sought-after periphery of Delhi. Thisland is under agricultural land ceiling and not available for urban use,except with the permission of HUDA with the condition that 20 percentof the housing should go to the poor.195 TDR is included as part of the national urban policy in Brazil.Implementation started with 10,000 houses for 120 co-operatives ofthe poor between 1989 and 1992 in Sao Paolo. (Fernandes, 2002.) NGOslike Instituto Polis continue to provide advocacy and technical and legalassistance to slum communities and land owners to implement theapproach in several cities of Brazil. In Mumbai TDR is linked with thegovernment’s policy of 1999 of providing houses free of cost to 4 millionslum dwellers in fi ve years. (Burra, 2005.)196 UN-ESCAP, 1994.197 See Panaritis, 2007.198 Guidance can be found in Alden Wily 2002. See also Deininger etal. 2007; see ILD 1994, 2002, 2004.199 Mosqueira, 2007.200 See Collier 2007: 135-140.201 Rajan, 2005.202 Collier 2007: 140-156.Chapter 2 BibliographyAcemoglu, D. and J.A. Robinson. 2005. Economic Origins of Democracyand Dictatorships. Cambridge University Press.Acemoglu, Daron, James Robinson and Simon Johnson. 2004. ‘Institutionsas the Fundamental Cause of Long-Run Growth.’NBER Working Paper No. 10481.ADB. 2002. Indigenous Peoples/Ethnic Minorities and Poverty Reduction:Philippines. Manila: Asian Development Bank.Agarwal, Bina. 1994. A Field of One’s Own. Cambridge: CambridgeUniversity Press.Ahmed, Fauzia Erfan. 2007. ‘Microcredit, Segmentation, and PovertyAlleviation Strategy for Women.’ In: Kasturi Rangan et al.:15-24Alden Wily, Liz and Mbaya, S. 2001. Land, people and forests in easternand southern Africa at the beginning of the 21st Century.The impact of land relations of the role of communities inforest future. IUCN-EARO.Alden Wily, Liz. 2002. Getting the Process Right: Land Administrationas Governance: A discourse on the political economy ofland tenure management. Comments on the Legal Basis forLand Administration in an African Context. Paper presentedto the World Bank Land Policy Conference in Africa, April29-May 2 2002, Kampala, Uganda._______. 2003. Governance and Land Relations. A Review of Decentralizationof Land Administration and Management inAfrica. Land Tenure and Resources Series. InternationalInstitute for Environment and Development [IIED] London._______. 2004a. Putting Rural Land Registration in Perspective:The Afghanistan Case in Proceedings Land Administrationin Post Confl ict Areas; 71-93. International Federation ofSurveyors Commission 7 Cadastre and Land Management,2004. http://www.fi g.net/commission7/geneva_2004/index.htm (for original draft only)_______. 2004b. Rural Land Relations in Confl ict: A Way Forward.Policy Brief. Afghanistan Research and Evaluation Unit,Kabul August 2004. http://www.areu.org.af_______. 2005. From Meeting Needs to Honouring Rights: The Evolutionof Community Forestry Chapter 19 in The EarthscanReader in Forestry and Development (ed. Jeffrey Sayer)2005; 388-394. Earthscan UK (originally a Keynote Addressto the World Forestry Congress Quebec 2003)_______. 2006. The Commons and Customary Law in Modern Times:Rethinking the Orthodoxies. In From Knowledge to Action. EMwangi (ed.). CaPri, Washington._______. 2006b. Formalizing the Informal: Is There a Way to SecureHuman Potential through Land Entitlement? A Review ofChanging Administration in Africa, in: Linking the Formaland Informal Economy Concepts and Policies. Edited by B.Guha-khasnobis, R. Kunbur and E. Ostrom. Oxford UniversityPress._______. 2006c. Land Rights Reform and Governance in Africa: Howto Make it Work in the 21st Century? UNDP October 2006.______. 2007. An Interim Note on Customary Land Tenure in Post-Confl ict Liberia.121

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ChapterTHREETowards a GlobalSocial Contract:Labour Rights forLegal Empowermentof The Poor129

EXECUTIVE SUMMARYPurpose of this chapterChapter 3 is about labour rights for the fight against poverty. Based on our review of employment andworking conditions in the informal economy, we present two essential messages.The first is that governments and internationalorganisations must address the decentwork deficits of those who work informally, sincethe informal economy, characterised by low productivity,low earnings and high risks, has beengrowing worldwide, emerging in many new guisesand in unexpected places. The second messageis one of hope. It is about the new departure ininternational development strategies, in which wefind broad coalitions being formed among governments,international organisations, trade unions,employers and non-governmental organisationsthat are willing to take on the challenge of creatingand implementing policies for decent workand empowerment of the poor.We describe this new departure in internationaldevelopment strategies as an emerging ‘GlobalSocial Contract’ and propose that the Commissionon Legal Empowerment of the Poor (sometimesreferred to by its acronym, CLEP) furtherdevelop the concept into a framework integratingaccess to justice, property rights, labour rightsand business rights.130Labour rights, informal economy,empowerment and decent work: whatdo we mean?In Section 2, we define concepts used in this report.Labour rights include internationally agreedfundamental principles and rights at work, as wellas rights to social protection, income protection,workplace safety, decent working conditions andparticipation through representative organisationsof workers, in national policy fora. Thisconcept also takes into account and supportscommitments and policies for the creation of full,productive and freely-chosen employment andtraining. Informal economy refers to economicactivities by workers and economic units that are— in law or in practice — not covered or insufficientlycovered by formal arrangements governingboth enterprise and employment relationships.Legal empowerment is that process throughwhich people are provided rights in an appropriatelegal framework, which they can claim andunderstand, and which they can find useful inimproving income and employment opportunities.It is a process recognised both formally (legally)and informally (legitimately). We define decentwork as that available to all men and women,

and grounded in conditions of freedom, securityand dignity. It has four pillars (a) fundamentalprinciples and rights at work under internationallabour standards; (b) employment and incomeopportunities; (c) social protection and socialsecurity, and (d) social dialogue and tripartism.Informal workforce: who are wetalking about?The vast majority of the poor earn their living inthe informal economy where average earnings arelow, productivity poor, working conditions hazardous,and risks high. Section 3 provides a globalpicture of the informal economy, highlighting itssize, segmentation, and vulnerabilities. Womendominate the most-disadvantaged categories ofinformal work, notably industrial outwork andhome-based production. It is also in the informaleconomy where child labour and bonded labourare most prevalent, and where indigenous andtribal peoples are marginalized largely by discrimination.Despite early predictions of its eventualdemise, the informal economy continues to grow.Poverty and labour rights: Towards aGlobal Social ContractSection 4 describes a new departure in theinternational community regarding labour rightsand the informal economy; it features threenoteworthy elements: the Fundamental Principlesand Rights at Work from 1998; the DecentWork Agenda, first introduced in 1999, and the2002 Strategy for Labour Rights in the informaleconomy. These elements are gaining increasingsupport from a broad coalition of governments,international organisations, various employersand trade unions, as well as from non-governmentalorganisations.As part of efforts to achieve the MillenniumDevelopment Goals (MDGs), the 2005 WorldSummit of Heads of States agreed to make fulland productive employment and decent workfor all a central objective of both national andinternational policies and national developmentand poverty reduction strategies. In 2006 thiswas followed by the UN Economic and SocialCouncil’s Ministerial Declaration, which emphasisedfull and productive employment and decentwork for all as an end in itself and a means toachieve the MDGs. The Decent Work Agenda hastherefore been accepted as a global aim; it nolonger remains an ILO agenda alone. Decent workhas been declared a goal not only for the formalwage sector, but also for the informal economy.Growing recognition of the need for labour rightsto catalyse employment creation in the informaleconomy, while protecting its workers, has ledto an emerging global social contract, creating abroad agenda for reform and for empowerment.The economics of informality and thedebate on labour regulationsFor the working poor, it is not the absence ofeconomic activity that is the source of theirpoverty, but the nature of their economic activities.The link between work of low quality, orproductivity, and poverty is clear: if people earnedmore, poverty would decline. In Section 5, wereview research on the role of labour regulationin setting economic and social goals, and wedraw two major conclusions. First, we suggestcaution in interpreting this research, particularlythe cross-country studies. Caution shouldalso be exercised before translating the findingsinto country-level policy interventions withoutfirst considering country-specific conditions, theheterogeneity in the regulatory environment andemployment arrangements. Secondly, as a policyconclusion, we suggest a shift of focus from theprevailing ideological question on regulation-versus-deregulationto questions about how regula-131

tion can be used to promote decent work for theworking poor. The debate, we suggest, shouldfocus on the quality of regulation, and determiningthe right balance between security, supportivestructures, and flexibility in both the formal andinformal economy.Principles and practices of labourrights and legal empowermentOur proposed strategy for legal empowerment,introduced in Section 6, is based oncommon core principles, while remaining flexibleto fit different economic, social and political conditions.It is participatory, inclusive and gendersensitive.Some of the principles are basic: theyinclude the need to combine promotion of changewith management of change, labour rights withproperty rights, and flexibility with security.Examples are presented to show that reform isunderway; they illustrate how different policiescan be used to provide working people with legalidentity (India, the Philippines and Thailand),voice and representation (India), social protection(Brazil, Chile, Ghana, India, Mexico, thePhilippines), and new ways to resolve disputes(Tajikistan). They also show how different policiescan be used to improve the functioning of labourmarket institutions (Chile and Thailand), and tostrike a balance between protection and flexibilityin response to changing realities (Spain). Implicationsare drawn for other countries.Our recommendationsWe propose that the Commission accepts the followingrecommendations:Policy recommendationsStrengthen identity, voice, representation anddialogue: For the poor, labour and human capitalare the greatest assets, and these must be effectivelyrecognised and supported to help the poorwork their way out of poverty. First and foremost,the State must recognise their legal identity asworkers — the initial condition through whichthey can engage in legal reforms. Rights tofreedom of association and collective bargainingare also essential to strengthen the voice of theworking poor and to facilitate their dialogue withformal economy operators and public authorities.Improve the quality of labour regulation and thefunction of institutions: There is also need to improvethe quality of labour regulation and to enforcefundamental principles and rights at work.The aim is to create synergies between protectionand productivity of the working poor and their assets.Critical and self-critical reviews of the qualityof institutions and regulations should examineimpacts on prosperity and labour protection.Support application of a minimum package oflabour rights for the informal economy: Rightsshould be established in the informal economy thatupholds the Declaration on Fundamental Principlesand Rights at Work and the three crucial aspectsrelated to working conditions: health and safetyat work, hours of work, and minimum income.Such a minimum floor for empowerment should berealistic and enforceable. Progressive compliance— towards a fuller set of labour rights buildingupon this minimum floor - would be expected.Strengthen access to opportunities: Key to thelegal empowerment process is the promotion ofchange and dynamism. This may be achieved byforging links between private initiative and publicpolicy to encourage expansion of employment ina growing and inclusive economy. Opportunitiesfor decent work are also advanced by provisionfor education, training and retraining, as well asby efforts to combat discrimination and promoteefficient labour markets.132

Support inclusive social protection: Universallyaccepted instruments, such as the UniversalDeclaration on Human Rights, recognise socialsecurity as a fundamental societal right for all.Laws, institutions and responsive mechanismsprotecting the poor from economic shocks, aswell as guaranteed access to medical care, healthinsurance, old age pensions, and social services,must be upheld. Social protection mechanismsmust be open to all types of workers and notsolely on the basis of formal evidence of employment.From a systemic perspective, rights to pensionsand health protection should be granted onthe principle of universality to people as citizensrather than as workers.Promote legal empowerment as driver for genderequality: A key challenge is to ensure that ILOlabour standards, promoting equality of opportunityand treatment, are effectively extended to allworking poor, especially women, in the informaleconomy. This requires knowledge of whereworking poor women are concentrated in thelabour force, how they are inserted into the globalproduction and with what consequences. Thereis a growing international movement, inspired bythe Self-Employed Women’s Association (SEWA)of India, to increase the visibility and voice offemale informal workers and to address their particulardisadvantages, in terms of opportunities,rights, protection and voice.Support legal empowerment for indigenouspeoples: Although indigenous peoples are disproportionatelyrepresented among the poor, theirneeds and priorities are generally not reflected inefforts to combat poverty. ILO’s Indigenous andTribal Peoples Convention provides guidance andstrategies for legal empowerment with respect tolabour rights and protection of employment.Process recommendationsPromote national development frameworks forlegal empowerment and decent work: The decentwork agenda is best defined at nationallevel through social dialogue. Its aim is to makeemployment a central goal of economic policies,recognising that progressive improvement in thequality of work, including labour rights and returnsto labour, is a main route out of poverty andof informality. Decent Work Country Programmes(DWCPs) are major tools for driving this reformprocess forward in partnership with relevant nationaland international institutions.Mobilise the regional levels to support nationalreform programmes: Reform strategies addressingemployment and labour rights will need to beadapted to regional and local priorities. RegionalDevelopment Banks, regional organisations, likethe African Union, as well as the UN and itsagencies, funds and programmes can be tappedas institutional champions for an integrated reformagenda on legal empowerment for the poor.Mobilise the principal actors of the global system,particularly the World Bank and the ILO, to workbetter together for decent work: The World Bank’sPoverty Reduction Strategies and ILO’s DWCPsare crucial instruments for reform. Legal empowermentthrough labour rights requires closecooperation between governments, employersand workers, both nationally and locally. Capacitybuilding support from the leading global institutionswill strengthen the ability of traditionalsocial partners to reach out to workers in theinformal economy. A key to a successful reformprocess at national level is better policy coherenceat global level.Support voluntary initiatives for legal empowermentthrough labour rights: The ILO’s FundamentalPrinciples and Rights at Work inspires many133

voluntary code-of-conduct initiatives. They arepursuing important strategies for motivating improvementsin the performance of multinationalcorporations, and in encouraging businesses tobecome more sensitive to ethical consumer reactions.Such initiatives should be strengthenedand coherence between them promoted so as toavoid dangers of proliferation. Voluntary initiativesshould be seen as stepping stones for legalempowerment, rather than a means to avoid legalobligations.Mobilise donor countries to promote legal empowermentand decent work: Donor countries havemany opportunities to support legal empowermentand the inclusion of a decent work agendain regional and national strategies.Promote better understanding of costs and benefitsof legal empowerment through decent work:Expected benefits of reform from legal empowermentthrough decent work require further study,particularly their effects on productivity andprosperity. The costs of policy initiatives to startand sustain reform processes also need to be betterunderstood.Strengthen the statistical base for legal empowerment:Better national statistics and indicators onsize, composition, and contribution of the informaleconomy would improve visibility and facilitateplanning, particularly for formulating policiespromoting Legal Empowerment of the Poor.Recommendations to further developthe Global Social ContractThere is a tripartite consensus from employer,worker and government representatives on theneed for a formal and effective legal systemwhich guarantees all citizens and enterprises thatcontracts are honoured and upheld, the rule oflaw is respected and property rights are secured.This is a key condition not only for attractinginvestment, but also for generating certaintyand nurturing trust and fairness in society. 1 Thegrowing recognition of the need for labour rightsto catalyse employment creation in the informaleconomy, while protecting its workers, has led toan emerging global social contract; effectively,it is a broad agenda for reform and for empowerment.Labour rights, business rights, propertyrights and business rights, taken together, canform the basis of this new social contract.Five fundamental areas of action could underpinthe new social contract: (1) Strengthen identity,voice, representation and dialogue; (2) Strengthenquality of labour regulation and effectiveenforcement of fundamental principles and rightsat work; (3) Support application of a minimumpackage of labour rights for the informal economy;(4) Strengthen access to opportunities fordecent work, education, training and retraining,while combating discrimination to ensure efficientlabour markets, and (5) Support inclusivesocial protection.We describe the new departure in internationaldevelopment strategies, centred on the DecentWork Agenda, as a Global Social Contract andpropose that the Commission (or CLEP) furtherdevelop the concept by integrating access tojustice, property rights, labour rights and businessrights into a framework for Legal Empowermentof the Poor. Our proposals are firmly basedin the international human rights tradition, whichthe State, as primary duty bearer, is obliged toprotect and promote.Finally, we reflect on the words that form the conceptGlobal Social Contract. ‘Contract’ suggestsan emphasis on mutual responsibility. The state,for example, has a duty to protect, and citizenshave the right to protection. But there are obliga-134

tions that follow from this, and employers andemployees are also tied by mutual obligations.Similarly, large businesses have a duty not toexploit smaller ones with which they have productionor distribution ties. Our inclusion of the word‘global’ places a focus on the role and responsibilityof the actors at international, regional,national and local levels, while ‘social’ callsattention to the aim of this initiative, which is toimprove the social conditions of people in poorcountries. Importantly, we have placed the word‘towards’ before ‘a global social contract’ in thetitle of our chapter to emphasise development,process and time horizons.1. Introduction: Purpose ofour focus on Labour RightsThe Commission has identified the issue of labourrights as one of four elements of Legal Empowermentof the Poor. Almost half the world’s populationof 6 billion lives on less than US$2 a day,while a fifth survives on US$1 a day or less. Formost people mired in poverty, the only asset theyown is their own labour. The World Bank estimatesthat for over 70 percent of the poor, findingwork — either wage work or self-employment— is the main pathway out of poverty; 2 but thestark reality, according to the ILO, is that some500 million of the working poor are currently unableto achieve this goal.Informality in the workforce has always beenpredominant in developing countries — but itis also growing in developed economies. For thepoor, informal employment is the predominantform of employment, in which they have no legalidentity as entrepreneurs or as workers. Also,the wider policy environment and institutionallandscape, including systems of legal and socialprotection, are biased towards formal incorporatedfirms and formal organised workers. Often,the poor are shut out of the legally recognisedsystems that would allow them to benefit fromtheir hard work. They are mostly excluded fromthe legal mechanisms that protect their assetsrelated to property or labour. They lack access toa fully-functioning justice system that protectstheir rights regardless of status in life.135The ILO notes that informality is mainly a governanceissue; 3 it is traced to laws and institutionalframeworks that are not responsive to theconditions in which the working poor have alwaysbeen or are increasingly found. The boundaries oflaws and institutional frameworks remain unyieldingto the growing number of poor who are found

outside their protective reach. The World Bankhas shown that, while informality is strongly correlatedwith low productivity and a high degree ofpoverty, 4 governance and quality of regulation canplay an important role in engendering prosperityand protection for the informal workforce.Our aim is to suggest how to address the viciouscircle of informality, lack of legal protection, andpoverty. Our point of departure is that poverty isboth a market failure and a public policy failure,which the international community has begun torecognise. Within the past 10 years, for example,attempts have been made to obtain global consensuson the Fundamental Principles and Rightsof Work, and to gain widespread endorsement ofthe Decent Work Agenda. Furthermore, there isevidence of growing recognition of the need to extendlabour rights to the workforce in the informaleconomy.These are strategic priorities and they constitutethe three pillars of an emerging global social contractwith wide support in the international community,including governments in rich and poorcountries, the UN family, international financialinstitutions, employers, trade unions, and NGOs.This chapter contains seven sections. Section2 defines labour rights, informal economy,empowerment and decent work, while Section 3explains who we are talking about — the size andcomposition of the informal workforce and themany segments found therein. Next, Section 4highlights new initiatives for labour rights in thefight against poverty and describes the internationalconsensus that has developed around thisnew agenda — Legal Empowerment of the Poorthrough labour rights. Following this, Section 5examines the economic rationale for legal empowermentthrough labour rights, and summarizesthe economic debates surrounding labourregulations. In Section 6 we provide recommendationson the principles and practices of reform,as well as case materials on selected countryexperiences reflecting appropriate responses tothe extension of labour rights and standards toall forms of employment or work arrangements.Finally, Section 7 sets out our recommendationson policies and processes needed to carry out theproposed plan of action.Our recommendations are aimed at taking thisagenda forward in a manner coordinated withthe other working groups of the Commission onLegal Empowerment that are focused on accessto justice, property rights and business rights. Weargue that is it important to merge the free marketapproach with a human rights approach bycombining: (a) promotion of economic growth toimprove productivity and job creation stimulatedby competition, specialisation and free trade, and(b) management of economic growth to obtainwidely-shared prosperity through the advancementof decent work, social dialogue, inclusion,and social protection of all workers.136

2. Labour Rights, InformalEconomy, Empowermentand Decent Work: What dowe mean?In this section we define the key terms andconcepts that underpin our discussions; namely,labour rights, informal economy, legal empowermentand decent work.Labour RightsThe concept of labour rights includes the internationallyagreed-upon Fundamental Principles andRights at Work 5 as well as rights to social protectionand income protection, workplace safety,decent working conditions and the participationthrough representative organisations in nationalpolicy forums. This concept also takes into accountand supports commitments and policies forthe creation of full, productive and freely chosenemployment as well as workforce development.These rights can be expressed through differentmechanisms at the international, national and locallevels, such as those relating to internationallabour standards, national labour law, nationaland local regulations and labour agreementsbetween employers and workers. Socially responsiblecorporations and other organisations mayalso express them in a voluntary way.Informal EconomyThe informal economy is defined as comprising‘all economic activities by workers andeconomic units that are — in law or in practice— not covered or insufficiently covered by formalarrangements’ regulating both enterprise and employmentrelationships. 6 Informal employment 7consists of two broad categories, the self-employedin informal (small unregistered) enterprisesand wageworkers in informal (unprotected)jobs, including disguised wageworkers. Underthis expanded international statistical framework,the specific criteria used for determining whatis (or is not) an informal enterprise and what is(or is not) an informal job are set by countries,including: what size of enterprise and what typeof registration should be used for determiningwhat is an informal enterprise; and what type ofcontract or social protection coverage should beused for determining what is an informal job.Legal EmpowermentLegal empowerment is defined as a processthrough which people are provided rightsin an appropriate legal framework, which theyunderstand, can claim, find useful in improvingtheir income and livelihoods, and which arerecognised both formally (legally) and informally(legitimately). Thus, legal empowerment requiresthat information is available and appropriateinstitutions are established to ensure that commercialand employment contracts are respected,property titles and businesses are registered,and access to social protection and justice is athand. By this, people are able to engage publicand private sector agents and participate in fullyfunctioning market institutions.All too often, the poor do not know of, or are notable to understand regulations. Moreover, theydo not have contracts, and lack resort to disputemediation. The absence of information and ofappropriate institutions curtails the exercise ofchoice. Yet, the existence of choice, the exerciseof choice, and the achievement of choice in thedifferent domains of a person’s life (includingwork) lie at the heart of legal empowerment. 8It is important to emphasise that empowerment isboth a process and a goal. It is a process wherebykey stakeholders are involved in framing coherent137

and sustainable solutions and people are engagedin a continuous effort to find responses to evolvingissues. However, it is a goal in that socialdialogue and participation is an objective in andof itself — one of the four pillars of decent workas defined below.According to one definition, empowerment isbased on four conditions, namely, access toinformation, systems of accountability, venues forinclusion/participation and local organisationalcapacity. 9In the domain of labour rights, empowerment issecured when the fundamental principles andrights at work are respected. These so-called‘enabling rights’ can be considered avenues toempowerment. 10 They constitute the basic rightto participation and freedom of choice in thearena of work that everyone should enjoy.Decent WorkThe International Labour Organisation introducedthe notion of decent work in 1999. 11 Its premise:opportunities for all women and men to work inconditions of freedom, security and dignity, hasbecome a global goal endorsed by the internationalcommunity. Decent work rests on four pillars:(a) fundamental principles and rights at work andinternational labour standards; (b) employmentand income opportunities; (c) social protectionand social security; and (d) social dialogue andtripartism.3. Informality and Poverty:Whom are we talkingabout? What is theiridentity?This section presents an overview of the informaleconomy, including its size and structure as wellas the workers in it. The Commission (CLEP) haschosen to focus on the informal economy becauseof the strong link between informality and poverty.Also, as the World Bank has found in a studyof 75 countries, informality is correlated with lowproductivity and low GDP growth. 12According to ILO estimates, there are some 500million working people living in households thatearn less than US$1 per capita per day. The vastmajority of these ‘working poor’ earn their livingin the informal economy. The informal economyis associated not only with low productivity butalso low earnings, poor working conditions, highrisks, and little (if any) legal or social protections.While there is not a complete overlap betweenworking in the informal economy and being poor,or working in the formal economy and escapingpoverty, the link between informality and povertyis quite significant and stark.What follows is a summary of recent estimates ofthe size of the informal economy in 25 developingcountries 13 and recent analyses of changesin informal employment over time in 20 of thesecountries. 14 Official national data were used toestimate informal employment in each of thecountries. 15Size and significance in developingcountriesInformal employment, broadly defined, comprisesone-half to three-quarters of non-agricultural em-138

ployment in developing countries: specifically, 47percent in the Middle East and North Africa; 51percent in Latin America; 71 percent in Asia, and72 percent in sub-Saharan Africa. If South Africais excluded, the share of informal employment innon-agricultural employment rises to 78 percentin sub-Saharan Africa; and if comparable datawere available for countries (other than India), inSouth Asia, the regional average for Asia wouldlikely be much higher.Some countries include informal employmentin agriculture in their estimates. Thissignificantly increases the proportion of informalemployment: from 83 percent of non-agriculturalemployment to 93 percent of total employment inIndia; from 55 to 62 percent in Mexico, and from28 to 34 percent in South Africa. 16The two main segments of informal employment,classified by employment status, are the self-employedand the wageworkers. The self-employedinclude employers, or owner-operators of informalenterprises who hire others; own-account workers,or owner-operators in single-person units orfamily businesses/farms who do not hire others,and unpaid contributing family workers, whoare family workers in family businesses or farmswithout pay.The wageworker segment consists largely ofinformal employees — those who are unprotectedin their work with a known employer that couldbe an informal or formal enterprise, a contractingagency, or a household; casual wage worker, orthose wage workers with no fixed employer whosell their labour on a daily or seasonal basis, andindustrial outworkers, who are sub-contractedto produce for a piece-rate from their homes orsmall workshops.Composition of the Informal EconomyIn all developing regions, self-employment comprisesa greater share of informal employment(outside of agriculture) than wage employment:specifically, self-employment represents 70percent of informal employment in sub-SaharanAfrica, 62 percent in North Africa, 60 percent inLatin America, and 59 percent in Asia. In China,it is estimated that between 1990 and 2004,urban informal employment increased by 125.55million people, which was 133 percent of allincreased employment. 17 Excluding South Africa,where black-owned businesses were prohibitedduring the apartheid era and have only recentlybegun to be recognised and reported, the share ofself-employment in informal employment increasedto 81 percent in sub-Saharan Africa.Self-employment represents nearly one-third oftotal non-agricultural employment worldwide. It isless important in developed countries (12 percentof total non-agricultural employment) than indeveloping countries where it comprises as muchas 53 percent of non-agricultural employment insub-Saharan Africa, 44 percent in Latin America,32 percent in Asia, and 31 percent in NorthAfrica.Informal wage employment, including disguisedwage employment, is also significant in thedeveloping world: comprising 30 to 40 percent ofinformal employment (outside of agriculture). 18Home-based workers and street vendors are twoof the largest sub-groups of the informal workforce:with home-based workers being the morenumerous but street vendors the more visible ofthe two. Together they represent 10-25 percentof the non-agricultural workforce in developingcountries and over five percent of the total workforcein developed countries.139

Segmentation in the Informal LabourMarket 19Available evidence suggests that there is markedsegmentation within informal labour marketsin terms of average earnings across the differentemployment statuses. Specifically, informalemployers have the highest earnings on average;followed by their employees and informal employeesof formal firms; then own account operatorsfollowed by casual wage workers, and industrialoutworkers: see Figure 1. An inverse hierarchy isobserved for the risk of being from a poor household:employers are least likely to be from poorhouseholds and, especially if they are the primarybreadwinners, industrial outworkers are the mostlikely to be from poor households.In Tunisia, for example, informal employers earnfour times the minimum wage and over two times(2.2) the formal wage. Their employees earnroughly the minimum wage, while industrial outworkers— mostly women home-workers — earnless than one-third (30 percent) of the minimumwage. In Columbia and India, informal employersearn four-to-five times the minimum wage, whileown account operators earn only one-and-a-halftimes the minimum wage. 20Research findings suggest that it is difficult tomove up these segments due to structural barriers(state, market, and social) and/or cumulativedisadvantages. Many workers, especially women,remain trapped in the lower-earning and morerisky segments.Figure 1 Segmentation of the Informal Economy: By Sex, Average Earnings and Poverty RiskPoverty RiskAverage EarningsSegmentation by SexLOWHIGHEmployersPredominantly MenInformal EmployeesOwn Account OperatorsMen and WomenCasual Day LabourersUnpaid Family WorkersPredominantlyWomenNote: The informal economy may also be segmented by race, ethnicity, caste or religion.Source: Chen et al 2004, 2005.140

Box 1 Different Categories of Informal Workersand Corresponding ChallengesCategories of WorkersEmployees of informal enterprisesCasual day labourersHomeworkers or Home-based producersDomestic workersContract labour for formal fi rmsMigrant labourersConceptual/Practical ChallengesAbility of employers to complyCost of complianceZero-cost of non-complianceEpisodic/seasonal workNo fixed employerAmbiguous employment status:neither dependent nor independentAmbiguous relationship with contractor:commercial vs. employmentUncertainty as to who is principally responsible:contractor or lead firm?Household as employerMultiple employersUncertainty re who is principally responsible:contractor or formal firm?Intersection of immigration status/regime and labour status/regimeSource: Martha Chen, ‘Labour standards and informal workers: The nature of the challenge.’ Paper prepared for the Commission on Legal Empowerment of thePoor, November 2006.Another type of segmentation is based on differencesbetween women and men within theinformal economy reflecting gender norms whichinfluence both the supply of and the demand forlabour. As a general rule in developing countries,men tend to be over-represented in the top segmentsof the informal economy; women tend tobe over-represented in the bottom segment.More specifically, relatively high shares of informalemployers are men and relatively high sharesof industrial outworkers are women. In India, forexample, 6 percent of informal employers, 19percent of own account operators, 16 percent ofinformal wage workers, and 59 percent of industrialoutworkers are women. 21 These stylised factsare depicted graphically in Figure 1.A legal empowerment agenda for workers in theinformal economy must take into account the differentcategories of informal workers and the specificrealities of their work arrangements. In Box1, below, there are illustrations of the conceptualand practical challenges in considering labourrights and protections for the different categoriesof informal workers. A proper understanding ofthe nuances and challenges should lead not onlyto appropriate legal responses but also to a widerset of policy tools and institutional strategies. 22141

Informalisation of Labour MarketsThere is a widespread assumption that theinformal economy is counter-cyclical: that is, itexpands during economic down turns and contractsduring periods of economic growth. To besure, empirical evidence from a set of developedand developing countries indicates that the levelof informal employment, taking self-employmentas a proxy indicator, decreases when GDPper capita goes up and vice versa. 23 However, asshown above, the informal economy is made upof both self-employed and wage workers, therebydemonstrating limitations to the use of self-employmentalone as a proxy indicator. Furthermore,the co-relationship between informal employmentand growth is not straightforward. Recent analysesof data over time from different developingcountries suggest a more complex and dynamicrelationship between informality and economicgrowth. While economic downturns are almost invariablyassociated with an expansion of employmentin the informal economy (due to the growthin survival activities), steady rates of economicgrowth may be accompanied, not by a reduction,but actually an expansion of employmentin the informal economy. This is because duringeconomic upswings, certain forms of informalemployment may expand, such as the more entrepreneurialsmall firms as well as sub-contractedand outsourced activities linked to the globalproduction system. 24 This may well demonstratethat increasingly the formal economy is enteringinto a symbiotic relationship with the informal,where the former makes use of the latter toimprove profits and growth strategies, perhapseven to avoid respecting labour standards andregulations. In these countries, it was only aftera sustained period of higher levels of growth thataggregate informalisation declined. 25 This importantfinding is further elaborated in Box 2.Box 2 Relationship betweeninformality and growth:Cross-country evidenceConsider the findings from 20 countries in Asia,Africa, and Latin America at two points in time— generally in the 1980s and the 1990s. Foreach of the countries, the rate of change in informalisationis compared to the average per capitaGDP growth (Heintz and Pollin 2003). Most of thecountries (14 out of 20) experienced growth in informalisation,while four experienced a decline and twoexperienced little, if any, change. What is interestingto note is that informalisation increased in threecountries with respectable per capita growth rates(>2 percent) and declined in two countries with poorper capita growth rates (

In North American, European Union, and otherOECD countries, available evidence suggeststhat non-standard employment is on the rise.The term ‘non-standard work’ as commonly used,includes: a) jobs entailing an employment arrangementthat diverges from regular, year-round,full-time employment with a single employer butwithout security; and b) self-employment, withor without employees. (Carré and Herranz 2002.)The common categories of non-standard wagework are temporary, fixed-term and part-time.Increasingly, inter-firm sub-contracted work inthe service sector (for example, janitorial servicesand home care) and the manufacturing sector(garment making, electronic assembly) is alsoincluded.What follows is a brief summary of trends in threecategories of non-standard work — part-timework, temporary work, and self-employment — inEurope, including differences by sex. (Carré andHerranz 2002, Carré 2006.)Part-Time Work: Since the early 1970s, therehas been a marked growth in the proportion ofpart-time workers in total employment. By 1998,part-time workers accounted for 16 percent oftotal employment in EU countries and 14 percentof total employment in OECD countries.Temporary Employment: For the EU as a whole,and in a majority of EU nations, the share ofworkers in temporary employment, including bothdirect hire and agency hire, increased from themid-1980s to the late 1990s. By 1998, temporaryemployment accounted for around10 percent of total employment in EU countries.Self-Employment: Self-employment, includingboth employers and own account workers, has increasedin many OECD countries over the past 25years. 26 Indeed, outside of agriculture, self-employmenthas grown at a faster rate than total employmentin 14 (out of 24) OECD countries wheredata were available. Also, as self-employment hasbeen growing, so has the share of own accountself-employment within total self-employment. Asa result, in OECD countries today, more self-employedpersons are own account workers, ratherthan employers.In addition to these common forms of non-standardwork in OECD countries, there are otherforms of non-standard work — notably, casualday labour, industrial outwork, and other forms ofsub-contracted work — for which data are not soreadily available.In sum, the purely counter-cyclical model of informalitydoes not hold. At least in the short term,countries demonstrate significant variation in theirpatterns of informalisation even under conditionsof steady economic growth. Also, different segmentsof the informal economy demonstrate substantialvariation in their cyclical patterns. Certainsegments of the informal economy expand duringdownturns in the economy: particularly survivalactivities and sub-contracted activities for firmstrying to cope with the downturn. Certain othersegments of the informal economy expand duringupturns in the economy: notably, dynamic independententerprises and sub-contracted activitieslinked to global value chains.Gendered patternsInformalisation of Labour Markets by SexThe last two decades have seen a marked increasein women’s labour force participation: most significantlyin the Americas and Western Europe andmore modestly in Sub-Saharan Africa, SoutheastAsia, and East Asia. 27 Only in two regions — EasternEurope and South Asia — has the women’slabour force participation rate actually fallen. Themarked increase in women’s labour force partici-143

pation worldwide has given rise to the notion ofthe ‘feminisation of the labour force’. But thisnotion has been defined and used in two distinctways. First, to refer to the situation in which theratio of women’s labour force participation rate tomen’s labour force participation rate increases overtime. Second, to refer to a situation in which thestructure of the labour force itself is ‘feminised’:that is, when jobs take on features associated withwomen’s work such as low pay, drudgery, uncertainty,and precariousness. 28Whether or not there is a causal link between theincrease in women’s labour force participationand the growing precariousness or informality ofwork is not clear — and has been hotly debated.The pervasive segmentation of labour marketsby gender, which we discussed above, suggeststhat women’s labour did not simply substitute formen’s labour. Rather, that there has been someparallel process at work creating low-paid andpoor quality informal employment opportunitiesfor (primarily) women. 29Estimates of changes over time in the degree ofinformalisation within the female and male labourforce are not available. However, we have seenabove that growth in certain forms of informalemployment — notably, sub-contracted worklinked to the global production system — expandsduring periods of economic growth, especiallywhen growth is driven by trade and financialliberalisation. What is important to note hereis that women workers tend to be overrepresentedin global production systems, at least in the earlystages of trade liberalisation when a premium isplaced on export-oriented light manufacturingand low-skilled (and low-paid) workers. 30Informal Employment in Developing CountriesInformal employment is generally a larger sourceof employment for women than for men in thedeveloping world. Other than in the Middle Eastand North Africa, where 42 percent of womenworkers (and 48 percent of male workers) arein informal employment, 60 percent or more ofwomen non-agricultural workers in the developingworld are informally employed. Among non-agriculturalworkers, in sub-Saharan Africa, 84 percentof women workers are informally employedcompared to 63 percent of male workers; in LatinAmerica, 58 percent of women workers comparedto 48 percent of men; and in Asia, 73 percent ofwomen workers compared to 70 percent of maleworkers.Non-Standard Employment in DevelopedCountriesIn virtually all EU and OECD countries, the incidenceof part-time work is much higher amongwomen than men: in some countries it is twice ashigh. By 1998, women represented 82 percentof all part-time workers in EU countries. Further,rates of part-time work are high for women, butnot men, in their prime working years.Temporary employment, like part-time work,is primarily a female phenomenon, althoughthere is wide variation among EU countries. Inall countries except Austria, the incidence oftemporary employment among females is higherthan among all workers. And, like part-time work,temporary employment is concentrated in the service-producingindustries. Interestingly, womenaccount for the majority of agency temps incountries where such employment concentratesin services, while men account for the majority ofagency temps in countries where such employmentconcentrates in manufacturing and construction.Effectively, ‘the gender composition ofemployment mirrors that of the sectors in whichtemporary agency assignments take place.’ 31In 1997, women comprised one in three of144

self-employed persons in OECD countries andtheir proportion is growing. For EU countries asa whole, the incidence of own-account work isgreater for men (11 percent) than for women (7percent). But, in some countries, a higher proportionof women than men are own-account workers.Age is a factor in own-account work: thoseaged 45 and above are more likely than youngerpersons to be working on their own account. 32Indigenous and Tribal PeoplesFinally, one specific group in society that hasoften suffered from abject poverty and profounddiscrimination consists of indigenous and tribalpeoples. It is estimated that there are 350 millionindigenous and tribal peoples (ITPs) representing5000 ethnic groups. While they representfive percent of the world’s population, they accountfor 15 percent of the world’s poor. Poverty,inequality, and various types of injustices haveplagued ethnic societies around the world. 33The ILO has defined indigenous and tribal peoplesas those who have (a) traditional lifestyles,(b) culture, economic conditions and way of lifethat is different from the other segments of thenational population (e.g., in their ways of makinga living, language and customs), and (c) theirown social organisation and traditional customsand laws. Indigenous peoples are, furthermore,distinguished from tribal peoples by the fact thatthey live in historical continuity in a certain area,or before others occupied or came to their area. 34The definition of ‘indigenous’ as provided by theUnited Nations shares features with that providedby ILO: it highlights the ‘historical continuity ofthese peoples with pre-colonial societies; theirstrong attachment to their traditional territories;their distinct social, economic and political institutionsas well as distinct languages and beliefs;their non-dominant position in national societiesand their wish to identify themselves as differentfrom the rest of society.’ 35At the root of the poverty and social exclusionfacing ITPs everywhere is discrimination. Whetherimplicitly or explicitly, ITPs have faced discriminationaimed at wiping out their cultural identityBox 3 ILO’s Convention on Indigenous and Tribal Peoples1989 (No. 169)ILO adopted the Indigenous and Tribal Peoples Convention(No. 169) to include the fundamental concept thatthe ways of life of indigenous and tribal peoples shouldand will survive. It also stressed that these peoples andtheir traditional organisations must be closely involvedin the planning, design and implementation of developmentpolicies that affect them. It sets the minimuminternational standards while opening the ground forhigher standards in countries that can go further.Convention No. 169 adopts a general attitude of respectfor the cultures and ways of life of indigenous andtribal peoples, placing emphasis on their right to acontinued existence and to development according totheir own priorities.It is a comprehensive instrument covering a range ofissues pertaining to indigenous and tribal peoples,including land rights, recruitment and conditions ofemployment, access to natural resources, social securityand health, education and means of communication,vocational training, conditions of employment andcooperation and contacts across borders.Protection is still the main objective but it is based onrespect for indigenous and tribal people’s cultures, theirdistinct ways of life and their traditions and customs.It is also based on the belief that indigenous and tribalpeoples have the right to continue to exist with theirown identities and the right to determine their own wayand pace of development.145

through a variety of legal instruments and policies.They have ranged from outright exclusion toinclusion at very inferior conditions.The typical outcomes involved are dispossessionof their traditional lands, relocation withoutcompensation and basic support services; underinvestmentin education and health; ill-adaptededucational systems and materials — all of whichtranslate, among others, into disadvantageousstatus in labour markets. ITPs expelled from theirancestral domains become seasonal, migrant,bonded or home-based labourers; they are exposedto various forms of exploitation. Discriminationin wage is common practice and there ishigh incidence of forced labour. Unemployment,especially youth unemployment, is higher amongITPs compared to the national average. 36The challenge lies in how to improve living andworking conditions among ITPs so that they cancontinue to exist as distinct peoples, if they wishto do so. Specific efforts for legal empowermentof indigenous people have to be made. The ILO’sIndigenous and Tribal Peoples Convention (seeBox 3) provides guidance and strategies for legalempowerment with respect not only to labourrights and protection of employment, but also toland and property rights.Special efforts for their legal empowerment aredemonstrated in an ‘ethnic audit’ of 14 PovertyReduction Strategy Papers (PRSPs) as well ascase studies of country processes in Bolivia,Cambodia, Cameroon, Guatemala and Nepal. Theresearch clearly showed that while indigenouspeoples are disproportionately represented amongthe poor, their needs and priorities are generallynot reflected in the strategies employed tocombat poverty.Legal empowerment of indigenous and tribalpeoples must address the structural causes oftheir disenfranchisement and social exclusionthrough:• Legal frameworks that recognise individualand group rights.• Institutions and policies that respect and accommodatecultural diversity.• Organisation and mobilisation of indigenouspeople for participation and political change. 37ConclusionsThe vast majority of the working poor earn theirliving in the informal economy where averageearnings are low, productivity is poor, workingconditions are hazardous, and risks are high. Anyattempt to formulate policies and approachesfor the informal economy must understand itscharacteristics, including the deep segmentationfound in it. This section provided a global pictureof the informal economy, highlighting its size,segmentation, and the vulnerabilities of its particularsegments. Women dominate the most-disadvantagedcategories of informal work, 38 notablyindustrial outwork and home-based production. Itis also in the informal economy that child labourand bonded labour are most prevalent and mostdifficult to address. Indigenous and tribal peoplesare marginalized largely due to discrimination.Their cultural identity is suppressed and they areexcluded from social services that should preparethem for the labour market; furthermore, when atwork, they face many forms of discrimination.Despite early predictions of its eventual demise,the informal economy has not only grownworldwide but also emerged in new guises andunexpected places. Though understood to becounter-cyclical, different segments of theinformal economy are seen to have differentcyclical patterns leading to different patternsof informalisation across countries. In virtually146

all cases, the informal economy expands duringeconomic slumps or downturns, as expected.In some cases, the informal economy expandsduring periods of economic growth. Economicgrowth has been accompanied by an increase inthe more dynamic micro-enterprise activities andsubcontracted work for larger supply chains especiallythose linked to the global economy. Thus,the growing significance of the informal economy— and its apparent endurance as a feature of thelabour market — leads us to examine how labourrights can be applicable to the workers found in itand what role legal empowerment of the informalworkforce can play in breaking the vicious cycleof low productivity and poverty.4. Poverty and LabourRights: a new departurePoverty: A market failure and a publicpolicy failureThere is a broad consensus around the notionthat labour is not a commodity 39 and, therefore,that labour markets are different from other markets.The labour market has a double function:it is a mechanism for both the creation of newresources and for the distribution of income andprosperity. While enterprises should be subject tocompetition, which means that some will succeedand grow while others will disappear, people orworkers have to be treated in a completely differentway. Public policies for workers and theirfamilies have to be focused on inclusion, on newopportunities for decent work and on shared prosperity(See Box 4 for an elaboration of the socialcase for labour regulation).147In addition to their intrinsic value for the workingpoor, labour rights standards are fundamental toupholding the human rights obligations of statesand other ‘organs of society’ as set out in theUniversal Declaration of Human Rights and manyother international covenants, conventions, andtreaties, as well as set out in national legislationaround the globe. From the perspective of thisCommission, labour rights and regulations arealso fundamental to achieving legal employmentof the poor.Labour rights and labour standards have beenan issue for international promotion and regulationfor almost a hundred years. All countries,including the poorest countries, in principleprovide their workforce with labour rights. Labourlaws and labour protection models are traditionallydesigned with the presumption of a formalemployer-employee relationship. This relation-

Box 4 Social case for labourregulationThe social case for labour market regulationsemanates, fi rst and foremost, from the principlethat labour is not a commodity. The distinction liesin the human aspect of labour. As such, its behaviouris affected by the work environment and by theincentives that are given. While machines operateaccording to technical specifications, labour has tobe motivated based on what they care about. Theyare contracted to perform a certain job and are paidwhen they complete the job. The completion of thecontract is not as straightforward as it would be fornon-human means of production as this requiresa complex range of information on both sides andincentives to ensure compliance. 42ship has been the cornerstone around whichlabour law, collective bargaining agreements andsocial security systems are framed. Whatever itsprecise definition in different national contexts,the employment relationship has represented ‘auniversal notion which creates a link between aperson, called the employee (frequently referredto as the ‘worker’) with another person, calledthe employer to whom she or he provides labouror services under certain conditions in return forremuneration.’ 40Despite the long-standing and wide-spreadcommitment to labour rights, a large majorityof workers are excluded from labour rights andsocial protection. Thus, informality and povertyis not only a market failure, it is also a failure ofpublic policies. Several factors, in the form ofhistoric traditions, structural failures and conflictingpolitical interests, help explain the persistenceand growth of informality.• One explanation is the history of labour lawand regulation. Labour rights were historicallydesigned with the presumption of a formalemployment relationship thus excluding thosewithout a formal employment relationship.• Another explanation is a lack of confidencein laws and law enforcement. Some politicalregimes have further undermined publicconfidence due to poor governance, causingmany enterprises to operate in the informaleconomy.• A third explanation is a lack of public policyattention. Governments, employers, and workers— the three social partners in the ILOstandard-setting systems — have focused onthe formal economy and the formal organisedlabour force. The informal sector and informalemployment have been studied and discussedsince the 1970s. A first discussion of theinformal sector took place at the InternationalLabour Conference in 1991 and subsequentlythe International Labour Conference reachedpolicy conclusions regarding informal employmentin 2002. 41• Another factor is weak and poorly-designedenforcement mechanisms. Countries that haveimproved the design and reach of their enforcementmechanisms to match the circumstancesof workers and units in the informaleconomy have been able to reduce informality.The relationship between informal employmentand poverty had not, until recently, received theattention they deserve, much less reached the topof the development policy agenda. The interestto bring about reform is quite new and the reformstrategies, discussed by the ILO, World Bank, theinternational trade union movement and others,and the efforts to develop feasible solutions bycountries with large informal economies, are stillin their early stages of development.148

A New Departure: Fundamental Principles andRights at Work, the Decent Work Agenda, andLegal Empowerment of the Working PoorThe recognition that productive employmentand decent work are key pathways to povertyreduction, and that informality represents both amarket failure and a public policy failure, haveled to a reassessment of development strategiesof the 20 th century, including the ILO labourstandard strategy. Over the past decade, tripartitediscussions on key related themes at the annualinternational labour conferences have contributedto this review process, as have the activism,scholarship, and policy analysis of other stakeholders.What has emerged from this rethinkingis an international consensus around an agendaof fundamental principles and rights at work, alsoknown as core labour standards, decent work andlegal empowerment of the working poor in theinformal economy.The First Step: Fundamental Principles andRights at Work: A first step in the developmentof new international strategies to fight povertyand social injustice through labour rights was theestablishment by the International Labour Conferencein 1998 of a set of fundamental principlesand rights at work; they include:• The right to freedom of association and collectivebargaining.• The elimination of all forms of forced or compulsorylabour.• The abolition of child labour.• The elimination of discrimination in employmentand occupation.Endorsed by the international community, thesecore labour standards constitute a ‘minimumfloor’, necessary both for the respect of fundamentalhuman rights and for the effective functioningof labour markets. They are applicable toall workers and economic units.The Second Step: The Decent Work Agenda: Asecond step in the rethinking of traditional approacheswas the introduction at the InternationalLabour Conference in 1999 of the Decent WorkAgenda. Decent work is central to efforts to fightpoverty. It is captured in four strategic objectives:fundamental principles and rights at work andinternational labour standards; employment andincome opportunities; social protection and socialsecurity; and social dialogue and tripartism.These objectives hold for all workers, women andmen, in both formal and informal economies;engaged in wage employment or working on theirown account; and working on the streets or infields, factories, small workshops, or offices; intheir homes or in their neighbourhoods.Legal empowerment through labour rights is notonly a means for preventing a race to the bottom.Such legal empowerment can also be designedto create confidence, to facilitate change and tomaintain cohesion, as shown by many of the moreprosperous countries. Labour standards, collectiveagreements and social protection in thesecountries contribute to defining minimum levelsof income and productivity. In other words, effectiveapplication of labour standards can contributeto giving a positive incentive for enterprisesin the informal economy to increase their productivityand incomes and to formal firms to extendlabour rights to all of their workers: both core andperipheral, both direct and contracted hires, upand down their supply chains.Labour standards are not only about the protectionof worker rights. They also include promotionalmeasures, such as access to skillsupgrading, life long learning and productiveemployment.149

Box 5 ILO Conventions and Recommendations Pertinent tothe Informal EconomyHuman capabilities andempowermentCore labour standards• Freedom of association andcollective bargaining(C87 and 98)• Equality (C 100 and 111)• Forced Labour (C 29 and 105)• Child Labour (C 138 and 182)(The Indigenous and Tribal PeoplesConvention, C 169, must also bementioned, in view of its provisionson educational measuresto eliminate prejudices and tocombat discrimination and fullrealisation of their rights.)Source: Anne Trebilcock 2004.Labour market policy frameworksfor bettergovernanceEmployment policy• Employment Policy(C 122 and R169)• Job Creation in SMEs(C 189)• Human Resource Development (C142 and R 195)Institutions of governance• LabourAdministration Convention(C 150)• Protection of Wages(C 95 and R 85)• Right to Organise and CollectiveBargaining (C 98 and 154)• Consultation (Industrial, National,and Tripartite (C 113 and 114)Protection of peopleSocial security instruments• Social Security (Minimum Standards)(C 102)• Indigenous and Tribal PeoplesConvention (C 169)• Maternity Protection (C 183)Safety and health instruments• Occupational Safety and Health(C 155 and R 164)• Guarding of Machinery (C 119) and WorkingEnvironment (Air, Pollution, Noise and Vibration;C 148)• Safety and Health in Agriculture(C 184)• Rural Workers’ Organisation(C 141)• Various safety and health conventions inspecific sectors such as mining,construction, work involving asbestos andbenzene.The Third Step: Empower People in the InformalEconomy: This step was taken in 2002 when theInternational Labour Conference discussed andadopted a resolution on Decent Work and theInformal Economy, representing a new departurein addressing the topic. The new conceptualframework depicts a continuum of productionand employment relations. It does away with theidea that there are distinct formal and informal’sectors’ without direct links and instead stressesthat there are ‘linkages, grey areas and interdependenciesbetween formal and informal activities.’The framework views formal and informalenterprises and workers as co-existing along acontinuum, with decent work deficits most seriousat the bottom, unprotected, unregulated, survivalistend, but also existing in some formal jobsas well, and with increasingly decent conditionsmoving up towards the formal protected end. Byhighlighting the dynamic linkages between formaland informal activities, the policy issue can morerealistically be framed: the issue is not whetherinformal workers or informal units have direct tieswith the informal economy but whether those tiesare benign, exploitative or mutually beneficial.The policy concern must enhance the positivelinkages and ensure that there is decent work allalong the continuum. 43150

The conclusions stressed the need to ‘eliminatethe negative aspects of informality while at thesame time ensuring that opportunities for livelihoodand entrepreneurship are not destroyed,and promoting the protection and incorporationof workers and economic units in the informaleconomy into the mainstream economy.’ With aspecial focus on countries struggling with abjectpoverty and with a rapidly growing labour force,the ILO resolution urged that measures taken‘should not restrict opportunities for those whohave no other means of livelihood. However, itshould not be a job at any price or under any circumstances.’A clear challenge for follow-up is todemonstrate how job quantity and quality can gotogether and how respect for basic labour rightsmight promote productivity growth. A relatedchallenge is to ensure that activities targetingthe informal economy do not lead to the growthof poor quality employment, but rather to theupgrading of working conditions. The conclusionsalso call for an upward transition, not a downwardpull along the continuum of decent work.Beyond the four core labour standards there is arange of standards, including minimum wages,occupational safety and health, working hours,and maternity protection, which directly impactworking conditions. These are determined nationallyand their application varies with the level ofdevelopment of the country and its capacity toenforce these standards. 44 One convention of directrelevance to the informal economy is the ILOHome Work Convention, adopted in 1996, whichworks to extend legal empowerment to homeworkers (industrial outworkers who work fromtheir homes), who are predominantly women.Compliance with these standards can be viewedas progressive, where different segments of thelabour market experience different degrees ofprotection. In reality, ‘the formal shades into theinformal’ and people move between work opportunitieswith different degrees of protection. 45 Thegoal is to progressively achieve compliance with abroader range of standards throughout the wholeeconomy, leading to gradual formalisation of theinformal economy.It is instructive to highlight provisions in ILOConventions and Recommendations that maybe applicable to the informal economy. Theseinternational labour standards provide guidanceto national economic and social policies, includinghow such policies can be applied to decentwork and the informal economy. These Conventionsand Recommendations may be understoodunder the following broad objectives: (a) humancapabilities and empowerment, which relateto the core labour standards, (b) labour marketpolicy frameworks for better governance, and(c) protection of people. 46 These standards formthe backbone of ILO’s Decent Work agenda, andcover not only the formal sector but also, mostimportantly, the informal economy. For it is in theinformal economy where decent work deficits arefound to be most challenging and disturbing.Towards a Global Social ContractAs noted above, the international communityhas endorsed three outcomes of the ILO’s internationallabour conferences over the past decade,which, taken together, provide a strategicframework for advancing the realisation of labourrights, reducing poverty, and expanding equityworldwide. The 1998 Declaration of FundamentalPrinciples and Rights at Work, the 1999Decent Work Agenda, and the 2002 Resolutionon the Informal Economy have made significantcontributions to what is now a widely-sharedcommitment to universally ensure a minimumfloor of fundamental labour rights; they have alsorecognised that the final objective should be the151

provision of full, productive, freely-chosen andprotected employment in a democratic context offreedom of voice, organisation and social dialogue.Furthermore, the extension of this commitmentto include the informal workforce providesa comprehensive framework for inclusion of thoseamong the poorer segments of the populationwho are employed but register significant deficitsin regard to decent work.The 2005 World Summit of Heads of Statesstrongly supported the goal of fair globalizationand ‘resolved to make the goals of full andproductive employment and decent work for all,including for women and young people, a centralobjective of our relevant national and internationalpolicies as well as our national developmentstrategies, including poverty reduction strategies,as part of our efforts to achieve the MillenniumDevelopment Goals.’ 47 This was followed by theUN Economic and Social Council (ECOSOC)2006 Ministerial Declaration, which emphasisedfull and productive employment and decentwork for all as an end in itself and as a meansto achieve the Millennium Development Goals(MDGs), including poverty eradication. On thisoccasion, the multilateral system 48 was enjoinedto mainstream the goals of full and productiveemployment and decent work in all their policies,programmes and activities. 49The Decent Work agenda has therefore been acceptedas a global goal and is no longer an ILOagenda alone. Decent work has been declaredas a goal not only for the formal wage sector,but also for the informal economy. A decadelongprocess of rethinking international labourstandards has now led to an emerging globalsocial contract, a broad agenda for reform and forempowerment.The Working Group on Labour Rights, in preparingthis chapter, saw an opportunity to move onestep further and provide additional elements tothis emerging global social contract. We suggestadvancing simultaneously on labour rights,job creation and social protection, focusingparticularly on the working poor in the informaleconomy.Labour rights for informal workers: what is anachievable minimum fl oor?All workers in the informal economy should becovered at least by a ‘minimum floor’ as containedin the 1998 Declaration of Principles and Rightsat Work. This Declaration established the applicationof core human rights to the arena of labour orwork; included in its provisions are calls for no useof forced or child labour, no discrimination, andthe freedom of voice, organisation and bargaining.The Declaration also constitutes the foundationsfor implementing other labour rights and providingenabling conditions to exercise them and, thus,achieving the objective of providing employmentopportunities while ensuring protection. 50 Thisminimum floor could include three additionallabour standards for determinants of working conditions:hours of work, diseases and accidents atwork, and minimum wage. 51What we are proposing here — an enlarged minimumfloor — has already gained internationalacceptance, notably during the last generation offree trade agreements of the United States andcountries of Asia and Latin America. The adoptionof such a minimum floor would ensure therights to rest, to health coverage of work-relatedrisks, and to fair remuneration — all according tostandards established by national legislation. Enforcementof such rights and provisions should berequired for all workers in the informal economy,independently of the size or form of the economicunit in which they work. This would justify rein-152

forcement and, eventually, a redesign of labourinspection institutions.For informal workers outside formal enterprises,full compliance of labour rights as establishedby national legislation needs to be enforced. Thisshould go beyond the minimum floor, requiringeventually reforms to the labour legislation for thefacilitation of compliance. Advances in this directionwould lead to full achievement of the DecentWork objectives.Unfortunately, not all employment relationshipsare explicit, where rights and obligationscan be clearly identified. Many workers areemployed under diffuse employment relationswhere the relation is hidden or where there areproblems in the application or interpretation ofthe law. There is need for additional policies todetermine if an employment relation exists and toclarify the responsibilities for compliance amongthose enterprises involving multi-parties. 52 Thelatter kinds of arrangements are continuing toexpand and are serving to decentralise the laboursystem in efforts, apparently, to reduce labourcosts. In the process, however, they are often bypassinglabour regulations and collective bargainingagreements and eroding the power of unions.Interpretation of existing laws as well as newlegislation will be needed to regulate these disguisedemployment arrangements, and to determinewhether an employment relationship existsand who is primarily responsible for obligationsto workers. This essential first step in movingtowards compliance should be followed by appropriatelyadapting labour laws and the labourinspection system. 53The situation of workers in informal enterprisesposes additional challenges, since the capacity ofmany informal enterprises to absorb the cost ofcompliance is restricted by low productivity andincome. 54 As employment opportunities could bedestroyed in such cases, a strategy is needed forincreasing compliance and promoting progressiveenforcement without legally adopting a dualsystem. An expanded minimum floor should, however,be enforced even in these enterprises, sincecost concern cannot be accepted as an argumentfor non-compliance given the nature of the rightsinvolved and the fact that compliance does notnecessarily involve significant costs.Most standards require abstinence fromdiscriminatory or unlawful behaviour ratherthan financial expenditure. A strategy could,however, recognise constraints where they exist inaddition to the obligation to comply with a minimumfloor; basically, it should commit to gradualconvergence to full compliance and to verificationof progress towards this goal. This also requiresadapting the labour inspection procedures andpractices to move from sanctions to training inthe early stages and to progressive compliance,as recommended by the ILO in a recent paper. 55A broad category that deserves special treatmentis that of home work (production or service workin a worker’s home) and domestic work (housecleaning, cooking for others). Included in thiscategory are significant numbers of workers. Workmight involve producing for intermediaries insubcontracting arrangements as well as selling orproducing directly for employers. There is also aconcentration of women and use of family workthat may involve children in these activities.National labour laws do not usually cover domesticworkers; they have no rights and little capacityto organise. Most are poor and experiencesignificant deficits of decent work. Employmentrelations, where they exist, justify the applicationof rules covering other workers in the informaleconomy. The convention (177) and a recommendation(184) adopted by the International153

Labour Conference in 1996, in recognition andsupport of home workers, calls for their equaltreatment with other workers: in particular, itcalls for freedom of association in organisationsof their own choosing and protection againstdiscrimination, minimum age for work, remunerationand protection in safety and health at work,social security and maternity. This minimum floorfor home workers, mandated in the 1996 Conventionand Recommendation, coincides with whatis proposed above for all workers of the informaleconomy, with the addition of social protectionand maternity.Business and labour rights at workThere are, in addition, a proportion of independenthome workers that perform a double role ofentrepreneur and worker and involve other familymembers in the production process. Independentworkers are also found beyond those who work athome and constitute around half of employmentin the informal economy. Their identity is unclear,since they are both employers and workers, andtheir ways of organising should be open to theirpreferences. Their voice and their claims areusually directed against local governments andtheir behaviour in a highly competitive environmentis to operate in isolation to other producersor workers in similar situations. In spite of thesecharacteristics, the minimum floor is relevant andcould enable these independents to organise,empowering them to exercise both their labourand business rights. On the latter, improvementsin the regulatory environment and in processingwill result in increasing the opportunities to developbusinesses and in diminishing the barriersto grow. This should result in higher productivityand incomes.The International Labour Conference, in its 2007discussion on Sustainable Enterprises, 56 arguesthat ‘emphasis needs to be placed on the transitionof informal economy operators to the formaleconomy and ensuring that laws and regulationscover all enterprises and workers.’ The ILO Resolutionon the Promotion of Sustainable Enterprises,endorsed by employer, worker and governmentrepresentatives, argues that ‘poorly designedand unnecessary bureaucratic burdens on businesseslimit enterprise start-ups and the ongoingoperations of existing companies, and leadto informality, corruption and efficiency costs.’Well-designed transparent, accountable and wellcommunicatedregulations, including those thatuphold labour and environmental standards, aregood for markets and society. They facilitate formalisationand boost systemic competitiveness.Regulatory reform and the removal of businesscontracts should not undermine such standards.Social protection for informal workersThe extension of social protection — health andpensions, as well as maternity — to informalworkers requires a strategy that considers differentoptions, from expanding coverage of existingsystems to the development of new mechanismsby the excluded, through pooling, of resources orinsurances. Alternatives should be considered,while examples of different schemes for the provisionof protection need to be evaluated. Indiarecently introduced a bill to regulate employmentand service conditions of unorganised workersand to provide for their safety, social security,health and welfare and introduced a WelfareFund financed by government and registeredemployers with this purpose. 57 In the Philippines,the Statutory Social Security system andthe health insurance plans have increased theircoverage through voluntary schemes open to selfemployedworkers. 58From a systemic perspective, these rights should154

e granted to people as citizens rather than asworkers, and they should be awarded on theprinciple of universality. This has already been reflectedin Latin America, where some ‘traditionalmodels’ have been redesigned, by the additionof a publicly-financed ‘solidarity pillar’ to privatecontribution pension systems. In its recently publishedreport on informality in Latin America, 59the World Bank fully supports this change forboth health and pension coverage. In the caseof health care, shocks that go uncovered imposesignificant costs to society. Therefore, there isa case for providing minimum essential healthcoverage, de-linked from the labour contract andfinanced through general taxation. Similarly, inthe case of insufficient incomes in old age, thereare social costs involved that justify minimumincome support not linked to the labour contract.Chile, which pioneered the privatisation of thepension and health systems, is taking the lead inintroducing a non-contributory pillar that guaranteesa solidarity pension to all citizens above 65years old who receive a pension of 50 percent ofthe minimum wage. It will be universally granted,but efficiency is ensured by gradually reducingthe subsidy for those who receive other pensions,thus reducing the need for public fundsand providing incentives to contribute to thesystem. In fact, the resulting model establishesa mid-way for non-contributory pensions, since itis universal for all citizens, but it recovers partlythe fiscal contribution from high-income pensioners.Bolivia is the only country in Latin Americathat has introduced a universal non-contributorypension (BONOSOL) and Brazil has a similarsystem for rural workers (FUNRURAL). 60 Healthis covered to a larger extent than pensions andreaches universality by a combination of differentsystems: a social insurance system in CostaRica that covers contributors and non-contributors;a public-funded system in Cuba, and a mixof public institutions, social security and privateinsurances in Uruguay, Brazil and Chile, amongothers. Chile has strengthened access to publichealth for all citizens by introducing an attentionguarantee of 56 basic pathologies (AUGE) inaddition to the existing national health insurance(FONASA).De-linking health and pension coverage fromthe labour market would create opportunitiesto increase employment and improve businesses,while guaranteeing security. It will helpdecrease the existing protection deficits but it willrequire sound fiscal policies and, particularly, theadequate funding of decent health and pensionscoverage. A similar approach should be used inthe case of child care and maternity given thepotential effect, respectively, on the early developmentof cognitive abilities in children and theparticipation of women, particularly those frompoor households, in the labour market.The Role and Limitations of Voluntary Codes ofConductMultinational corporations and non-governmentorganisations have also taken forward the corelabour standards and the decent work agenda byestablishing voluntary codes of conduct, involvingin some cases subcontractors and outworkers.Codes of conduct constitute a strategy formotivating improvements in the performanceof multinational corporations. Among the manyimportant initiatives are the Fair Labour Association,SA8000, the Clean Clothes CampaignFoundation and the Ethical Trading Initiative.While the codes advanced through these programmesvary, most of them tend to be based onILO’s core standards, particularly the prohibitionof forced labour, child labour, and discriminationin the workplace. These organisations take155

different paths to enforcement, with some takinga centralised approach in overseeing and controllingpayments for monitoring, while others followa ‘consulting firm approach’ which allows companiesto choose and pay for their own monitors.There is a need to move towards unified codes inthe interest of promoting good governance in thebusiness sector.Labour Rights, Social Protection, EmploymentCreation: trade-offs or complementarities?The emerging global social contract shouldinclude the promotion of more and better employmentopportunities and aim to reduce the existinggaps in protection, particularly concentratedin poorer population. It has to open opportunitiesas well as to provide protection. There are tradeoffsinvolved, but there are also strong complementarities.The experience accumulated duringthe last decades could contribute to enhance thelatter effects, without ignoring the lessons learntto diminish unnecessary costs introduced by illdesignedpolicies. Security provides incentivesfor learning and innovation and both are requirementsfor growth and employment creation. Thereis also need to facilitate adaptation of firms to thenew competitive conditions, and this is particularlyrelevant in matters involving labour contractsand regulations.One of the lessons learnt is that the prescriptionfor flexibility, through the introduction of temporaryor atypical labour contracts, has serious drawbacks, affecting more than the lives of workersand their families. The rigidity of the permanentcontract and, particularly, the costs involved interminating this type of contract, could constitutea barrier in times of adjustment. On the otherhand, such contracts also provide a simple way ofprotection in countries where other mechanisms,like unemployment insurance, do not exist or arevery limited. The erosion of the permanent contractcan be changed by going back to a modifiedversion; for example, by introducing longer trialperiods, reducing or increasing the severancepayments in case of termination of employment,etc. The availability of temporary and fixed-termcontracts will still be needed, particularly to openwider opportunities for those more affected byunemployment and for those who wish to reconcileeducation or house-family care responsibilities.At the same time, temporary or fixed-termjobs should not replace permanent jobs and thelimits of their use should be established throughconsultation and dialogue.The legal recognition of hidden employmentrelations or those without contracts will provideidentity to the affected workers and constituteenabling conditions for them to exercise theirlabour rights, particularly labour and socialprotection. At the same time, the formalisation ofemployment relations, even if gradually achieved,opens opportunities and provides incentives forimproving business management. A culturalchange in the management of micro-enterprisesand, particularly, of family businesses is induced,since compliance with labour obligations requiresthe introduction of accountancy and cost benefitsanalysis to ensure viability of the enterprise. Theright of association is also conducive to developingalliances between producers, thus reinforcingtheir voice and their ability to negotiate with localauthorities; it is also enabling for potential pricereduction of their inputs and for easier accessto concentrated markets. This also representsa major cultural change since it means shiftingfrom individualistic to collective behaviour. Therehas been international tripartite consensus on theneed to combat disguised employment relationships.National policy could serve to ensure effectiveprotection to workers especially affected by156

uncertainty as to the existence of an employmentrelationship (workers in the informal economy, forexample). 61ConclusionsThis review of development strategies and ofinternational labour standard setting showsthat there is a growing political understandingof the fundamental importance of employmentand work conditions for the fight against poverty.It also shows that there is a new departure inthe international community regarding labourrights and that work in the informal economynow is addressed. The three elements of this newdeparture — Fundamental Principles and Rightsat Work, the Decent Work Agenda and the rightsin the informal economy — are now supported bya broad coalition of governments, internationalorganisations, trade unions and employers andnon-governmental organisations.5. The economics ofinformality and the debateon Labour RegulationsThere is now a broad recognition of a decent workdeficit in the global labour market - from the absenceof social protection to the absence of basicrights at work. A key economic indicator of thatdeficit, as explained by the ILO World Employmentreport of 2004/2005, is whether men andwomen can earn enough from their work to liftthemselves and their families out of poverty. Forthe estimated 500 million working poor who livein households with daily incomes of less thanUS$1 per capita, the answer is ‘no’. In their case,it is not the absence of economic activity that isthe source of their poverty, but the nature of theireconomic activities. The link between work of lowquality or productivity and poverty is starkly clear:if people were able to earn more from their work,then poverty would decline. Thus, it is not justany work per se which can raise individuals out ofpoverty; but rather productive and decent work.Taking this view as point of departure, the purposeof this section is to provide a brief overviewof the role of labour regulations in economic performance.We examine, firstly, some broad crosscountryevidence about the impact of labourregulations on growth and employment, makingreferences to a number of individual countrystudies. We then proceed to what we would argueis an important addendum to reinterpretingprior assumptions regarding the nature, role andimpact of labour market regulations for the workingpoor of the world. Our recommendations arepresented at the end of this section.157

Table 1 Mean Measures of Regulation, by Income LevelArea of RegulationLowIncome LMI UMIHI - nonOECDHI -OECDTotalRigidity of Hiring 44.28 33.68 29.91 27.00 20.60 34.33Rigidity of Hours 47.60 39.64 40.57 45.22 32.00 42.40Rigidity of Firing 40.00 33.04 33.43 27.39 14.00 33.26Aggreg. Employment Index 43.96 35.45 34.64 33.20 22.20 36.66Hiring Costs 12.40 16.01 17.31 21.43 10.17 15.62Firing Costs 65.32 50.91 44.63 31.32 54.64 51.34Source: Doing Business, 2006 and authors’ own calculations1. ‘LMI’ refers to Lower Middle Income countries; UMI to Upper Middle Income countries and HI to High Income economies. These are standard classificationsdrawn from the World Bank’s World Development Report (2005).2. All indices are normalised to 100, with the italicised, composite indices the arithmetic mean of the preceding sub-indices.The economic impact of LabourRegulation: an overview of key resultsThis section provides an overview of some ofthe key measures and results from the InvestmentClimate Assessment (ICA) surveys and theDoing Business Survey (DBS) both run underthe auspices of the World Bank with a focus onsummary measures of labour market regulationand worker protection. 62 In turn, we raise somecaution about the interpretative value and policyrelevance of these results.Most studies of labour regulation are basedon the assumption that such regulationsare, in one form or another, obstacles to businessoperation, and hence, to productivity and prosperity.These studies rarely address the intrinsic valueof regulations, or the perceived need or politicaleconomic circumstances that gave rise to the regulationsin the first place. 63 A first question is whatrole labour regulations play relative to other formsof regulation in hindering the growth of firms. Thisquestion was addressed recently in an ICA survey.The conclusion of this survey was that the topten most frequently reported obstacles to growingbusiness operation were: policy uncertainty, macroinstability, tax rates, corruption, cost and access tofinance, crime, regulation and tax administration,skills, court and legal systems, and electricity.Labour regulation came in at eleventh place,reported by 16 percent of the respondents. Morepointed evidence from the Business EnterpriseSurvey Unit of the World Bank, which includesthe ICA surveys, suggests that firms around theworld do not necessarily view labour regulationsas a dominant determinant of, nor obstacles to,growing their businesses. The evidence suggeststhat less than six percent of all firms, irrespectiveof size, view labour regulations as a ‘severe’or ‘major’ obstacle to business expansion. Thisfigure is between 2.5 and 5.5 percent for lowincome, lower middle-income and upper middleincomeeconomies. In the case of high-income(OECD) economies, the estimate is about 10.5percent (World Bank, 2007). No significantlydifferent estimates are derived by size of theenterprise. Therefore, and notwithstanding theiroverall limited relevance to business growth, theperception of the relevance of labour regulationsto business growth increases with the level ofdevelopment. Therefore, in contrast to the DBS158

surveys discussed below, the ICA surveys indicatethat labour regulations appear to be of even morelimited relevance to low-income countriesIn contrast to the ICA surveys, the DBS is focusedon a detailed assessment of the regulatoryenvironment in individual economies. It hasan extensive labour regulation module, whichis based very closely on the methodology of theBotero et al (2004) study. 64 In addition, the DBSis the most recent, and indeed, possibly the mostwidely used measure of labour regulation andworker protection within an international context.Hence, despite some reservations expressedregarding the DBS, it continues to be a centralinformation base for policymakers and investorsalike. For this reason, our working group forChapter 3 of this report has made review of themethodology of the DBS and the debate on theDBS the basis for policy recommendations.The table above presents a snapshot of thekey measures available to the public user,from the dataset. We present the data by countryincome level. All measures are converted to anindex ranging between 0 and 100. Values closerto 100 indicate higher levels of rigidity or protection.The ‘difficulty-of-hiring’ index measuresrestrictions on part-time and temporary contracts,together with the wages of trainees relative toworker value-added. The rigidity of hours measuresthe various restrictions around weekend, Sundaypublic holiday work, as well as limits on overtime,and so on. The ‘firing’ index examines specificredundancy clauses within the relevant legislationin detail. What the DBS refers to as hiring costs,are in effect social protection costs, measuring allsocial security and health costs associated withhiring a worker. Finally, the cost of firing, measuresthe costs of terminating the employment ofan individual in terms of legislated notice-periodrequirements, severance pay, and so on.From the aggregate cross-country data, there isan interesting bifurcation in the regulation andprotection measures. Hence, the data indicatethat the highest measures for any area of regulationrelating to rigidity in hiring, firing and hoursof work are found in low income economies,with the lowest level of employment regulationamongst high income OECD economies. In addition,the data show that firing costs are also thehighest amongst low income countries, althoughnotably hiring costs are the highest in non-OECDhigh income economies.The Consequences of Labour Market RegulationThere are two important questions on policy issuesthat are of relevance to the debate aroundlabour regulation and worker protection. Thefirst revolves around the consequences of labourregulation, in all its different manifestations, foreconomic growth: do we find evidence that labourmarket regulation hinders economic growth? Thesecond issue is related, but more concerned withthe specific outcomes in the labour market, as aconsequence of this regulatory regime: does theevidence suggest for example, that higher levelsof labour regulation are correlated with higherrates of youth unemployment, larger informalemployment and so on?A number of studies suggest that regulationin general, and labour regulation in particular,is negatively and significantly associated withgrowth in per capita GDP (Loayza et al, 2006;Forteza and Rama, 2001; Heckman and Pagés,2003). On the other hand, Botero et al (2004)find that ‘There is no evidence that employmentlaws or collective relations laws vary with thelevel of economic development.’ 65 Loayza et alshow that the effect of regulation is graduallymitigated as governance — and thus regulatoryquality — improves.159

However, a more detailed examination of theabove literature suggests that the crosscountrygrowth regressions often reflect either onthe specific components of the labour regulatoryregime that may be hindering growth, or indeedrepresent the entire gamut of labour legislationas one index. Both these approaches and subsequentresults suggest that there is a heterogeneityin the labour regulatory regime that needs tobe grasped, and furthermore that this heterogeneitycan have a differential impact on economicgrowth. For example, Forteza and Rama (2001)find in one of their set of results, that over theperiod 1970-86, the number of ILO Conventionsratified is insignificantly related to GDP growth,but that the minimum wage indicator is negativeand significant. Loayza et al (2006), in turn, finda significant and negative relationship betweeneconomic growth and the labour regulation index,but this index is represented as an aggregatemeasure, and is not expanded into the componentsnoted in Table 1.The evidence on the impact of the labour regulatoryregime on specific labour market indicators,in addition, suggests similar outcomes andconsequent concerns. Hence higher levels oflabour regulation appear to be significantly associatedwith a larger informal economy, higherinformal employment, reduced male participationrates and higher unemployment rates particularlyamongst the youth (Botero et al. 2004;Loayza et al. 2006; Lazear 1990). However,once again, these results are either too aggregatedin their measure of labour regulation, orindeed, do reflect on the heterogeneous impact oflabour regulation on these labour market indicators.Specifically, then, it is not clear whetherall components of labour regulation and workerprotection encourage growth of informal employment,or some components do so more thanothers. This would seem to be a critical avenueof enquiry — in order to better assist the currentpolicy debate. In addition, where such specificityis isolated, as in the Botero et al (2004) study,one finds that certain components of the labourregime are more important than others in shapinglabour market outcomes. Hence, protective collectiverelations laws, but no other components ofthe labour regulatory architecture, are shown tobe associated with a larger informal economy.Across-country growth regression analysis(using the ordinary least squares approach)serves to illustrate the problem of aggregatingacross indices to arrive at firm conclusions. Ifsuch a regression is run on the DBS 2006 results,and simply includes most of the individualregulation indices — rather than the compositemeasures often utilised - the regulatory effectsincluding those for the labour market aremuted. Hence, of the individual labour regulatorymeasures in this admittedly very simplisticspecification, two of the five (hiring costs andhours rigidity) are significant at the five percentlevel. Notably however, the signs on both thesecoefficients are positive, indicating, for example,that higher hiring costs (and hours of rigidity) areassociated with higher GNI per capita economies.This does not mean, however, that regulation ingeneral and labour regulation in particular, arenot important in the growth debate. Instead, itdoes suggest some caution in our interpretationof the published results and, more importantly,their translation into country-level policy interventionswithout due consideration both to theheterogeneity in the regulatory environment, andto country-specific conditions.Two additional caveats to the debate relating tothe impact of labour regulation are worth noting.Firstly, that the absolute impact of labour regulationmay, even when using composite measures,160

e lower than that created by other regulatoryindices. Hence, Loayza et al (2006) note thatwhile GDP growth declines by 0.42 percentagepoints for every one standard deviation increasein an economy’s (composite) labour regulation index,this estimate for product market regulationsis over four times as large, at 1.86 percentagepoints. The fact is that the negative correlationof labour regulation with average income is notstatistically significant.Secondly, (and again drawing on Loayza et al[2006]), good governance and the quality of regulations,noted below, do make a difference. Hence,specifications controlling for quality of regulation,do appear to erode some of the negative impact oflabour and product market regulations on growth.For labour market regulations, the threshold ofgovernance quality required is relatively low andcomparable to Ireland and Portugal. For productmarket regulations, the threshold is quite high andcomparable to the quality of governance in Switzerland,United States and England. Hence, thenotion that labour regulations can and do interactwith the quality of their application in explaininggrowth outcomes and does so in a non-linear manner,is a nuance that should not be lost.Thirdly, one of the indicators in the DBS, the ‘employingworkers indicator’ (EWI), is now subjectto a debate between the ILO and the World Bank.While the Bank recently has revised its policy torequire that its contractors respect core labourstandards, the ILO claims that recommendationsbased on EWI are contrary to that policy. In a reviewof the EWI the ILO states that the index doesnot take into account the reasons of labour legislation.The ILO in fact argues that ‘the narrow andlimited methodological foundations for the EWI areinsufficient and possibly damaging as a guide topolicy formulation.’ 66On the general aspect of regulation and informalitysome studies focus on the voluntary aspectsof informality. 67 By avoiding taxes and regulatoryobligations, it is believed that informal companiesgain a substantial cost advantage that allowsthem to stay in business despite their small scaleand low productivity. More productive, formalcompanies are prevented from gaining marketshare. The result is slower economic growth andjob creation. 68The International Organisation of Employers(IOE) 69 describes the informal economy as‘largely negative,’ trapping individuals and enterprisesin a spiral of low productivity and poverty.For governments it entails the loss of revenue,‘and for workers it can mean inferior workingconditions, job insecurity, lack of access to statebenefits and social security.’The Impact of Labour Market Regulation: CountryStudiesA recent OECD 70 study found that making firingmore expensive for older workers will protectthem against dismissal while severance paymentsallow workers to smooth consumption duringunemployment periods. They also increase theincentive for longer-lasting employment relationships,which may increase worker satisfactionand productivity. At the aggregate level, morestable employment-relations foster technologicalprogress and skill upgrading 71 and, in an argumentfrequently used in Latin America, workerprotection, they correct potential power asymmetriesbetween employees and firms. 72Yet, various studies have shown that firing costscan lead to greater informality. They increase costsby forcing firms to keep non-productive workersin the firm, or to remain overstaffed for significantperiods of time. Thus it makes it more difficultfor firms to fire, but also to hire. In developed161

countries this translates into unemployment, andin Latin America (which, however, is often overregulated),it translates into lower formal labourdemand and larger informality. For instance:• A recent study that explicitly models theimpact of firing costs over labour demand inPeru shows that an increase in expected severancepayments has a negative correlation withformal labour demand. 73• Kugler et al. 74 found that in Spain a reductionin payroll taxes and firing costs increased thedemand for permanent workers.• Acemoglu and Angrist, in an interesting studyabout the effects of the American DisabilityAct, found that outlawing the firing of disabledworkers actually reduced labour demand fordisabled workers, precisely the opposite effectthat the law intended. 75The recent work on the Indian labour regulatoryregime (Besley and Burgess, 2004; Ahsan andPagés 2007) suggests that the clauses linked tofirm size within the industrial disputes regulatoryarchitecture may have had a deleterious impacton the growth of the economy’s manufacturingindustry (Ahmed and Devarajan, 2007). However,once again, these conclusions are incomplete:Firstly, the Indian experience indicates that whilethe regulations are a part of the problem, in somecases the operational and logistical inefficienciesas well complexities associated with settlingdisputes (Ahmed and Devarajan, 2007) are significantin explaining the lack of expansion withinmanufacturing. Secondly, while amending partsof the regulatory framework is necessary it is alsotrue that active labour market programmes andpolicies, such as those recommended by the ILOfor India, must be part of any attempt at encouragingsecure employment creation and reducingpoverty levels.Towards a More NuancedUnderstanding of Labour RegulationsThe above has suggested that, on the basis ofthe assembled evidence, the labour regulatoryenvironment is important in the debate aroundoutput expansion and employment growth indomestic economies. This fact however, shouldnot translate into too blunt an interpretation,and consequent policy advice, on reforming thelabour legislative environment at the individualcountry level.Some caveats need to be introduced here if amore informed debate around labour regulationand policy reform in the developing world is toensue. They may help to ensure progress in dealingappropriately and intelligibly with the labourmarket in the event that policy reform packagesare tabled at country level. Perhaps economists,who are often at the forefront of such reformprocesses, should understand the most importantof these cautionary notes. The caveat is thatlabour regulation as a reform issue, is not to beviewed as a binary variable. The choice withinany policy reform package in most economiesis never between no labour regulation at all andcomplete, comprehensive legislation. Unduefocus by economists on extreme deregulationof the labour market often results in no reformat all. The notion that a labour market, like anyproduct market, needs to be as deregulated as faras is theoretically possible, can result in contentiousand not very productive policy debates. Inthe conclusions of the study on Impact of Regulationand Growth and Informality, Loayza et al.bring a similar message. They emphasise thattheir study ‘does not intend to assess the impactof regulation on social goals that could be beyondthe strict sphere of economic growth — broadgoals such as social equity and peace, or narrowones as worker safety, environmental conserva-162

tion, and civil security, which typically motivatesspecific regulations. Thus, our conclusions on therole of regulation must necessarily be evaluatedin a more comprehensive context before drawingdefinitive social welfare implications.’One specific manifestation of this problematicparadigm lies in the area of union power.For economists, this is a standard sub-measure ofrigidity in the labour market. Within the Botero etal study (2004), for example, it is captured underthe collective rights index. However, for many legalexperts the right to join a union and the freedomof association are viewed as universal rightsissues and not by any means as matters touchingon labour market regulation. Such experts wouldalso view positively the idea that the greater thenumber of unionised individuals in a society thestronger the indication of a thriving democraticsociety with enshrined individual rights andinterests. The notion that union membership issomehow coupled with labour market rigidity isanathema to a significant proportion of the legalcommunity. Indeed, policy consistency is requiredwhen stressing the importance of democracyand good governance to economic growth onthe one hand, while reflecting on rigidity inducedby high levels of union power on the other.Interpretation of RegulationsThe standard measures of regulation found in theDBS are, as noted above, numeric conversions ofcountry-level legislative provisions. The DBS doesnot proclaim to do any more than this. However,it is worth reiterating the importance of how suchlegislation is interpreted by both the courts of lawand the relevant institutions of authority (such as,for example, dispute resolution bodies). Legislativeprovisions are more often than not, subject tointerpretation by the relevant legal authority. Howjudges, for example, interpret the notion of ‘fairdismissal’ falls to a variety of different variablesincluding the subjective opinion of the judge; themerits of the particular case; the evolution of jurisprudenceon relevant issues raised in the case;the resources available to the parties and so on.The simultaneous impact of these variables wouldtherefore then lead to a specific interpretation ofthe law. The outcome, as a consequence of thesefactors, may be an over-regulation or indeedunder-regulation of specific labour market activitiessuch as reasons for dismissal; unfair labourpractices; probation rights and so on.Simply put, the interpretation of labour legislationby the vested authorities may in fact yield ameasure of regulation that is at odds with thoseproduced by surveys such as the DBS and ICAs.The reality, however, is that attempting to extendthe DBS measure into the realm of court judgementsand their orientation is almost impossible.However, it is essential to note them in any discussionthat measures labour regulation within acountry. Implicitly, legislative provisions representan incomplete and less than satisfying measureof labour regulation in an economy.There is another layer to understanding the legislativeenvironment in relation to the labour market:In many countries, its labour law architectureflows from, and is intricately and deliberatelylinked to, both its international and complementarydomestic legal obligations. Hence, drasticpolicy interventions designed to deregulate aneconomy’s labour market, may require due recognitionof the ILO Conventions that a country hasalready ratified. In addition, rights of an individualenshrined in the country’s constitution serveas the bedrock from which specific labour lawprovisions are made. Tampering with the latter ina substantive manner may indeed be unconstitutional.The generic point, however, is that shouldderegulating a labour market involve significant,163

legislative changes, it will critically impact on thebroader legal environment of most countries. Insum, the notion of deregulating a labour marketmay indeed have significant and possibly intractablelegal outcomes.The Institutional EnvironmentThe extent to which the institutional environmentreinforces or hinders legislativeprovisions is often under-appreciated in debatesaround labour market regulation. In most economies,institutions govern and manage the labourmarket. These include employer and employeeorganisations; the courts of law including specialistcourts; institutions of dispute resolution;ministries of labour or employment; collectivebargaining institutions; tripartite institutions andso on. These institutions will be differentiallyresourced in human and physical terms; will yieldcontrasting performances according to pre-setobjectives; will have different governance structures,parameters of influence and ultimatelypower within the society and so on. Simply put,these range of factors, all of which are time andcontext-dependent, can and will fundamentallyalter the manner in which labour regulatory provisionsimpact on the economy.Two examples would suffice: Firstly, a sectoralminimum wage regulation mandated by governmentwill have little impact on either wages oremployment, if enforcement and oversight of thisregulation through the relevant institutions is ofa poor quality. In such a case, economic outcomescould potentially be relatively benign if theinstitutional oversight is weak and poor in quality.Secondly, in many developing countries, the courtsystem is poorly resourced and inefficient. Therule of law takes a long time to be implementedin economies with an inefficient judicial system.For labour law cases, this could mean that rigidityin the labour market is more about an inefficientjudiciary than any aspect of wages, union poweror indeed the labour legislation itself. Ultimatelyhowever, the almost obvious point is that institutionsmatter, and nowhere more so than withinthe labour regulatory environment.Institutions should also matter to economistswhen examining the issue of labour regulation.Apart from the binary variable issue noted above,or the idea that perfectly competitive output andfactor markets are the optimal outcomes, theimportance of institutions is often overlooked inthese debates. In our view, institutions that areefficient and complement the interaction betweenindividuals are good for growth, and this fitswithin the classic understanding of an efficientlyfunctioning labour market. Especially high qualityinstitutions can help to ensure that this marketfunctions efficiently and competitively. It is notclear that malfunctioning or non-existent, institutionsare an appropriate and acceptable conditionfor an optimally functioning labour market.Heterogeneity in the Regulatory ArchitecturePerhaps one of the key elements of this debatearound labour regulation, growth and informalityis to acknowledge the distinction between grades,types and levels of labour regulation. This is an allusionto the key, albeit obvious, point that there isa distinction between the establishment and protectionof core labour standards on the one hand,and the more detailed specifications around thenature of hiring and firing clauses for example. Itis often around the latter that much useful debateis to be had. However, it is important that the protectionand promotion of labour standards remainsat the core of any in-country labour market policyprogramme. This is critical to ensuring that thelabour rights agenda is complementary to a widerset of actions to improve both the quality of work164

and the quantity of employment opportunities inthe developing world. The securing of core labourstandards we believe is at the core of promotingthe Legal Empowerment of the Poor and indeedthe kernel of a decent work agenda.Some recognition, however, needs to be given tothe possibility that labour regulation beyond corelabour standards may, under certain conditions,exacerbate segmentation in the labour market.Aspects of labour regulation may reinforce theinsider-outsider divide by promoting barriers tohiring and firing. While this can reduce turnover,it may also affect employment growth.• Thirdly, we are of the opinion that more attentionshould be given to critical factors such asthe nature and quality of legal institutions andthe interpretation of the law. Better governanceis strongly correlated with economicgrowth and prosperity.ConclusionsThis review of the economic impact of labourregulation has led us to draw the following policyconclusions:• First, a methodological conclusion: we suggestcaution in interpretation of the published results,particularly from cross-country studies,and more importantly, their translation intocountry-level policy interventions without dueconsideration both to the heterogeneity in theregulatory environment, and country-specificconditions. This is confirmed both by the findingsin the Investment Climate Assessment,presented in the beginning of this section, andof the conclusions in the cross country analysismade by Loayza et al.• Secondly, we suggest a shift of focus from theideological question on regulation or deregulation,to the question how such regulation canbe used to promote decent work for the workingpoor. Thus, the debate on labour regulationsshould focus on what is the right balancebetween security, supportive structures, andflexibility for firms in both the formal andinformal economy.165

6. Principles and practicesof Labour Rights and LegalEmpowermentThe task of the Commission for Legal Empowermentof the Poor is to identify how legal instrumentscan be used to empower the poor. In thischapter we addresses one of the key areas oflegal empowerment, namely how internationaland national systems of labour standards andlabour rights can become more inclusive andpromote more productive and decent work in thefight against poverty. There is - in this arena as inother arenas of legal empowerment - no quick fixfor shifting from informal and low productive employmentto decent and productive employment.There is no single solution, which can be appliedin all countries. A strategy for empowerment hasto have common core principles but remain flexibleenough in design to fit many different economic,social and political conditions. It has tobe participatory, inclusive and gender sensitive.Some principles are basic for any reform strategyin this field and they are introduced in Section6.1. There are many lessons to learn from recentnational and local initiatives for empowerment,which will be presented in Section 6.2. Someconclusions are drawn in 6.3. On the basis ofthese principles and practices, policy recommendationsare introduced in Section 7.The basic principles for inclusivereformBoth promotion of change - and management ofchangeThe most successful countries, in terms of productiveemployment, are using a mix of economicand social policies, implemented with flexibilityand designed for security. Within the context ofcompetition, specialisation and free trade, thisapproach helps to promote change and productivity;it also helps in the management of changeand in the creation of decent work opportunities,a sense of inclusion and a widely shared prosperity.The mix has varied from country to country,and the different policies are adjusted occasionallyto improve the synergy between economicand social policies, decent work and inclusion.Both property rights - and labour rightsThe report from World Commission on the SocialDimension of Globalisation argued that informalactivities should be transformed and integratedinto a growing formal sector that provides decentjobs, incomes and protection. A balanced approachto upgrading the informal economy wouldrequire the systematic extension of propertyrights, accompanied by similar action on corelabour rights for all persons engaged in informalactivities. The report argues that such a transformationis an essential part of a national strategyto reduce poverty and promote inclusion. Whileit suggests that the key to empowering the poorthrough property rights is the provision of legalidentity to their assets, it also advances theunderstanding that the key to their empowermentthrough labour rights lies in conferring uponthem a legal identity as workers or entrepreneurs,thereby making disguised commercial or employmentrelationships visible.Both protection - and fl exibilityThe World Development Report 2006, entitledEquity and Development, recognises the intrinsicvalue of equity and makes the case for investingin people, expanding access to justice, land, andinfrastructure, and promoting fairness in markets.The report asks whether labour market institutionscan be designed to be pro-growth and pro-166

equity. The key to success is to link employmentcreation with protection. This requires buildingbroad societal consensus for coordinated reformsacross a variety of labour market institutions andprovision for support to workers in re-entering thelabour market following investments in educationand training, in incentives that would encouragemobility, and in job creation, among othermeasures.Lessons from national reform practiceThere are lessons to be learned from countrieswhich recently have introduced policies aimedat empowering workers and entrepreneurs in theinformal economy.Legal identityLegal identity, as worker or entrepreneur, isof fundamental importance for legal empowerment.Some countries have tried to establishthese identities and make the employmentrelationships explicit (in labour laws or in theirextensions). Thailand provides an example of howthe labour law has been extended to home workersthrough a ministerial regulation. In this case,home workers are considered ‘employees’ thosewho use raw materials and tools that come fromthe employer. The Ministerial Regulation also affirmsthe application of the Fundamental principlesand rights at work to these workers (SeeCase 1, Annex 2). Employment relationships havealso been determined through judicial decisions.In the Philippines, the Supreme Court has applieda four-fold test in determining the existenceof an employer-employee relationship: 76 ‘(1) theselection and engagement of the employee; (2)the payment of wages; (3) the power of dismissal;and (4) the power to control the employee’sconduct.’ Furthermore, the evidence of payment— through a pay slip — has been accepted asproof of employer-employee relationship (SeeCase 2, Annex 2). India offers an example of awelfare fund where the trade unions provide acertification of the eligibility of the worker. Theidentity therefore comes from membership in atrade union (See Case 3).Voice and representationThe right to voice and representation is as importantas legal identity. Throughout the world, tradeunions are launching and supporting campaignsfor the representation and protection of informalworkers. For example, the Inter-American RegionalOrganisation of Workers has issued guidelinesand manuals to enhance organisation and representationof workers in the informal economy. TheAlliance for Zambia Informal Economy Associationswas launched in 2002 in partnership withthe Zambia Congress of Trade Unions. 77The Self-Employed Women’s Association (SEWA),India, is the well-known and very promising tradeunion of women informal workers who actively engagein collective bargaining and otherwise leverageinfluence over the environment in which theywork (See Case 4). Over the past two decades,SEWA has co-founded and inspired a number oforganisations of informal workers which individuallyand collectively are gaining voice and representationin relevant policymaking fora.In Ghana, the ILO’s Decent Work programme hasworked with local government to promote socialdialogue by creating District Assembly Sub-Committeeson Productive and Gainful Employmentthat include representatives of informal enterprises,informal workers, the private sector, andgovernment. In the Philippines, local developmentcouncils are mandated on the regional,provincial, municipal and village-level wheredifferent interest groups, including registered andaccredited local organisations, are represented.167

The Homeless People’s Federation Philippines,HPFP, participates in various municipal and village-leveldevelopment councils, including a fewlocal housing councils (See Case 5).Social protection reformReform of the social protection system is astrategic way to empower people. In India in2002, the National Commission on Labour proposeda national bill for workers in the unorganised(informal) sector with the objective of regulating‘the employment and conditions of serviceof unorganised sector workers and to provide fortheir safety, social security, health and welfare’.The bill provides for the establishment of Workers’Facilitation Centres to support and assistunorganised workers, provides for the setting upin the states of an Unorganised Sector Workers’Welfare Fund, with funds from government andcontributions by employers and registered workers;and sets out minimum conditions of service,including hours of work and minimum wages (SeeCase 6). In India in 2007, the National Commissionon Enterprises in the Unorganised Sector(NCEUS) has drafted and proposed two nationalbills on the conditions of work and social securityof workers in the unorganised (informal) sector:one for agricultural workers, the other for non-agriculturalworkers. Both bills incorporate provisionsfor regulating the conditions of work andsocial security of informal workers. The statutoryNational Social Security Scheme proposed by theNCEUS consists of the following package of minimumbenefits: illness, hospitalisation, maternity,disability and life insurance, and old age pension.Other promising examples of extending socialprotection to informal workers are from Ghanaand the Philippines. In Ghana, with joint supportfrom the government and ILO’s Decent Work programme,associations and individuals who havejoined local credit unions are encouraged to enrolin the National Health Insurance Programme.In the Philippines, the statutory social securitysystem (SSS) and the health insurance schemeshave been progressively made universal throughvoluntary schemes that are open to self-employedworkers through lower-priced packages and awider network of collection units, including banksand organised groups (See Case 7). Notableexamples are also found in Latin America; theyinclude efforts in Mexico to extend social securitycoverage to the informal sector; innovations in socialcoverage of the Solidario programme in Chile;first rights-based health coverage in Chile, andconditional cash transfers in some 14 countriesbeginning with Brazil and Mexico.Improvement of the quality of labour marketinstitutionsSeveral countries have introduced reforms to improvethe quality of labour market institutions. In2006, Chile introduced a reform in subcontractingprocedures to include more workers in formallabour rights arrangements. The objective is topromote subcontracting, while at the same timeensuring compliance with all the labour obligations.The law introduced a formal arrangementbetween subcontractors and the main firms tomeet a set of labour obligations. Direct responsibilitylies with the subcontractor, but the mainfirm has the right to demand from the subcontractora certificate of compliance issued by thelabour inspectorate agency and has the right towithhold payments from subcontractors in casesin which there are pending obligations vis-à-vistheir workers (See Case 8).Spain has over the last 20-25 years introduced aseries of reforms of its once highly-regulated systemin an attempt to better balance the demandsof an open market economy with the needs of168

works, first by allowing for an increase in theuse of fixed-term contracts, then by reintroducingconstraints in the use of temporary contractswhile easing employment protection legislationfor permanent workers. More recently Spanishtrade unions, employer organisations and governmentsigned an agreement to bring the use offixed-term work contracts more in line with theEuropean social model (See Case 9).Legal empowerment through alternative disputeresolutionFor poor people around the world, getting accessto courts and legal support to protecttheir rights is often impossible. In many cases,the reason for this is straightforward — they cannotafford to pay the legal fees. In Tajikistan, theUK has helped to solve this problem by supportingThird Party Arbitration Courts. These courtsare an alternative way of resolving disputes: twosides to a dispute agree to nominate a third partywho they both trust to mediate their disagreementand come to a decision. Although they operateindependently of the formal legal system, decisionsare recognised by Tajikistan’s official courts.Third Party Arbitration Courts provide poor peoplewith a cheap, fair and accessible way of resolvingdisputes and protecting their rights. Third PartyArbitration has helped to make legal servicesavailable to 800,000 people in Tajikistan. Theapproach has also been used successfully in Russia,Kyrgyzstan, Moldova, Ukraine and Georgia(See Case 10).Improved business environmentThe World Bank Investment Climate Survey illustratesthe need to improve the business environmentto encourage investment, entrepreneurshipand workers rights. Many countries have foundnew ways to support SMEs through various initiativeswith the aim of upgrading them into theformal economy (See Chapter 4 for examples).Simplifi cation of contracting proceduresThe Senegalese Government provides an exampleof a pro-active policy of contracting out publicinfrastructure projects to small scale contractors.In this case, bidding procedures and documentshave been substantially simplified in order topermit smaller contractors to participate in thebidding process. Bureaucratic documentation isalso minimised and bidding documents containofficial unit cost estimate in order to guide theless sophisticated contractor. A general session isheld wherein contractors are told about the existenceof the implementing agency and informedabout procedures, from the bidding to the awardingand implementation. Simplification of theprocess goes as far as making the name of thewinner very clear in the announcement so thateven an illiterate contractor’s representative canreadily determine who was awarded the contract(See Case 11).There are also lessons to be learned from countriesthat have recently introduced policies aimedat empowering workers and entrepreneurs in theinformal economy through business rights (SeeChapter 4).169

Conclusions for national strategies forlegal empowermentThe examples noted above illustrate how differentpolicies can be used to provide working peoplewith: Identity (India, the Philippines, Thailand);Voice and representation (India); Social protection(Brazil, Chile, Ghana, India, Mexico, thePhilippines), and New ways to resolve disputes(Tajikistan).These examples also demonstrate how differentpolicies can be used to improve the functioningof labour market institutions (Chile andThailand), and how they can work to adjust thebalance between protection and flexibility inresponse to changing realities (Spain).These and many other illustrations show thatreform is under way. Other countries can use theexamples and principles presented can be usedby other countries in their effort to design strategiesfor Legal Empowerment of the Poor. Thereis a need for global action to convert these ‘goodnews’ approaches into a global movement.7. Towards a new socialcontract: Policiesand Processes for LegalEmpowermentPolicy recommendationsBuilding on an emerging global social contract— the broad support for the Fundamental Principlesand Rights at Work and the Decent Workagenda — we recommend that the Commissionendorse the following priorities for legal empowermentof those living and working in poverty:• Strengthen identity, voice, representation anddialogue. The process of legal empowermentstarts with identity. Just as property and physicalassets of the poor are recognised, so alsomust the greatest asset of the poor, namelytheir labour and human capital, be effectivelyrecognised. There is a particular need toensure that workers and entrepreneurs in theinformal economy have the right to freedom ofassociation through organisations of their ownchoosing and to collective bargaining, particularlywomen and youth who are over-representedin the informal economy. Emphasis shouldbe placed on building up representativeorganisations of the working poor, particularlywage workers and self-employed operating inthe informal economy, to have voice, representationand dialogue with formal economyoperators and with public authorities in orderto defend their rights.• Strengthen the quality of labour regulationand the effective enforcement of fundamentalprinciples and rights at work. The purpose isto create synergies between protection andproductivity of the working poor and of theirassets. Reviewing the quality of institutions170

and of regulations should involve a critical andself-critical review of legal instruments fromthe point of view of their impacts on productivityand on the protection of labour.• Support application of a minimum packageof labour rights for the informal economy. Theaim should be that every country strives for aminimum floor for empowerment that is realisticand enforceable, as a basis to graduallystrengthen and extend application of standards,taking into account productivity levelsand other national circumstances. To this aima package of labour rights is proposed for theinformal economy that upholds the Declarationon Fundamental Principles and Rightsat Work and three crucial aspects related toworking conditions: (1) health and safety atwork; (2) hours of work, and (3) minimumincome. It must be recognised that labourstandards at this minimum level constitutea basic floor for empowerment beyond whichprogressive, rather than full, compliance isexpected. That is, we propose to build upprogressively from this basic floor throughinstitutional approaches that are feasible evenfor production units with limited capacity forcompliance. Strategies can aim at progressivecompliance and gradual convergence into aunified set of working conditions, as a goal.Some of the standards such as occupationalsafety and health can be improved immediatelyat a low cost. Others can be achievedgradually through a developmental process ofawareness raising and capacity building.• Strengthen access to opportunities for decentwork and to opportunities for education,training and retraining, as well as combatingdiscrimination to ensure efficient labourmarkets. This priority aims to promote changeand dynamism, linking private initiative withpublic policy so as to expand employment in agrowing and inclusive economy. Labour rights,to be effective, should not exclude the workingpoor, nor constrain their creative and entrepreneurialpotential. Opportunities for educationand capacity building as well as measures forcombating discrimination help increase legalrecognition of the poor and bring them closerto such economic opportunities. The reorganisationof production and distribution throughsub-contracting and outsourcing is associatedwith the expansion of informal employment inthe supply chains. Private and public procurementrepresents, therefore, a practical yetstrategic policy lever through which to upgradethe productivity, incomes and working conditionsof the working poor. Integrating employmentcreation, labour rights and decent workinto public and private procurement practicesis therefore a key mechanism to legally empowerthe poor. Often solutions to poverty andinformality can be found outside as well aswithin the informal economy. Policies to createand provide improved access of the poorto new opportunities for full, productive andfreely chosen employment, as promoted in ILOConvention 122, can provide a key mechanismfor empowering the poor in the informaleconomy and facilitating their transition toformality.• Support inclusive social protection. Therecognition of the rights to social security hasbeen developed through universally acceptedinstruments, such as the Universal Declarationof Human Rights and the InternationalCovenant on Economic Social and CulturalRights, which proclaim that social security isa fundamental societal right to which everyhuman is entitled. This promise must beupheld by all countries through laws, institu-171

tions and responsive mechanisms that couldprotect the poor from shocks and contingenciesthat can impoverish, and measures thatguarantee access to medical care, healthinsurance, old age pensions, and socialservices. These mechanisms must not besolely dependent on the evidence of employmentstatus but must be open to all types ofworkers. From a systemic perspective, rightsto pensions and health protection should begranted to the people as citizens rather thanas workers, and they should be awarded onuniversality principles.We also recommend the following specific actionsfavouring legal empowerment:• Ensure that legal empowerment becomes adriver for gender equality. Poverty has a genderdimension, and legal empowerment can helpdrive gender equality. A key challenge is toensure that ILO labour standards which promoteequality of opportunity and treatment areeffectively extended to informal sector workers.78 The starting point for this process may befound in the core labour standards on genderequality, namely, the Equal RemunerationConvention, no.100, 1951; the Convention onDiscrimination (Employment and Occupation),no. 111, 1958. Much useful guidance can befound in the 1996 ILO Home Work Convention79 which mandates the extension of legalprotection and legal empowerment to homeworkers, who are predominantly women. Genderis already a mainstream priority in the integrationof Decent Work in the PRSP work. Specificcapacity-building efforts have in particularbeen made in Bolivia, Brazil, Ecuador, Ethiopia,Honduras, Paraguay, Peru, Uruguay andYemen to influence Poverty Reduction Strategies(PRSs) at the formulation stage. A morein-depth process has been recently launchedto further consolidate gender and employmentin three country PRS processes, namely inBurkina Faso, Liberia and the United Republicof Tanzania. This integrated approach includesenhancing the capacity of constituents formainstreaming gender equality in employment;facilitating gender budgeting of projected employmentprogrammes in the PRS action plans;building partnerships with other organisationsat national and international levels, which areinvolved in promoting gender equality in PRS.• Support legal empowerment for indigenouspeople. The ILO Indigenous and Tribal PeoplesConvention provides guidance and strategiesfor legal empowerment with respect not onlyto labour rights and protection of employment,but also with respect to land and propertyrights. Special efforts for their legal empowermentare demonstrated in an ‘ethnic audit’undertaken of 14 PRSPs as well as casestudies of country processes in Bolivia, Cambodia,Cameroon, Guatemala and Nepal. Theresearch clearly showed that, although indigenouspeoples are disproportionately representedamong the poor, their needs and prioritiesare generally not reflected in the strategiesemployed to combat poverty. Another contributionis research produced by the ILO anddebated at the United Nations PermanentForum on Indigenous Issues and within theInter-Agency Support Group. Subsequently,the World Bank organised an InternationalConference on Indigenous Peoples and PovertyReduction (New York, May 2006) and committedto work towards the practical inclusion ofindigenous peoples’ concerns in the PRSPs ina selected number of pilot countries in Africa,Asia and Latin America.172

Process recommendationsOur working group recommends that theCommission consider the following policyprocesses and institutional champions for theimplementation of its recommendations on legalempowerment through labour rights.• Promote national development framework forlegal empowerment and decent work. Nationalgovernments and parliaments are responsiblefor labour rights and social conditions andbear a major responsibility for the reform andeffectiveness of national labour market institutions.The Decent Work Agenda proposes avalue-based framework that is best definedat the national level through social dialogue.It does not propose a one-size-fits-all solution,nor imply conditionality of any type. Themix and sequencing of policy actions are tobe defined locally, taking account of diversityin the level of development, including financial,human, and institutional capacities, andimplemented through cooperation betweengovernment, business, workers and society.The intrinsic value of the Decent Work Agendais to make employment a central goal of economicpolicies and progressive improvementin the quality of work, including labour rightsand returns to labour as the main strategy formoving people out of poverty. Decent WorkCountry Programmes (DWCPs) are the maintool for driving this reform process forward inpartnership with all national and internationalinstitutions. DWCPs contribute to internationaldevelopment frameworks such as povertyreduction strategies, national Millennium DevelopmentGoal strategies, the United NationsDevelopment Assistance Framework (UNDAF),and other integrated development plans.• Mobilise the Development Banks to supportnational reform programmes. Reform strategiesto include employment and labour rightswill need to be adapted to regional and localpriorities. Therefore the Regional DevelopmentBanks, Political Organisations and UN organisationscan be tapped as institutional championsfor the reform agenda on legal empowerment.Development Banks need to make legalempowerment a top priority, integrating accessto justice, property rights, labour rights andbusiness rights in one comprehensive strategyfor good governance of markets, to supportnational reform processes. They need to seekthe support from regional political authoritiesand from the UN regional organisations.• Mobilise the principal actors of the global system,particularly the World Bank and the ILO,to work better together for decent work. Two ofthe main global actors in the field of work anddevelopment, the ILO and the World Bank,have both contributed by developing instrumentsfor reform, the World Bank’s PRSs andthe ILO DWCPs. A key to a successful reformprocess at the national level is better policycoherence at the global level. Legal empowermentand reform of labour rights require closeco-operation between governments, employersand workers, nationally and locally. Theywill need support in many forms from theleading global institutions to build capacity.The common goal should be to make labourmarkets work better — more efficient andmore equitable — for both workers and smallbusinesses.• Support voluntary initiatives for legal empowermentthrough labour rights. Codes of conductconstitute a strategy for motivating improvementsof the performance of multinationalcorporations. An increasing number of them,including that of the Ethical Trade Initiative,are based on ILO’s core labour standards, par-173

ticularly the prohibition of forced labour, childlabour and discrimination in the work place.These codes of conduct initiatives are alreadyplaying an important role, as businesses havebecome more sensitive and responsive to theconcerns of ethical consumers.• Mobilise donor countries to promote legal empowermentand decent work. Donor countriescould do a lot to support legal empowermentand the inclusion of a decent work agenda inregional and national strategies. For example,the EU is supporting the integration of decentwork goals in national PRS processes in 60countries.• Promote a better understanding of the costsand benefits of legal empowerment throughdecent work. The costs and benefits of undertakingreforming legal empowerment throughlabour rights and decent work need to beaddressed. The first basic question is what arethe expected benefits of such reform on productivityand thereby on prosperity. The mainpurpose of reform is to improve the qualityof labour market institutions and thereby thefunctioning of labour markets. Such reforms,provided they are well designed, should beseen as likely to enhance productivity. Nonaction,or maintaining the status quo, shouldbe seen as leaving a burden on the economy.With income inequality growing ever largerwith worrying implications for sustainablesocieties, an ambitious reform programmeintegrating Legal Empowerment of the Poorshould be seen as a necessity, not a luxury.The second basic question is the cost of startingand sustaining the reform process and theaffordability of related policy initiatives. Thereis no simple answer to that question. Therewill be initial costs that have to be fundedmainly through restructuring of public expenditureprogrammes. The amount of costs andthe pay-back in the form of higher quality oflabour market institutions will probably varybetween states, depending on policy designand the success of the reform process. A successfulstrategy for integrating workers in theinformal economy — through, for example,integrating employment creation programmeswith social protection systems - will broadenthe tax base and decrease unemployment,underemployment, decent work deficits, andother social costs, so that initial costs willsoon be outweighed by benefits.• Strengthen the statistical base for legalempowerment. 80 Labour force and othereconomic statistics need to be improved tofully capture the size and contribution of theinformal economy. Although estimates of thesize and (less so) contribution of the informaleconomy are available in a growing number ofcountries, all forms of informal employment- especially women’s home-based productionand disguised wage employment - are not yetfully visible in the official national statisticsused to informal national policies. The legalempowerment strategy must, therefore,include efforts to make visible all forms of informalemployment. This should include makingdisguised employment relationships moreexplicit; it should also make more visible boththe invisible supply chain and home-basedproduction. Our working group recommendsthat improved labour force and economic statisticsbe a priority goal for national statisticalservices and be incorporated into the MillenniumDevelopment Indicators.174

Towards a New Social Contract.There is a tripartite consensus from employer,worker and government representatives on theneed for a formal and effective legal systemwith guarantees for all citizens and enterprisesthat contracts are honoured and upheld, therule of the law is respected and property rightsare secure. Such a legal system is a key conditionnot only for attracting investment, but alsofor generating certainty, and nurturing trust andfairness in society. 81 The growing recognition ofthe need for labour rights to catalyse employmentcreation in the informal economy, while protectingits workers, has now led to an emerging globalsocial contract, a broad agenda for reform andfor empowerment. Labour rights, business rights,property rights and business rights taken togethercan form the basis of this new social contract.Our Working Group for Chapter 3 suggests thatthe underpinnings of the new social contract onlabour rights include five fundamental areas ofaction, namely:- Strengthen identity, voice, representation anddialogue.- Strengthen the quality of labour regulationand the effective enforcement of fundamentalprinciples and rights at work.proposals are firmly based in the international humanrights tradition. Human rights are the basisfor the Social contract. It is the obligation of thestate as the primary duty bearer to protect andpromote these rights.• We use the word ‘contract’ to emphasise mutualresponsibility. The state has a duty to protectand the citizens have the right to protection— and obligations, which follow thereof.Employers and employees are also tied bymutual obligations. And large businesses havea duty not to exploit smaller businesses withwhich they have production or distributionties.• We use the word ‘global’ to emphasise the roleand responsibility of the actors at the international,regional, national and local levels.• We use the word ‘social’ to emphasise that theaim of this initiative is to improve the socialconditions of people in poor countries, including:income, health, education, working conditions.• We have put ‘Towards’ before a Global SocialContract in the title of this report to emphasisdevelopment, process and time horizons.- Support application of a minimum package oflabour rights for the informal economy.- Strengthen access to opportunities for decentwork and to opportunities for education, trainingand retraining, as well as combating discriminationto ensure efficient labour markets.- Support inclusive social protection.We recommend a new departure in internationaldevelopment strategies, centred on the DecentWork agenda as a Global Social Contract. Our175

Annex 1:Recent and current initiatives toimprove statistics on the informaleconomyWhat is clear from the statistics presented inthis Report is that the informal economy isfar larger than most people recognise. However,the informal economy is still undercounted andundervalued in most countries. Few countries collectthe statistics needed to fully capture all formsof informal employment, both self-employmentand wage employment. Reflecting the assumptionsunderlying labour regulations and labour economics,- notably, the presumption of an explicit employer-employeerelationship — labour force andother economic statistics do not always reflect thefull range of work arrangements and employmentstatuses.To generate more accurate and comprehensive statisticson informal employment and labour marketsmore generally, it is necessary to improve statisticalconcepts and methods, including:• An expanded set of place of work indicators,including work at home, on the street, in fields,in forests, in waterways, or in the open air;• An expanded set of employment status indicators,including all types of self-employment,wage employment, and intermediary ambiguouscategories (such as independent contractorsand industrial outworkers);• Data on the socio-economic status of differentcategories of workers, including: level of earnings;legal status: contract versus no contract,registered versus non-registered; working conditions;and social protection coverage by typeand source (health insurance, old age pensions,disability insurance, unemployment insurance,life insurance, maternity, child care);Improved statistics would help to focus the attentionof policymakers on the economic contributionsof the informal economy and the linkagesbetween informal employment and poverty. Morespecifically, improved labour-force statistics thatcapture all forms of informal employment wouldserve to:• Increase the visibility of those who work in theinformal economy, especially the least visibleand most vulnerable workers;• Advance understanding of the informal economy,including its contribution to economicgrowth and its links with poverty;• Inform the design of appropriate legal reformsand policies for the working poor in the informaleconomy.Ideally, a unified framework for data collectionwould be developed — one that allows for theclassification, comparison, and analysis of thefull set of employment statuses and work arrangementsthat exist in both developed and developingcountries.Fortunately, there are a number of recent and currentinitiatives to improve statistics on the informaleconomy. The 2002 International Labour Conferenceand the 2003 International Conference ofLabour Statisticians have endorsed an expandedstatistical definition of informal employment thatincludes self-employment in informal (small unregistered)enterprises and wage employment ininformal (unprotected) jobs, The ILO Bureau ofStatistics, the International Expert Group on InformalSector Statistics (Delhi Group), and the globalnetwork Women in Informal Employment: Globalisingand Organising (WIEGO) are jointly producinga manual on surveys of informal employmentso defined (forthcoming in 2008). The Sub-Group176

on Gender Indicators of the Inter-Agency and ExpertGroup (IAEG) on MDG Indicators and the TaskForce on MDG #3 (Education and Gender Equality)have endorsed an indicator on the ‘structureof employment by type and sex’ developed by theILO Bureau of Statistics and WIEGO and a growingnumber of countries are using this indicatorto compile and present their national labour forcedata. The System of National Accounts is currentlyrevising its chapter on measuring the informal sectorcontribution to GDP.The donor community should support these initiativesto improve labour force and economic statisticsand national governments should use theexpanded statistical definition and related statisticalmethods in their collection of labour force andother economic statistics.Annex 2:Country case experiencesCase 1:Extending Thailand’s labour lawthrough the Ministerial Regulation forhome workers 82In Thailand, in 2004-05, the Ministry of Labourtook the initiative of drawing up ministerial regulationsto extend the reach of the labour law tohome workers and agricultural workers. Homebasedworkers are defined as having the followingcharacteristics:1. They receive contracts from an employer to produce,assemble, repair or process;2. They work at a location that is not the establishmentof the employer;3. They work to earn a wage;4. They use all or part of raw materials or productioninstruments of the employer;5. They are contracted to work at home, and thework they do is a part or all of the productionprocess or business of the employer.177Case 2:Judicial ruling on employmentrelationship in the PhilippinesThe Supreme Court in the Philippines, in landmarkdecisions, recognised an employer-employeerelationship in situations where this is ambiguous.The said Supreme Court rulings upheld the statusof workers on commission, boundary, 83 piece-rateor task base and workers hired through a third partysuch as a recruitment agency.In determining the existence of an employer-employeerelationship, the Supreme Court 84 applied

the following four-fold test: ‘(1) the selection andengagement of the employee; (2) the payment ofwages; (3) the power of dismissal; and (4) thepower to control the employee’s conduct.’The Supreme Court insisted that, in the case oftransport operators, the owner of the public vehiclehas supervision and control over the driver.The management of the business is in the owner’shands. The owner as holder of the certificate ofpublic convenience must see to it that the driverfollows the route prescribed by the franchising authorityand the rules promulgated as regards itsoperation. The fact that the drivers do not receivefixed wages but get only that in excess of the socalled‘boundary’ they pay to the owner/operator isnot sufficient to withdraw the relationship betweenthem from that of employer and employee.Case 3:Welfare fund in IndiaThere are workers who would not be able to participatein a contributory, voluntary scheme, no matterhow well designed such schemes are. Workerswho earn very little income or have seasonal workwould not likely be able to keep up with the requiredcontributions.Recognising this constraint, several states in Indiafound a solution in taxing the revenue that thesector generates, rather than the employers or theworkers. The funds raised from these levies, whichare Termed ‘welfare funds’, used on the welfare ofthe workers who produce the taxed products.India uses this system for the benefit of those whoproduce bidis (hand-rolled cigarettes), mine workers,cine workers and workers in the building industry.The Bidi Workers Welfare Act (1976), for instance,provides the national labour legislation that taxesthe revenue generated by the sector (but not employers)to create a welfare fund administered bygovernment. There are estimated to be over fourmillion bide workers in India, 90 percent of whomare women. Most of them work under a sub-contractfrom their homes for a low piece rate and withoutaccess to health insurance or social security.Taxes of 50 paise (or half a rupee) per 1,000 bidisare levied. The welfare fund operates hospitals anddispensaries, awards scholarships and providesschool supplies and uniforms. Initially, the funddid not cover standard aspects of social protectionsuch as sickness, occupational injury, maternity,disability, old age or survivors and unemploymentcoverage, but it has now been extended into groupinsurance for which the welfare fund pays half.The Life Insurance Corporation Insurance Schemesubsidises the other half. 85Welfare funds have also been set up also for workersin building and construction. In Tamil Nadu,a tax of 0.1 to 0.3 percent is levied on the costof all building or construction projects. This taxfinances the Tamil Nadu Scheme issued in 1994which prescribes the procedure for registeringmanual workers and the supply of identity cards.It also provides for crèches to look after the babiesof women construction workers, a group accidentinsurance scheme, educational assistance for sonsor daughters of registered workers, assistance formarriage of the son or daughter of the worker, assistanceto meet expenses towards the delivery ofa child, assistance to families of manual workerswho died due to accident or natural causes, andpension to cover every worker who has reached 60years and has been a member continuously for fiveyears.A bill is also now pending that seeks to create asimilar welfare fund to cover the ‘unorganised sector’more broadly.178

Case 4:Collective identity, collectivebargaining and global impactIndustrial outworkers, whether in the garment,shoe, or electronic sectors, face a number of commonproblems, among them: low piece-rates andearnings; irregularity of work; irregular and (often)delayed payments and the costs of providing/maintainingworkspace, utilities, and equipment.In addition, some endure harsh or dangerous workingconditions — for example, shoe makers are exposedto toxic glues and many other workers suffersore backs and deteriorating eye sight from workingin badly-equipped and poorly-lit workplaces(often their own homes).SEWA has a long history of working with garmentworkers focusing primarily on negotiating higherpiece-rates and fairer working conditions for garmentindustrial outworkers, many of whom are Muslim.These organizing efforts have involved negotiationswith the Labour Commissioner — as well asrallies in front of his office — to demand minimumwage, identity cards, and welfare schemes (childcare,health care, and school scholarships) for subcontractedgarment workers.In 1986, SEWA was able to get a minimum wage forgarment stitching (89.60 rupees per day) includedin the official Gujarat state Schedule of minimumwages under the Minimum Wages Act. 86 Over theyears, SEWA has also helped ‘own account’ garmentmakers to acquire new skills, improved equipment,and market information to try to compete inthe fast-changing local garment market. This hasincluded loans for improved sewing machines andrelated gadgets, training at the National Institute ofFashion Technology (NIFT), and installing electricityin the homes of SEWA members (to avoid thehigh costs of tapping electricity illegally).In recent years, as export-oriented, factory-basedgarment production has expanded in AhmadabadCity, SEWA has begun to organise waged workersin garment factories as well.During the 1980s, SEWA began establishing linkageswith membership-based organisations ofhome-based workers and street vendors and NGOsworking with these groups. In the mid-1990s, attwo separate meetings in Europe, these organisationscame together under SEWA’s leadership toform two international alliances — one of organisationsof home-based workers, the other of organisationsof street vendors.From its inception, the alliance of home-basedworker organisations was centrally involved in thecampaign to pass an International Labour Organization(ILO) convention on home work. To helpwith the campaign, SEWA and its allies promotedresearch efforts to compile and analyse existingdata on home workers worldwide, and UNIFEM wasasked to convene an Asia region policy dialogueon home workers that included government representatives.With the passage of the ILO Conventionon Home Work in 1996, SEWA and HomeNetrecognised the power of statistics and of ‘joint action’of activists, researchers, and policymakers.This recognition led to the 1997 global action-research-policynetwork called WIEGO which servesas a think-tank for the growing global movement ofinformal workers.In 1995, SEWA organised a meeting of representativesof street vendor organisations from a dozenof cities around the world as well as activistsand lawyers working with them at the RockefellerFoundation Study and Conference Centre in Bellagio,Italy. At that meeting, the participants draftedthe Bellagio International Declaration of StreetVendors which calls for action by individual traders,traders’ associations, city governments, andinternational organisations including the United179

Nations, the ILO and the World Bank. The participantsalso called for the establishment of an internationalnetwork of street vendor organisationsto be called StreetNet. In early 2000, a StreetNetoffice was set up in Durban, South Africa. In November2002, after several regional meetings ofstreet vendor organisations, StreetNet Internationalwas officially launched. The aim of StreetNet isto promote the exchange of information and ideason critical issues facing street vendors, marketvendors and hawkers (i.e. mobile vendors) and onpractical organising and advocacy strategies.Membership-based organisations (unions, co-operativesor associations) directly organising streetvendors, market vendors and/or hawkers amongtheir members, are entitled to become affiliated toStreetNet International. As of late 2007, Street-Net International had 34 affiliates in 30 countries,including: local associations or trade unions, nationalfederations or associations, and regional alliances.Over the past decade, SEWA has also co-foundedor inspired national and regional branches ofhome workers and their allies (called HomeNets)in South-East and South Asia, and national alliancesof street vendors in India and Kenya. It alsoserves on an international coordinating committeethat has organised three regional and two internationalconferences of organisations of informalworkers; and as advisor to an international steeringcommittee that is planning the first internationalconference of organisations of waste collectors tobe held in Columbia in early 2008.Together, these organisations have helped foster aglobal movement of workers in the informal economythat now includes local trade unions and othermembership-based organisations of informal workers,national and global trade union federations thathave begun organising informal workers, severalnational federations of workers’ education associations,the International Federation of Workers’ EducationAssociations (IFWEA), eight national andtwo regional HomeNets, StreetNet International,and the WIEGO network. Drawing inspiration andguidance from SEWA, this movement continues toidentify and network with organisations of informalworkers and to enlighten and influence policy debateson the informal economy.Case 5:Federation of urban poor participatingin governanceThe Homeless People’s Federation Philippines(HPFP) is a self-help, community-based federationthat promotes savings mobilisation in low-incomecommunities as a way of building their financialcapacity to invest in their own development. HPFPworks towards securing land tenure, upgradingsettlements and uplifting the economic status ofits members. It uses savings mainly as a strategy,not only to finance community investments butalso to bring people together to work towards theircommon goals. HPFP is thus not only a financialtool but also a social mechanism, which buildsnetworks of communities that foster continuouslearning and innovation, partnerships and supportsystems. This network of communities opens upnew possibilities for negotiations with the stateand, among other things, the realisation of newforms of partnership.In relation to its partnerships with public institutions,the federation deems it important to berecognised as a partner of barangays — villagelevel governance units that are the first line of engagementwith communities — and to participatein one important mechanism available to people’sorganisations and NGOs, namely the barangay developmentcouncil, where barangay physical, eco-180

nomic and social development plans and budgetsare prepared and approved. Barangay plans andprojects have a palpable impact on communities.Road projects, for example, can lead to dislocationof some communities, and health-related projectsmay overlap rather than complement communityinitiatedfacilities.In general, local development councils are mandatedat all levels, from the barangays up to thecities and provinces. They were created to encouragepeople’s participation in governance andthereby to promote transparency in all local governmenttransactions. The barangay developmentcouncil, in particular, is a vehicle that ensures theparticipation of civil society groups in the choice ofdevelopment projects and in the appropriation anduse of funds, so that these are not the sole responsibilityof barangay officials. HPFP leaders lobbiedsuccessfully for the activation of a barangay developmentcouncil in Quezon City, on which thereare as HPFP representatives, and HPFP leadersare also members of the city development councilof General Santos City. However, the experience ofthe federation is that without local pressure, thesecouncils may not operate effectively and may existonly in name.Engaging government and private agencies did notcome easily to the HPFP. Communities still struggleas they interact with government and privateentities that are not accustomed to dealing withthe poor on an equal footing. Below are some strategiesthat the HPFP has learned to adopt throughyears of engagement with public and private agencies.Alignment with electoral cycles: One of the lessonsfrom previous engagement experiences is that anyprojects or concessions approved by elected officialsshould be completed within the electoralperiod. Thus, planning must also be aligned withelectoral cycles.Establishing relationships with career officials:Despite changes in elected officials, the HPFPcan maintain relationships with career officials,who retain their positions even after changes inpolitical leadership. The HPFP continues to receivesupport from career officials, some of whomendorse the officials.Show of numbers and a broad network: The HPFPalso uses its national and international network toobtain concessions from public agencies, and therehave been instances where government officialsand landowners have agreed to certain concessionswhen these were requested in the presenceof large numbers of people. The federation hasused its international connections and its membershipin international groups (for example, theShack/Slum Dwellers International) to force closerrelationships with important public officials. It hasalso invited public officials to participate in multilateralprojects and international exchanges, thushelping to consolidate individual relationships andidentify win—win strategies.Capitalising on its track record and the HPFP nameto bolster local efforts: The HPFP has earned credibilitywith government and private organisationsthrough its self-help efforts in mobilising savingsand securing land tenure. Government functionariesand private agencies usually ignore HPFPcommunities until they find out about the financialstake members have invested in their work, thegains they have achieved through their own initiativeand the networks that they have been able toestablish.Strengthening technical know-how. Needless to say,good technical know-how is critical to taking a principledand informed position when negotiating. Unlesscommunity associations know how to expresstheir interests in operational terms, they will not be181

able to go beyond general statements of intent, andmay inevitably fall prey to unscrupulous parties whocan conceal their intent behind complex terminology,legalese, mathematical formulae and unverifieddocuments. Building technical skills is thereforean important component of successful engagementwith the state. The HPFP makes it a point to shareinformation and transfer their knowledge to a widerange of communities. 87Case 6:Legislative Initiatives for UnorganisedWorkersTwo legal initiatives in India are described belowconcerning Unorganised Workers. 88Unorganised Sector Workers (Employment andWelfare) Bill, IndiaAt present, the Government of India is actively reviewinga national bill on workers in the unorganisedsector, which was drafted by the National Commissionon Labour and submitted to Parliament in2002. This Bill has the objectives of regulating ‘theemployment and conditions of service of unorganisedsector workers and to provide for their safety,social security, health and welfare.’ 89 It defines aworker as ‘a person engaged in Scheduled Employmentwhether for any remuneration or otherwise.’(Some 122 occupations are listed as ScheduledEmployment.) The bill, furthermore, provides forthe establishment of Workers’ Facilitation Centresto support and assist unorganised workers, who:1) are responsible for registration of workers andfor guidance on a range of issues, such as disputeresolution, self-help groups and schemes availablefor their benefit; 2) will maintain a register of workersand provide an identity card and social securitynumber and 3) will be responsible for formulatingsafety and social security schemes, includinghealth and medical care, employment injury benefit,maternity benefit, old age pension and safetymeasures.Additionally, the bill provides for the setting up,at state level, of an Unorganised Sector Workers’Welfare Fund, supported with funds from government,employers and registered workers. It alsosets out minimum conditions of service, includinghours of work and minimum wages.There is an attempt as well to safeguard the rightsof women. Wage discrimination on the grounds ofgender is prohibited and a female worker is entitledto ‘such maternity benefits with wages asprescribed.’ Employers are also liable to pay compensationfor injury on duty. (Source: Governmentof India, 2003)Unorganised Sector Workers’ Social SecurityScheme, IndiaOver 90 percent of India’s workers are in the informaleconomy (including agricultural workers),with little, if any, statutory social security. Most arecasual labourers, contract and piece-rate workersand self-employed own-account workers. The Governmentof India recently launched the UnorganisedSector Workers’ Social Security Scheme on apilot basis in 50 districts. The scheme provides forthree basic protections: old age pension, personalaccident insurance, and medical insurance. It iscompulsory for registered employees and voluntaryfor self-employed workers. Workers contribute tothe scheme, as do employers. Where self-employedworkers join the scheme, they pay worker and employercontributions. Government also contributes.Workers Facilitation Centres are being set up toassist workers (see above under Securing Rightsof Informal Workers). The scheme will be administeredthrough the already existing Employee ProvidentFund Organisation offices around the country(Source: Government of India, 2004).182

Case 7:Social security for all in thePhilippinesIn the Philippines, two complementary facilities -the statutory social security system and the healthinsurance scheme — are being made progressivelyaccessible to everyone through voluntary schemesthat are open to self-employed workers, lowerpricedpackages and a wider network of collectionunits, including banks and organised groups.The Philippines Social Security System (SSS) offersa comprehensive range of cash benefits asinsurance for retirement, death, disability, maternity,sickness, old age, death and work-relatedinjuries. In 1995, it extended membership to theinformal sector under its self-employed and voluntarymembership scheme. Under this scheme,the minimum monthly salary to qualify as an SSSmember was lowered to P1,000 and the definitionof self-employed was expanded to ‘all selfemployedpersons regardless of trade, business oroccupation, with a monthly net income of at leastP1,000.’ This definition would include householdhelp, individual farmers, fisher folk and othersmall entrepreneurs who may join the scheme asvoluntary members. 90As of December 2002, SSS covered about 24.3million members, of whom 4.5 million are self-employedor working in the informal economy. However,the scheme continues to have problems withcompliance, and workers often blame non-membershipon lack of time, lack of information, lackof regular employment, cost of contributions, anddifficulties trying to contact SSS representatives.The Philippine Health Insurance Corporation (Phil-Health) used to be integrated with the Social SecuritySystem, but was separated, in part, to lowerthe cost of medical insurance package for householdsthat set their priorities for immediate ratherthan the longer-term medical needs covered bythe SSS. Phil-Health administers health insuranceand provides hospitalisation as well as out-patientbenefits to its members and their beneficiaries intimes of need and illness.Phil-Health has expanded its programme to includethose working in the informal economy through the‘Individually Paying Programme’ (IPP). In 2002,Phil-Health covered 54.6 million Filipinos, or 64percent of the country’s projected population forDecember 2005. Of the total covered, 54 percentare employed; 15 percent are individual payers;sponsor 22 percent by third parties, and 0.6 arenon-paying members. Individual payers includethe self-employed (market vendors, farmers, fisherfolk),private practitioners and professionals(doctors, lawyers), and those separated from work.With 2.9 million members as of March 2006, it iscalculated that IPP membership grows by an averageof 30 percent each year.Under the IPP, household heads pay a monthlycontribution of only P100 (currently just over $2)to have their families covered by health insurance.This entitles members and their dependentsto limited hospital coverage for room and board,laboratory tests, medicines and doctors’ fees whenconfined in a hospital. Phil-Health has furtherpilot-tested a partnership with organised groupssuch as cooperatives to facilitate its reach to thosewho are difficult to reach individually.Lowering the cost of insurance packages, allowingmore frequent collection, and partnering withorganised groups, could serve to make such voluntaryschemes available to all.183

Case 8:Minimum Living Standard SecuritySystem in ChinaIn 1993, the Chinese government began to reformthe social relief system in cities, at the same timeseeking to try out a minimum living standard securitysystem. In 1999, this security system wasestablished in all cities and county towns throughoutthe country. In the same year, the Chinesegovernment officially promulgated the Regulationson Guaranteeing Urban Residents’ Minimum Standardof Living to ensure the basic livelihood of allurban residents. This has been decided ‘primarilyon the basis of urban residents’ average incomeand consumption level per capita, the price levelof the previous year, the consumption price index,the local cost necessary for maintaining the basiclivelihood, other connected social security standards,the materials for the basic needs of food,clothing and housing, and the expenditure on under-agechildren’s compulsory education.’ 91Funds for this purpose are included in the fiscalbudgets of the local people’s governments, whichdetermine the minimum living standard accordingto the cost necessary for maintaining the basiclivelihood of the local urbanites. Urban residentswith an average family income lower than the minimumliving standard can apply for the minimumliving allowance. Investigation of the family’s incomeshall be conducted before issuance of theminimum living allowance, the level of which iscalculated in terms of the difference between thefamily per-capita income and the minimum livingstandard.Case 9:Labour protection for subcontractsin ChileIn 2006, a law regulating subcontracting was introducedin Chile. According to the Ministry ofLabour, 35 percent of workers in Chile are notdirectly hired by large firms finding work insteadthrough subcontractors or other providers of personnel.At present, responsibility for labour obligationsrests with the hiring firm. Compliance isoften low and capacity to pay limited, particularlyin the case of personnel suppliers who can operatewith little capital. In this way, labour obligationsare thoroughly diluted. The situation is such thatsome hiring firms are themselves creations of theprincipal firms.The law introduced in Chile regulates both typesof arrangements, but the objective is to limit thesupply of labour to only short-term replacementworkers. In the case of subcontracting, the objectiveis to promote it but to ensure compliance withall the labour obligations, as follows:• A deposit of a re-adjustable guarantee (nearlyUS$9000 at recent exchange rates) is requiredfor the providers of labour, and the deposit canbe used in cases of non-compliance and a timelimit of six months has been introduced for thecontracts.• In the case of subcontracting, provisions wereintroduced on responsibility for the labour obligations,which affect both subcontractors andthe main firms regarding responsibility for thelabour obligations. Direct responsibility lies withthe subcontractors, but the main firms have theright to request from the subcontractor a certificateof compliance (issued by the labour inspectorateagency), and they also have the right towithhold payments for subcontractors in cases ofobligations still pending. In fact, the law transformsthe principal firm into an instrument of la-184

our inspection and sanction and it ensures thatcompliance will increase. 92Case 10:Spain: Flexibility at the margin 93In Spain, a two-tiered hierarchy of standards wasapplied to different categories of workers — withflexibility allowed for new entrants and unemployedpersons (to encourage firms to hire them) and acontinued level of protection kept for permanentworkers (to avoid threatening the entire workforcewith job insecurity).High unemployment rates during the first half ofthe 1980s in Spain triggered the adoption measuresto regulate contracts of limited duration (orfixed term contracts) to ensure that they met minimumstandards of employment contracts whileleaving employment protection legislation for permanentworkers untouched. These contracts havelower dismissal costs and offer social securityrebates for the first two years of the contract. Itis applicable only to workers below 30 years orover 45 years, long-term unemployed and disabledworkers.Overall, fixed-term contracts have been instrumentalin increasing employment in Spain while maintaininga certain degree of labour rights. This hasbenefited some specific groups of workers, mainlylow skilled, and is clearly a better option than remainingunemployed. 94In 2006, Spanish trade unions, employers’ organisationsand government signed an agreement toprovide additional safeguards within these contracts,and to bring contractual arrangements moreinto line with the European social model. The mainpoints of the agreement are as follows:• After more than 24 months on a fixed-termcontract in the same enterprise and doing thesame job, over a reference period of 30 months,the worker’s contract becomes one of indefiniteduration;• Employer bonuses for four years when targetgroups (women, youngsters, and longer-term unemployed)are offered an open-ended contract;• Precise definition of and action against illegalposting of workers between firms;• Cuts in employer social security contribution;• Extended unemployment benefits for olderworkers, and measures to increase protectionof flexible fixed-term workers.The success of fixed-term contracts in Spain is stilla matter of discussion. Given the strict regulationson permanent employment, the main attractivenessof fixed term contracts is the flexibility andlow firing costs they entail. This kind of contractsallows for a quick adaptation of the staff to changingeconomic conditions.An important element in the assessment of fixedtermcontracts is whether workers with temporaryarrangements are trapped in this situation for along time or, on the contrary, can obtain a permanentjob after a relatively short period. It is saidthat fixed-term contracts could serve as screeningdevices that allow employers to observe workers’performance. Skilful workers would thus obtain apermanent contract after a probation period holdinga fixed-term contract. 95 However, this transitionfrom a temporary to a permanent post in Spain is,in general, rather slow and takes longer at presentthan in the past. 96The disadvantages of this measure must also benoted. There is, for example, little incentive as aresult either for employers or workers to invest inhuman capital and reduced overall labour mobility,due to inherent uncertainty, lower remunerationand high housing costs.185

Case 11:China’s positive responses to growingmarket economySince the founding of the People’s Republicof China in 1949, a planned economic systemhas been adopted, whereby highly concentratedemployment and wage and labour systemsguaranteed the livelihood of employees, and alsopromoted social security.However, this system has had to adapt with thechanges in economic and social development, particularlysince 1978, when China began its policyof reform and opening up. This period was markedby a focus on economic construction that swiftlymoved towards what has been called a ‘socialistmarket economy system.’As a result, labour and social security structuresunderwent many changes. Most obviously, Chinaexperienced unprecedented economic growth ofbetween eight to 12 percent, far exceeding thecentralised and collective growth patterns. This inturn affected employment patterns in cities withlarge urban migration from rural areas, un-contractedhires, long working hours, and low wages,with little or no job security or safety protection.Meanwhile, rural unemployment was also on theincrease and the gulf between classes was widening.It is estimated that there are more than 150million redundant rural labourers, with an unemploymentrate in urban areas and townships standingat over four percent.However, the most far reaching efforts to changethe law were announced in March 2006 by PremierWen Jiabao in his annual speech at the NationalPeople’s Congress. The wide ranging economic reformpackage includes a new labour law addressingworking conditions in China. With some amendments,influenced to some extent by the ILO, thenew labour ruling has become law taking effect 1January 2008. The State is now declared to haveobligations, good governance, better public institutions,protection clauses, contracts, regulationsand legal arbitrations. The reform package indicatesthat the State will play a crucial role by rethinkingdevelopment strategies and having solidpolicies in place. The following features are themost important of the new labour initiatives:• Most industrial employees, including migrantworkers are covered;• Provisions are clarified for collective contractsthat apply to groups of workers and employersindustry-wide or within a given region;• The employer must account for any deviationfrom the labour standards imposed by law,which also includes a requirement for them toprovide written contracts;• The courts will take a more stringent approachto labour violations as per the new laws. In fact,should the employer be found in violation ofeither the law or even ‘administrative regulations’,the labour administration has the powerto issue warnings or ‘rectifications’ dependingon the severity of the violation. There are alsoprovisions within the law for damages and evencriminal liability in those cases where labourrights are grossly infringed. The law strictlylimits tacking on probationary periods duringwhich the employer can arbitrarily terminate anemployee. This feature is designed to overcomean abusive practice that deprives employeesof protections from arbitrary discharge and requires‘just cause’ before an employee is dismissed;• This proposed law regulates for the first timethe new industry of labour brokers or ‘labourdispatchers,’ which has grown up to furnish exportindustries with ‘just-in-time’ workers whohave dubious legal status as employees under186

the law and therefore are often unprotected;• If employers keep using a temporary employeefor more than two fixed — term contracts, thecontract has to be converted into an indefiniteterm contract, thus ending the practice of ‘casualising’employment;• This draft law regulates abuses of ‘non-compete’clauses, whereby employers saddle skilledworkers in IT and other sectors with excessiverestrictions on who they can work for in the futureand severely hamper future job mobilitywith legal entanglements.To correct a predisposition in Chinese courts andamong labour arbitrators to exalt form over substanceand facts, the proposed changes make thefacts and realities of the employment relationshipthe key. Employees would no longer be confrontedwith the dilemma of enforcing a contract wherethe employer has illegally withheld one.Case 12:Out-of-court dispute resolution as apractical tool for legal empowermentFor poor people around the world, getting accessto courts and legal support to protect their rightsis often impossible. In many cases, the reason forthis is straightforward — they cannot afford to paythe legal fees. In Tajikistan, the UK has helped tosolve this problem by supporting Third Party ArbitrationCourts. These courts are an alternative wayof resolving disputes: two sides of a dispute agreeto nominate a third party who they both trust tomediate their disagreement and come to a decision.Although they operate independently of theformal legal system, decisions are recognised byTajikistan’s official courts. This means that whereparties do not comply with a decision, the statecan step in to enforce it.Third Party Arbitration Courts provide poor peoplewith a cheap, fair and accessible way of resolvingdisputes and protecting their rights. They areparticularly effective at protecting the rights ofwomen to land and property.Third Party Arbitration has helped to make legalservices available to 800,000 people in Tajikistan(12 percent of the population). The approach hasalso been used successfully in Russia, Kyrgyzstan,Moldova, Ukraine and Georgia. 100Case 13:Revising bidding and procurementpractices in SenegalGovernment can have a direct role to play in expandingopportunities for the informal sectorthrough affirmative action to purchase the goodsand services of the sector. In view of the weaknessesof the sector, government must changecontracting procedures, reduce barriers and makegovernment purchases more accessible to theinformal sector. There should also be improvedchannels of information between government andthe informal sector so that the government wouldknow what products are available while those inthe informal scetor would know what governmentis buying. With regard to simplifying requirements,the following actions are proposed:• Break large requirements into smaller sizes thatare more manageable by small suppliers.• Simplify bidding procedures for smaller requirements.• Reassess existing regulations with a viewto giving priority to internal sourcingof products.• Reassess procedures with a view to ensuringthat payments are made promptly to the suppli-187

er, perhaps even prepaid, to ease the financialrequirements of the informal sector suppliers.• Establish effective control systems to ensurethat these affirmative actions do not compromisethe need for a reasonable price, goodquality and timeliness. 101The Senegalese Government provides an exampleof a proactive policy of contracting out public infrastructureprojects to small scale contractors. Biddingprocedures and documents have been substantiallysimplified to permit smaller contractorsto participate in the bidding process. Bureaucraticdocumentation was also minimised while biddingdocuments now contain official unit cost estimatesas a guide to the less sophisticated contractor. Ageneral session is held wherein contractors are informedabout the existence of the implementingagency and are apprised of the entire procedure,from the bidding to the awarding and implementation.Simplification of the process goes as far asmaking the name of the winner very clear in theannouncement, so that even an illiterate contractor’srepresentative can readily determine who wasawarded the contract.The contract that the successful bidder has to signis basic and contains only essential elements, withsuperfluous or general content removed. The modelcontract used for all such projects is written inlanguage that is understandable to the layperson,avoiding legal jargon and complicated terminology.During the implementation of the contract, technicalassistance is provided to the awarded contractorregarding productivity improvement and basicmanagement. The technical assistance programmecomprises the following components: 1) short courseson basic management covering recordkeeping,accounting, stock control, and sub-project management;2) short courses and on-site technical assis-188tance for contractors’ managers, site supervisorsand foremen to improve technical management ofthe construction jobs to improve productivity; and3) ad hoc training for foremen and constructionworkers on specific construction techniques relatedto the job on hand. By its second year of operationin 1992, the programme had reached approximately720 individuals representing over 500 firms. 12

Chapter 3 Endnotes1 See Resolution concerning the promotion of sustainableenterprises, International Labour Conference, June 2007.2 World Bank, 2002a.3 Anne Trebilcock, 2005.4 Loayza, 2007.5 Declaration on Fundamental Principles and Rights at Work, ILO,1998.6 ‘Decent Work and the Informal Economy,’ Report of the Director-General, International Labour Conference, ILO, Geneva, 2002.7 In 2003, the International Conference of Labour Statisticiansendorsed a statistical framework for measuring informal economy.8 Alsop and Heinsohn, 2005.9 World Bank 2002b.10 Trebilcock, A., 2006.11 ILO, 1999.12 Loayza and Rigolini ,2006.13 ILO, 2002b.14 Heintz and Pollin, 2003.15 This summary is based on recent analyses of available nationaldata (using the indirect measure of estimating informal employmentas the difference between total employment [estimated by labour forcesurveys or population censuses] and formal employment [estimatedby enterprise surveys or economic censuses]) as well as earliersummaries of these analyses in Chen et al 2005. The authors of ILO2002 as well as Heintz and Pollin (2003) analysed a common set ofoffi cial national data collected and compiled by Jacques Charmes.16 National labour force data do not capture all forms of informalemployment for a variety of reasons. One reason is that some lawfulpaid activities are not declared to public authorities. The extent andcharacteristics of lawful but undeclared work differ widely betweencountries. A 2004 study for the European Commission found thatundeclared work represented as much as 20 percent of GDP in somesouthern and eastern European countries (‘Undeclared Work in anEnlarged Union’ 2004.) Of course, criminal activities are also notdeclared to public authorities. But the defi nition of the informaleconomy used by the Commission and in this Report excludes criminalactivities.17 See, Hu, A., The Emergence of Informal Sector and theDevelopment of Informal Economy in China’s Transition: A HistoricalPerspective (1952-2004) —(pdf version, slide 4) Available: http://ccs.tinghua.edu.cn and http://siteresources.worldbank.org/INTDECABCTOK2006/Resources/H_Angang.ppt18 Informal wage employment is comprised of employees ofinformal enterprises as well as various types of informal wage workerswho work for formal enterprises, households, or no fi xed employer.These include casual day labourers, domestic workers, industrialoutworkers (notably homeworkers), undeclared workers, and part-timeor temporary workers without secure contracts, worker benefi ts, orsocial protection.19 Chen et al., 2005.20 Analysis of national data by Jacques Charmes, cited in Chen etal., 2005.21 These fi gures were computed by Jeemol Unni using the individualrecords of the Employment and Unemployment Survey, 1999-2000,55th Round of the National Sample Survey Organisation, New Delhi.22 Heintz ,2006.23 Loayza and Rigolini, 2006. For fi gures on China, also see Hu,Angang, The Emergence of Informal Sector and the Developmentof Informal Economy in China’s Transition: A Historical Perspective(1952-2004). Available: http://ccs.tinghua.edu.cnand at: http://siteresources.worldbank.org/INTDECABCTOK2006/Resources/H_Angang.ppt24 Chen et al. 2005.25 Heintz 2006. Blunch et al. 2001.26 Statisticians distinguish three main sub-categories of selfemployment:1) ‘employers’, the self-employed who hire others; 2)‘own account workers’, who do not hire others; 2’; and 3) ‘unpaidcontributing family workers’. However, many statistical analyses,such as those by the OECD reported by Carré 2006, exclude unpaidfamily members because they are considered ‘assistants’, not‘entrepreneurs’. Since the majority of unpaid family workers in mostcontexts are women, this exclusion understates the real level ofwomen’s labour force participation and entrepreneurship (Carré 2006).27 UNRISD 2005, Heintz 200528 Heintz 2005.29 ibid.30 Chen et al 2005.31 Carré 2006:1332 Ibid.33 Tomei 2005.34 ILO 2003b.35 Based on conception provided by the United Nations Rapporteur,Martinez-Cobo, in the Study on the Problem of Discrimination againstIndigenous Populations. Cited in Tomei 2005.36 Tomei, 2005.37 ibid.38 Chen 2006b.39 Article I of the Declaration of Philadelphia, International LabourConference, 1944, Annex to the Constitution of the International LabourOrganisation.40 ILO 2006.41 Although a number of ILO labour standards addressed workersoutside of the formal economy (e.g., indigenous and tribal peoples,rural workers, etc.) since the 1960s, these did not previously result ininternational policy conclusions on the informalisation as a growingglobal trend.42 Stiglitz 2001.43 ILO 2002b.44 Freeman 1996.45 Tokman 2007a.46 Anne Trebilcock 2004.47 Paragraph 47 of the 2005 Summit Outcome Document.189

48 Including the UN funds, programmes and agencies, regionaleconomic commissions and development banks, as well as theinternational fi nancial institutions and the World Trade Organisation(WTO)49 Summit Outcome Document, ECOSOC 2006 Declaration.50 See Marty Chen, ‘Legal Empowerment of the Poor: Process andOutcomes’, Harvard, July 20, 2007.5152 This could be guided by the Employment RelationshipRecommendations, 2006, adopted by the 91st session of theInternational Labour Conference.53 Chile adopted a new law in 2006 to regulate thesearrangements, allocating solidarity responsibilities to sub-contractorand subcontracting fi rms involved. It also introduced the right ofthe latter to control the compliance of the former and to convert itsresponsibility into subsidiary. It also adapted the Labour Inspection tobe able to certify the degree of enforcement on line and up dated.54 See V. Tokman, “Informality, insecurity and social cohesion inLatin America’, International Labour Review, vol. 126 (2007), number1-2, ILO, Geneva. In Bogota, Colombia a survey of micro enterprisesindicates that 76 percent among them could not pay all the labourcontributions required by law, and in Lima, Peru this percentagereached to 85 percent.55 ILO, ‘Business environment, labour law and micro and smallenterprises’, Committee on Employment and Social Policy, GoverningBody 297th session, Geneva, 2006. Another specifi c experience is thechange of pecuniary sanctions by using the resources for improvingthe knowledge of micro-entrepreneurs on their obligations in Chile.Although ignorance cannot be claimed as an excuse for lack ofcompliance, there is need for support when levels of education are lowand access to costly professional services cannot be afforded.56 See Resolution concerning the promotion of sustainableenterprises, 96th Session of the International Labour Conference, June2007.57 See Case 6, annexed to this chapter.58 See Case 7.59 World Bank, ‘Informality: Exit and Exclusion’, Washington , 2007.60 The public funds involved are the highest in Bolivia (1,2percentof GNP) and are estimated for the quasi-universal pension of Chile at1,0 percent compared to the focused pensions in the Region that areusually below 0,5 percent of GNP.61 See International Labour Conference, Resolution on theemployment relationship, Geneva, 2006.62 The current, dominant rubric for understanding and analysingthe impact of regulation on economic growth is through the use ofmulti-country surveys, whose core function is to provide measuresof the costs of business regulation within an economy. These multicountrysurveys have, over a fairly short space of time, come todominate global, regional and country-level policy discussions aroundthe potential economic consequences of labour market regulation.Two of these surveys loom large for analytical work on the developingworld, namely the Investment Climate Assessment (ICA) surveys andthe Doing Business Survey (DBS) — both run under the auspices ofthe World Bank. The ICA measures fi rms’ perceptions of the investmentclimate in their country and are based on a standard core module(See http://rru.worldbank.org/InvestmentClimate/About.aspx for thisstandard questionnaire). The questionnaire covers senior manager’sperceptions of obstacles to growth and investment, as well asinformation on fi rm performance. The data is organised accordingto a series of topics including infrastructure and services; fi nance;government policies and services; labour relations and innovation(World Bank, 2007). Currently the ICA includes data on 58 countries(World Bank, 2007). The Doing Business Survey (DBS) has beenongoing since 2004, and in the most recent round in 2007, coveredclose to 180 countries. The DBS deals with issues such as contractenforcement; property rights regulation; business licensing and ofparticular interest to us here — labour market regulation. The methodof data collection is a combination of studying individual country lawsand regulations and surveys of local lawyers.63 For further background on these questions, see Berg and Kucera(eds.), In Defence of Labour Market Institutions: Cultivating Justice inthe Developing World (forthcoming).64 Botero et al (2004) undertook a seminal study on the impact oflabour regulation around the world. The data covers 85 countries andis very deliberate in its construction of indices of labour regulationranging from, for example, laws on overtime and part-time work tothose on dismissals, notice periods and the right to strike activity andcollective bargaining. The information is representative of countrylevelinformation for the late 1990s, and in most cases refl ects datafor 1997. It was, as far is known, the fi rst exhaustive, comprehensivemeasure of labour regulation that is cross-country in nature and notperception-based.65 Botero et al (2004), p. 1364, shows that of all the labourregulation measures, only dismissal procedures in their cross-countryregressions are a signifi cant and negative determinant of the logof GNP per capita, while social security provisions are positivelyassociated with growth.66 ILO Governing Body ‘The United Nations and Reform’ 300thSession Geneva, November 2007 GB.300/4/167 Maloney 2003.68 McKinesey Quarterly, ‘The hidden dangers of the informaleconomy.’69 IOE 2006.70 OECD 2006.71 Nickell and Layard 1998; and Levine and Tyson 1990.72 Gregg and Manning 1997.73 Saavedra and Torero 2004.74 Kugler et al. 2003.75 Acemoglu and Angrist 200176 In the case of Sara, et al., vs. Agarrado, et al. G.R. No. 73199, 26October 1988.77 See ILO,’The informal economy: enabling transition toformalisation,’ Tripartite Interregional Symposium on the InformalEconomy, Geneva, November 2007.78 See also Convention 156, Workers with Family Responsibilities.79 No. 177, 1966.80 See Annex 1 for more details.81 See Resolution concerning the promotion of sustainableenterprises, International Labour Conference, June 2007.82 Thanachaisethavut and Charoenlert 2006.190

83 Boundary: a cab driver, for example, pays a fi xed amount to theowner for the use of the vehicle, retaining the fares above this amountfor his expenses and keeping the balance as his actual earnings.84 In the case of Sara, et al., vs. Agarrado, et al. G.R. No. 73199, 26October 1988.85 Chen 2006c.86 As in other minimum wage negotiations, SEWA seeks to havethe minimum wage fi xed in a tripartite negotiation with the LabourCommissioner’s Offi ce, the employer, and the workers so it will beacceptable to all concerned. Also, SEWA does not expect that theminimum wage will be enforced but uses it as a benchmark or targetin on-going negotiations.87 Yu, S. and Karaos, A. 2004; UN-Habitat 2006.88 Chen 2006d.89 As noted earlier, ‘unorganised worker’ is the term used in Indiafor workers in informal employment and does not imply that suchworkers are not organised into unions or other organisations90 Previously, the defi nition of the regular self-employed waslimited only to ‘all self-employed professionals, partners and singleproprietors of businesses, actors and actresses, directors, scriptwritersand news correspondents, who do not fall within the defi nition of theterm ‘employee,’ professional athletes, coaches, trainers and jockeys’(Section 9-A, Social Security Act of 1997). Under the new resolution,the defi nition of self-employed has now been expanded to include lowincome earners.91 Government White Paper, 2004 at: http://www.china.org.cn/e-white/20040907/8.htm92 Tokman 2006.93 Larsson 2006.94 Estrada, and Izquierdo 2002.95 Guell-Rotllan and Petrongolo 2000.96 Dorantes, 2000.97 ‘China to train 60 million rural labourers before 2010’ in People’sDaily at : http//english.peopledaily.com.cn/200309/27/eng20030927_125088.shtml98 Wen Jiabao, Report of the Work of the Government. Delivered atthe Fourth Session of the Tenth National People’s Congress. 5 March2006. Available: http://big5.xinhuanet.com/gate/big5/news.xinhuanet.com/english/2006-03/14/content_4303943.htm99 ibid.100 DFID, 2006.101 Grierson and Mead 1995.102 Pean and Watson 1993.Chapter 3 BibliographyAcemoglu, D and J Angrist (2001) ‘Consequences of EmploymentProtection: The Case of the Americans with Disability Act’Journal of Political Economy, Vol. 109, October 2001.Ahmed, S and S.Devarajan (2007) Labour Laws: To Create Good Jobs,Reform Labour Regulations.Oped. Special to The Economic Times, India.Ahsan, A. and C. Pagés (2007) Are all Labour Regulations Equal?Assessing the Effects of Job Security. Labour Dispute andContract Labour Laws in India. SP Discussion Paper No.0713. Social Protection Discussion Papers. World Bank:Washington.R. Alsop and Heinsohn, 2005. Measuring Empowerment in Practice:Structuring Analysis and Framing Indicators. World BankPolicy Research Working Paper No. 3510. Washington, DC,World Bank, Feb.Amuedo-Dorantes, C., 2000. ‘Work transitions into and out ofinvoluntary temporary employment in a segmented market:evidence from Spain.’ Industrial and Labour RelationsReview, Vol. 53, Issue 2. pp. 309-325.Barrientos, A., D. Hulme and A. Shepherd. 2004. ‘Can Social ProtectionTackle Chronic Poverty?’ Background paper for theConference ‘Social Protection for Chronic Poverty - Risk,Needs and Rights — Protecting What? How?’ IDPM/University of Manchester, 23-24 February 2005.Besley,T. and R.Burgess. 2004. ‘Can Labour Regulations HinderEconomic Performance? Evidence from India.’ QuarterlyJournal of Economics. February. 91-134.Bhorat, Haroon. 2007. ‘Debates on Labour Regulations as a Cost ofDoing Business.’ Paper prepared for the UN Commissionon Legal Empowerment of the Poor.Blunch, Niels-Hugo, Sudharshan Canagarajah, and Dhushyanth Raju.2001. ‘The Informal Sector Revisited: A Synthesis AcrossSpace and Time.’ Social Protection Discussion Paper No.0119. Washington, D.C. The World Bank, July.Botero, J.C., S.Djankov, R. La Porta, F. Lopez-de-Silanes and A. Shleifer.2004. ‘The Regulation of Labour.’ Quarterly Journal ofEconomics. November. 1339-1382.Carré, Françoise and Joaquin Herranz, Jr. 2002. ‘Informal Jobs inIndustrialized ‘North’ Countries.’ Background paper forWomen and Men in Informal Employment: A StatisticalPicture.Charmes, J. 2000. ‘The Contribution of Informal Sector to GDP inDeveloping Countries: Assessment, Estimates, Methods,Orientations for the Future.’ Paper presented at the FourthMeeting of the Expert Group on Informal Sector Statistics(Delhi Group), Geneva, 28-30 August 2000.Chen, M. 2007. ‘Institutional Mismatch: Formal Institutions andInformal Realities.’ Paper prepared for the United NationsCommission of Legal Empowerment of the Poor. May 19._______. 2006a. ‘Informalisation of Labour Markets : Is Formalizationthe Answer ?’ Paper prepared for the United NationsCommission of Legal Empowerment of the Poor, November._______. 2006b. ‘Rethinking the Informal Economy: Linkages with191

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ChapterFOURBusiness Rights195

EXECUTIVE SUMMARY‘The opposite of poverty is not wealth — it is justice. The objective…is to create a more just society,not necessarily a wealthier one. And the great question is how do we do this?’Leonardo Boff, Franciscan Theologian, BrazilWork is central to our lives. Earning alivelihood is not only a basic need,it is a requirement for enriching oursense of well-being and the quality of life in general.Underpinning a system that contributes toemployment generation and to the ability to earna living are the savings, investment and innovationundertaken largely by businesses. 1Persistent poverty is the result of both publicpolicy failure and market failure. The two arerelated as prevalent policies and the resultingsystem of governance, institutional structure andlegal rights tend to characterise and limit thefunction of the economy, markets and businesses,and define what they can do and what theyare allowed to do.This report attempts to outline how legal mechanismscan empower millions of working poor whoapply initiative and entrepreneurship to earn theirliving in the informal sector of economies acrossthe world. It begins by outlining the barriers thatentrepreneurs face in accessing opportunities inthe formal economic system. Case studies arepresented to illustrate some solutions and innovations;they are intended to be studied, adaptedand scaled up. The report concludes by underliningessential principles and key considerations inmoving reform frontiers towards more inclusive,gender responsive and integrated economies.After examining current policy reform in privatesector development as well as innovation in institutionaldesign and business linkages, our workinggroup for this chapter concluded that legalempowerment of informal businesses can serveto promote rights-based economic empowerment.Legal recognition of labour and commercial rightsof business and its incorporation into governanceinstitutions should be at the core of legal mechanismsto empower informal business.Productivity and protection can and should bepromoted together. This two-pronged approachcould help to remove barriers in the wider legal/regulatory/market environment; it could do this bychanging or simplifying registration and licensingprocedures and extending greater legal rights tothe working poor. This would serve to empowerthe working poor to know and demand their legalrights, negotiate with officials, bargain more effectivelyin market transactions, and enforce contractsor seek redress when contracts are violated.It would also permit them to be represented inrelevant policymaking and rule-setting bodies.196

Informal and formal businesses are inextricablylinked. There are a variety of reasons for lack ofadherence to legal and regulatory requirementsby informal businesses. Non-compliance meansgreater profits for informal businesses, or it couldbe that the requirements are irrelevant, inappropriate,or non-existent for informal businesses.Possibly, informal businesses cannot afford tocomply with the regulations. Also, many do notknow what is required, or they may be unsureas to what advantages there could be under‘formal’ status. Because of the uncertainties,informal businesses continue to chart out fortheir own operational support, building networksand informal contractual arrangements groundedmore on social mores than on any legal basis.Legal, policy and regulatory reform and innovation,derived from what works for the poor andwhat would guarantee their fundamental rights,is long overdue. Millions of working poor men andwomen have no knowledge of what rights theyare guaranteed under national and internationallaw, or of government obligations to provide orfacilitate infrastructure, as well as financial,technical, and business services. With support ofcivil society organisations, or through their ownassociations, they are beginning to demand someform of legal identity or protection for themselvesand their livelihood activities.The response is a reform agenda that prioritisesapproaches to achieving the objectives,and determines the order in which the selectedmeasures are to be introduced. This would serveto optimise the productive potential of informalentrepreneurs and facilitate the protection oftheir businesses. As for the objectives, they arebroadly listed as follows: reducing regulatoryburdens; removing unnecessary barriers to formalmarkets and institutions; increasing opportunitiesfor business linkages; increasing benefits andprotections for all working in the informal sector;strengthening the organisation and representationof the informal entrepreneurs, and providingequal access of working poor women and men toall of the above.Additionally, improvement in the quality of institutionsin an economy has to proceed simultaneouslywith the transformation of the nature andefficiency of its informal economy. Learning frominstitution-building experiences of industrialisedcountries and those in transition as well from otherdeveloping countries, can be valuable. Thereare some good-practice examples from aroundthe world that illustrate how the constraintsof informal businesses have been successfullyaddressed through successful institutional andpolicy changes. At the same time, national andlocal level institutional changes can be initiatedimplicitly with the introduction of new economicactivities that may well provide direct and measurablebenefits.The Informal EntrepreneurStreet vendors, rural milk hawkers, millers andginners, small food cart pushers, shoe shiners,the itinerant fix-it technician, the roadside hairdresserand food caterer — these are the informalentrepreneurs who are vibrant visible economicplayers in the poorer countries of the world. Asan observer suggests, they are ‘the true entrepreneurs— more flexible, efficient and resilient thanthe over-regulated and overprotected dinosaursof the formal sector....’ 2 These entrepreneurs arecalled informal because they operate to some extentoutside the realm of formal legal regulationand protection, and without easy or full access tothe advantages of formal financial and businesssupport systems.There are some 500 million working poor earningless than one dollar per day (ILO 2004). The197

vast majority earn their living in the informaleconomy, occupying land they do not own, workingin small, informal businesses, and relying onfamily or friends for informal moneylenders forloans. Often, they have limited access to broadereconomic opportunities and are especially vulnerableto the uncertainties, the corruption and eventhe violence prevalent outside the rule of law.They have little or no access to settling disputesusing the legal machinery. Without legal rights orprotections, they are in a continual state of legaland political vulnerability. Informality, therefore,limits the opportunity for economic and socialdevelopment for individuals, families, businesses,communities, and even entire nations.The ILO defines the informal economy as accommodating‘all economic activities that are —inlaw or practice- not covered or insufficiently coveredby formal arrangements.’ 3 It includes wageworkers and own-account workers and contributingfamily members. Informal entrepreneurs arethe working poor who run very small enterprises.These include micro-entrepreneurs who hireworkers and two kinds of own-account operators,namely, heads-of-family businesses and singlepersonoperators.Around the developing world, women tend tobe concentrated in the low-end forms of ownaccountwork, and they are under-representedamong micro-entrepreneurs. On average, earningsin informal enterprises are low while costs andrisks are high, particularly for own-account operators,but especially for women operators.Legal Empowerment and LegalIdentityLegal Empowerment of the Poor, such that theirentrepreneurship is linked to greater economicopportunity, means not only reform in legal codesbut also policies to correct asymmetries in accessto information, education and training, and accessto financial, technical and business services.Additionally, the vast assortments of legal andregulatory rules and administrative systems, inwhich businesses are embedded, have to beexamined. A fundamental premise to all changeis that the legal identity of individuals as citizensand as entrepreneurs or workers must be clearlyestablished. For example, identity verificationis essential to commercial dispute resolutionprocedures and to local governance concerns.Similarly, property rights have ‘to be given toactual people, who themselves — in order to advanceand defend their access to and possessionof such rights — first must be able to formallyverify their personal status and identity. A crucialpre-requisite, then, to enhancing the quality ofproperty rights is ensuring that residents/citizenshave recognised documents (such as birth, death,marriage and divorce certificates) verifying suchbasic information as their name, age, sex andmarital status.’ 4Based on evidence, we argue that there is needfor an effective and enabling environment, regulatoryregime, commercial law and good economicgovernance for allowing business to operate withequitable economic rights and guaranteeinggreater accountability in the government’s abilityto issue laws and the capacity to implement andenforce them. This process should empower thepoor to use law and legal tools to prevail overpoverty, while persuading the government toequitably enforce its policies and regulations andreinforce the role of the civil society in implementinggreater accountability of all actors andat all levels. Sound economic governance is builtupon principles of equity and equality of opportunities.Public policies and action therefore mustsupport access to and distribution of assets, economicopportunities, and political voice participa-198

tion in decision making that promote sustainableenterprises. In order to effectively address thechallenge to ‘level the playing field,’ governancestructures have to emphasise greater investmentin the human resources of the poor, guaranteeson business rights for all and fairness in markets.Countries with pervasive inequalities in wealth,resources, weak institutions, and power typicallyexperience narrow financial sectors that meetthe needs of the privileged and the influential.Among the many market failures in developingcountries, notable are those in the financial marketsincluding those for credit, insurance, land,and human capital. With the consolidation ofmarket power in a limited number of large banks,lending tends to get biased in the favour of enterprisesthat are low risk and may exclude thosewith the highest expected risk-adjusted returns.Access to finance is essential for businesses;however businesses in the informal economy lackaccess to financial markets and the capacity tocompete in product markets.The higher the levels of inequities, the greaterwould be the propensity of the institutionsand social arrangements to favour the interestsof the influential and the privileged. Inequitableinstitutions generate economic costs, which areavoidable. It is therefore important to make surethat business rights do not provide exclusivebenefits and are not enforced selectively so that,both middle and poorer groups end up with unexploitedcapacity.An Integrated Economy ApproachLegal empowerment measures have to take placewithin a policy and regulatory approach whichrecognises that the two parts of the economy —formal and informal — do not exist independentlyof each other. There is a constant exchange ofideas, people, skills, goods and services betweenthe two parts. At the base of the private sectorare millions of small, micro, and mini entrepreneurs,who provide the bulk of the raw materialfor formal sector production, engage intermittentlyas labour in the formal enterprises, anduse products made in the formal sector. Thosewho have been employees in the formal sectorand have acquired new techniques, capabilitiesand business contacts, often move into the moreflexible informal sector and set up their own businesses.If relationships between different levelsof economic activity are to be anticipated, madestrategic and optimized, policy and institutionalchange for sustained business linkages and skillsdevelopment has to take place. Those who workin the micro-enterprises, and own-account workerswithin supply chains that lead into the formalsector, have to be accorded legal protection ona par with enterprises and workers in the formalsector.Successful design and support of appropriate policiesand institutions for an integrated economymust begin with analysis of innovations emergingat the interface between the informal and formal.Small producers and micro-entrepreneurs aredaily developing strategies for dealing with thedemands of formal institutions, while the latterhave also developed ways of managing their inevitableencounter with those who are the majorityin the poorer countries of the world. These copingstrategies hold clues as to what developmentinterventions can and should build upon, withinthe context of particular cultures, economies andindustries. Contextual specificity and lessonsfrom on-the-ground experience, are importantprinciples for policy and institutional innovationsfor an integrated and inclusive economy.Analysis of current practice could provide guidancefor the move from a bifurcated to an integrated,cohesive approach to entrepreneurship199

and economic activity. First, in order to encouragegreater engagement between establishedformal businesses and the smaller enterprises,transaction costs and risks of such engagementhave to be reduced. Second, the public sectorhas to develop and implement participatoryprocesses so that support is relevant to those onthe fringes of formal activity. Third, change hasto be negotiated through iterative dialogue andpartnerships spanning across central and localgovernments, the private sector, domestic capitalmarkets, producer groups and their social andeconomic organisations. Fourth, the function inmicro and small scale entrepreneurial activity of‘immediate and direct reciprocities’ 5 has to berecognised; in many low-income communities,economic activities and arrangements are embeddedin social relationships. How social relationsand values, not just market forces, affect themodus operandi of millions of entrepreneurs hasto be brought into economic reform considerations.How social and cultural norms conditionthe modes of production and overall situation ofwomen entrepreneurs and indigenous peoples isparticularly pertinent to this consideration.The Reform AgendaOur working group for Chapter 4 of this reportrecommends the following as key messages in thelegal empowerment of informal businesses:1. Policy Stance• Legally empowering small informal businessesrun by poor individuals or households shouldbe seen as a central pillar of a just societyand a central strategy for reducing poverty andinequality.• Most policies and the global economy currentlyaccord privilege to large firms/enterprises oversmall firms/enterprises.• Informality is here to stay and is an essentialfeature of the global economy.• Poverty and exclusion go hand in hand. Thepoor have no choice but to accept insecurityand instability as a way of life. Our reformagenda reflects the realities of poverty andexclusion experienced by poor people, andtherefore focuses on removing the barriers thathold the poor back, and building a frameworkof laws and institutions to provide genuineprotection and opportunity for all. This will requirewholesale systemic changes to all facetsof the legal framework, including: the politicalprocess, economic policy, law making, publicadministration, and law enforcement.• While national governments and the internationalcommunity should seek to create asmany formal jobs as possible and formalise asmany informal enterprises and jobs as possible,informality is not going to disappear. The realchallenge will be to reduce the ‘decent workdeficits’ of those who work informally, especiallythe working poor.• Poor people’s enterprise does play a vital role inthe economies of many countries, and the poortherefore have a right to earn a living free fromharassment, extortion, beating, wrongful eviction,expropriation and exploitation. They mustbe offered equal opportunity to access local,national and international markets.• Commercial rights for informal entrepreneurs/operators should be seen as an essential partof a package of rights for the working poorin the informal economy. This would includeproperty rights, labour rights, the right to socialprotection, and the right to organise and to berepresented in policymaking and rule-settinginstitutions and processes.• Other than social protection (property, health,life, disability, old age) that is relevant for wage200

workers as well as the self-employed in the informaleconomy, commercial rights are relevantto the half of the working poor in the informaleconomy who are self-employed.• Of the half of the working poor who are self-employed,the larger and more vulnerable groupare own-account operators, including bothsingle person operators and those who work infamily businesses or on family farms.• Productivity and protection can and should bepromoted together.• Economic policies should address issues ofredistribution.• Legal empowerment will stimulate growthwhich is on its turn a pre-condition to reducepoverty.2. Policy Positions• On basic commercial rights: right to work,including right to vend; right to a work space(including public land and private residences)and to related basic infrastructure (shelter,electricity, water, sanitation).• On intermediary commercial rights: right togovernment incentives and support (includingprocurement, tax holidays, export licensing,export promotion), and right to public infrastructure(transport and communication).• On advanced commercial rights: entity shieldingrules, limited liability and capital lock-inrights, mechanisms for perpetual successionof the firm and transferring its value, mechanismsto allow the use of standardised accounting,mechanisms to establish firm, managerand employee liability rights, protect minorityshareholders and default rules.3. Policy Process• Seeks to reduce the ‘decent work deficits’ ofthose who run informal businesses.• Includes representative voices of the workingpoor in the informal economy.• Recognises and addresses bias in existing commercialpolicies, regulations, laws, and proceduresthat favour larger firms/enterprises.• Seeks to extend government incentives andprocurements to the smallest informal enterprises.• Seeks to build backward and forward linkageson fair terms between larger and smaller firms.• Promotes social protection for informal operators(property, health, life, disability insurance),and does retraining, life-long learning and othersupport to mobility.4. Practical StrategiesGood practice examples from around the worldcould help in devising local needs-based modelsto address local issues and constraints.5. Policy DebatesDebates on formalisation of informal businesses.Formalisation could take on different forms,including:• Expanding formal employment opportunities.• Creating incentives for informal enterprises toformalise, such as:• Simplified registration procedures and progressiveregistration fees.• Supportive investment climate.• Fair commercial transactions between informalenterprises and formal firms.• Appropriate legal and regulatory frameworks,including enforceable commercial contracts,property rights and use of public space.• Tax-funded incentives, including: govern-201

ment procurement, tax rebates, and taxfundedsubsidies and incentive packages.• Provision of financial, business and marketingservices.• Creating mechanisms and financial arrangementsto provide social protection for informalproducers.• Promoting participatory policy processes andinclusive rule-setting institutions that involverepresentatives of associations of informalentrepreneurs.The broad effect of reform in attaining legal empowermentwill not only improve the well-beingand livelihoods of individual entrepreneurs; it willalso result in enhanced social protection, as wellas increased productivity and asset base of poorpeople and of the nation as a whole.I. Introduction andFrameworkSince the phrase ‘informal sector’ was coinedin the early 1970s 6 to describe the range ofsubsistence activities of the urban poor, there hasbeen considerable debate about its definition.The informal sector is not homogenous; it encompassesdifferent types of economic activities,different labour relations that range from the selfemployed,paid and unpaid, to disguised wageworkers and economies with different economicpotential that includes survivalist economies andsuccessful micro and small enterprises. In effect,the term ‘informal economy’ is more appropriateas it comprises the informal sector while notexcluding possible linkages of informal operatorswith the formal sector. 7Generally speaking, informal economyencompasses the expanding an increasinglydiverse groups of workers and businesses inboth rural and urban areas, operating informally— i.e., they are not recognised or protectedunder the legal and regulatory frameworks. Thenational and local economies continue to be acontinuum that ranges from informal to formal.The informal economy has been growing at arapid rate throughout the world, including in theindustrialised countries. In recent years, much ofthe employment potential within the developingcountries has been found in the informal economiesand, hence, in the informal enterprises.In these countries, a much higher proportion ofthose working in the informal economy are poor,with the share of women relative to men beingmuch higher.202Accordingly, the legal empowerment agendafor business rights emphasises reforms, creatingmechanisms and financial arrangements toprovide social protection for informal producers.

Good initiatives have been undertaken by ILO,the World Bank, USAID, among other organisations,to provide the poor and the disadvantagedwith the legal and institutional environment andthe rule of law in order that they might betterdevelop their capacity to use their own talents,energy and initiative for accessing livelihoodresources, and assets to generate efficient andproductive enterprises. The ultimate goal is toguarantee sustainable livelihoods for all — alongthe continuum from the informal to the formaleconomy. The approach: reorienting gender-baseddevelopment strategies to eradicate poverty. Thisrequires 1) a better understanding of the informalbusinesses and enterprises within the context ofthe formal and informal continuum, and 2) an integrativestrategy to design a system of businessrights that provides solutions to the lack of socialprotection, lack of representation and voice,and leads to more efficient economic functioning,greater trust and reduction in conflict, andimproved institutions with dynamic benefits forequitable investment and growth.This chapter on Business Rights presentsevidence to demonstrate that the inequality ofbusiness opportunities available to the poor isuneconomical and detrimental to sustainabledevelopment and poverty reduction. It will alsoprovide policy and rule of law implications emergingfrom removal of bureaucratic and administrativeinefficiencies in the life cycle of businessesand the study of market failures, particularly atthe local levels, while building upon the broadconcept of levelling the playing field — politicallyand economically — in the domestic and globalarenas.Why Business Rights? And why now?We live in world of increasing inequities. Therichest two percent of adults own more than 50percent of global assets. The poorest half of thepopulation holds only one percent of wealth. 8Unprecedented affluence co-exists with astonishingdeprivation, persistence of poverty and unmetbasic needs, violation of fundamental politicalfreedoms, and neglect or even absence of lawfulprivileges that uphold basic civil liberties for asignificant proportion of the population. Nearly40 percent of the world’s 6.5 billion peoplelive in poverty of which, a sixth live in extremepoverty. 9 The number of people living in extremepoverty in Africa has nearly doubled from 164million in 1981 to 316 million in 2001. Even forthe rest of the world, extreme poverty today hasincreased by nearly three percent from 1981. 10While the deprivations indicated above are morecommon in the less wealthy countries, they existin, one form or another, in rich countries too. 11Work, being central to our lives, is a basic requirementto enriching human well-being and thequality of life in general. Work empowers peopleto enhance their ability to attain and sustainlivelihoods, while it is largely left to business tocreate savings, investment and innovation thatcontribute to livelihoods and to employmentgeneration. 12 Persistent poverty may be blamedon both public policy failure and market failure.Interestingly, the two are related in that prevalentpolicies and resulting systems of governancestructure and legal rights have largely served tocharacterise the function of the economy, marketsand businesses, and to define what they cando and what they are allowed to do. Therefore,an integral constituent of poverty reduction musthave to do with empowering the working poor toaccess opportunities that could be created byreducing economic, legal and social inequalities.Businesses, generally speaking, constitute theprivate sector; they are usually led private individuals,communities and corporations. In many203

developing countries, however, informal enterprisesovershadow the private sector and theirnumber is increasing. Creation of good qualityjobs is determined to a large extent by enterprisecreation, innovation and expansion. Where thepotential for entrepreneurship, creativity, dynamicand productive job creation is stifled, eitherthrough onerous legal procedures and institutionsor through inequities represented by vested interestsand inadequate enforcement, entrepreneurswill gravitate towards the informal economy.Informal firms and enterprises account for morethan 50 percent of all economic activities andsome estimates conclude that over 30 percent ofthe developing world’s GDP and 70 percent of itworkers are outside the official economy. 13 Thesize of the informal economy is inversely relatedto economic development and, while, at thesame time, there is a significant correspondencebetween working in the informal economy andbeing poor. However, a large number of informalbusinesses in an economy are not per se a sign ofits underdevelopment; they are, rather, a reflectionof the fact that these enterprises are confinedto subsistence and insufficiently productiveactivities.Informal Economy and InformalBusinessesThe informal economy in Africa is estimated tohave been 42 percent of GDP in 2000. WhileZimbabwe, Tanzania and Nigeria were at the highend with the informal sector representing 59.4percent, 58.3 percent and 57.9 percent of respectiveGDP, Botswana and Cameroon were at thelower end, with 33.4 percent and 32.8 percentrespectively. At the turn of the century, 93 percentof the jobs created in Sub-Saharan Africa werein the informal economy, 14 with almost 80 percentof non-agricultural employment and over 60percent of urban employment. 15 In Latin America,the average size of the informal economy was 41percent of GDP with Bolivia as the largest informaleconomy at 67.1 percent, and Chile as thesmallest at 19.8 percent. In Asia, the range variedfrom Thailand at 52.6 percent, to Singapore with13.1 percent. In transition countries, by far thelargest informal economy was in Georgia with 67.3percent, and at the lower end were the Czech Republicwith 19.1 percent and the Slovak Republicwith 18.9 percent.In the recent years, the lion’s share of newemployment in developing countries has beenin the informal economy. Activities in the informaleconomy provide certain benefits to a marginalfew. Also, while some activities in the informaleconomy provide viable livelihoods with reasonableincomes for some, most informal workers earninsecure incomes under conditions that are not onpar with decent work standards. 16 They do not, forexample, receive medical or other benefits. 17 In effect,the decent work deficits are most pronouncedin the informal economy where most workers havelittle or no social protection and receive little orno social security. Also, poor respect and lack offreedom of association make it difficult for theseworkers and their employers to organise. 18 In addition,working conditions in the informal economyare often unsafe, uncertain, and poor in terms ofremuneration. Other concerns are poor occupationalhealth and safety arrangements, and realfears for sexual harassment and violence againstwomen. Furthermore, wages are suppressed belowadequate levels and fail to reward productivity orlong service. 19 Finally, the lack of social protectionmeasures, such as rights and representation,leave many in the informal work force trapped inpoverty. 20 Nearly all informal workers are amongthe poorest citizens of their respective countries,and they lack education, money and the ability to204

obtain formal, permanent work. 21 It is importantto add that a larger proportion of women relativeto men work in the informal economy and suffersfrom poverty.Legal Empowerment and BusinessRightsThe informal economy includes a growing andincreasingly diverse group of workers and ruraland urban enterprises operating informally. Whilethe informal economy comprises both productionunits of various kinds and elements of employmentstatus, this paper will focus mainly on businessrights relating to small entrepreneurs andthe self-employed. Business rights are integralcomponents of the strength of an economy. Whilemillions in the informal economy may be wagelabourers, consisting of paid, unpaid and disguisedwage recipients in ‘value chains’, engagedin survival-type activities, there are nevertheless asignificant proportion of poor people who are selfemployedin micro-enterprises, operating theirown business ventures, or contributing familyworkers, or employees.The problems and needs under each of thesecategories may be different, but they neverthelessfall into the ‘informal’ category because theylack recognition or protection under the legal,institutional and regulatory, judicial and disputeresolution frameworks. They also lack access tothe advantages of formal financial and businesssupport systems. In addition, they are excludedfrom, or have limited access to, public infrastructureand other benefits of the public goods aswell as to markets and they are therefore unableto be competitive or efficient in managing theiractivities. This, in turn increases their vulnerabilityto natural, social and political shocks andstresses and places doubt on the sustainability oftheir livelihoods.It is argued that prevalence and increase in informalbusiness is a consequence of inequitablepolicies and discriminatory enforcement that failto give support to those businesses and entrepreneurialopportunities in which tangible benefitsmight accrue to the poor. Accordingly, for mostsmall entrepreneurs and self-employed people,working in the informal economy is a survivalstrategy rather than an option.Balancing Human Rightsand Market-Based ApproachLegal empowerment aims to address relativedeprivation in all forms, including social,political and economic dimensions in the pursuitof a life of choice, freedom, respect and dignity.The issue of equity, in having rights and beingable to enforce them, is critical, as it relatesto the disparities in capabilities which reflectson access to wealth and resources as well as toownership of assets. While the rich and privilegedcan protect themselves and their rights by legalmeans as well as by influence and connections,the poor must rely on legally enforceable rights.The recognition of human rights is therefore necessary.Equally necessary are the legal means andcapacities to enforce those rights through accessibleand effective institutions and processes thatare transparent, participatory and accountable.At the same time, institutional reforms designedto eradicate poverty need to be put into place toensure that state and public policies work, thatregulation to create greater equity is in place, andthat the system will work to help the poor and thedisadvantaged to create wealth — even throughentrepreneurship.Public investments are crucial for developing thatkind of ‘private based economy’ that could allowthe private sector to create employment and sustainlong- term economic growth. In the absence205

of the provision of adequate infrastructure, healthservices and education, market forces alone canaccomplish little. Existence of markets is a prerequisitefor survival and sustainability of businessesand entrepreneurs. While the freedom toenter a market 22 is a vital constituent of development,the level of access and representation inthose markets determines the formal or informalcharacter of an enterprise and what it can accomplish.Again, the markets cannot functionin the absence of effective and equitable publicpolicy, rule of law, regulation, social support andpolitical freedoms. In principle, the markets, inaddition to creating economic efficiency, can alsoencourage greater economic equity. This would,however, depend on the structure of markets,their governance and associated legal rights, andthe nature and extent of their inclusiveness asreflected through active business enterprises.Private institutions are willing to develop innovativepartnership models to provide greater accessto goods and services by the poor. But they requireassistance through appropriate policies andstrengthened capacities to remove barriers to themarket creation and provide greater market accessto the entrepreneurs in the informal economies.At the same time, governments shouldnot hesitate to step in, possibly in the form ofpublic-private partnerships, that would encourageprivate institutions to meet the demands ofthe poor and enhance market access in rural andunderserved areas 23 .Economic success requires getting the balanceright between the government and the market,in terms of who should provide the goods andservices and how they should be provided. Anysuccessful development strategy demands theexistence of equitable access to markets by alland requires involvement of government, marketsand the private sector, and the civil society.Voice, Representation and EffectiveEconomic GovernanceIt is essential to build upon and refine the aboveissues in the context of the work of the Commissionon Legal Empowerment of the Poor (CLEP)and reform the development agenda by broadeningthe discussion of business rights and the informaleconomy in a comprehensive manner thatgoes beyond formalisation per se. It will emphasisethat the Legal Empowerment of the Poor tocreate and operate their enterprises and generatesustainable livelihoods sustainably requires themto have a voice in all aspects of policymaking,implementation and enforcement, and to havethe ability to work with governments and otherstakeholders to create new rights, capacities, andopportunities.The adverse effects of unequal opportunitiesof representation and political voice andpower for the poorer people on human developmentare particularly harmful because economic,political, and social inequalities tend to reproducethemselves over time and across generations,setting into motion a poverty trap that doesnot allow for improvements in the quality of theirlives.Business rights should result in the creation ofan efficient and inclusive private sector with asound domestic macro environment, having tradepolicies, institutional foundations and adequatecapacity for maximising benefits from the macroglobal environment and promoting distributionalequity.There is evidence, we believe, to argue the casefor an effective and enabling environment, for aregulatory regime and for commercial law, as wellas good economic governance that would allowbusiness to operate with equitable economicrights and guarantee greater accountability in206

the government’s ability to issue, implement andenforce laws. This would empower the poor to uselaw and legal tools to prevail over poverty, whilepersuading the government to equitably enforceits policies and regulations and reinforce the roleof the civil society in implementing greater accountabilityof all actors and at all levels. Soundeconomic governance is built upon principlesof equity and equality of opportunities. Publicpolicies and action, therefore, must supportaccess to and distribution of assets, economicopportunities, and political voice participation indecision-making that works to promote sustainableenterprises. In order to effectively addressthe challenge of ‘levelling the playing field’,governance structures have to emphasise greaterinvestment in the human resources of the poor,guarantees for business rights for all, and fairnessin markets.Greater Access to Markets, Goods andServices, and InfrastructureIt is vital to have functional legal principles andmechanisms that will enable entrepreneurs andbusinesses in the informal economy to havegreater access to goods and services and marketsso they can build productive and efficient businessenterprises. At the minimum, this requiresthe existence of equitable opportunities for thepoor to create, run and manage a business. Inturn, it translates into strengthened capabilitiesof the poor to access and effectively useresources, infrastructure, and constituent components24 of a business and factors of production.With such assurances, they could efficientlytransform their labour into a successful business.They could manage it to obtain certain profit, anduse the secure asset base to expand that businesssuccessfully. For a business to be sustainable,the entrepreneur should have the abilityto manage a high level of personal, professionaland financial risk, as well as the risk of physical,environmental and socially adverse impacts,in addition to the capacity to recover from thoseshocks.In the presence of missing or imperfect markets,the distribution of wealth and power affects theallocation of investment opportunities. Achievingeconomic efficiency would necessitate the combinationof actions relating to correction of the marketfailure as well as measures to provide greateraccess to services, assets, and political influenceby the disenfranchised suffering from adverseimpacts of inequitable development strategies.Inclusive Financial ServicesCountries with pervasive inequalities in wealth,resources, weak institutions, and power typicallyexperience narrow financial sectors that meet theneeds of the privileged and the influential. Amongthe many market failures in developing countries,the most notable are those in the financialmarkets, including those in the areas of credit,insurance, land, and human capital. With theconsolidation of market power in a limited numberof large banks, lending tends to get biased in thefavour of enterprises that are low risk. This mayexclude those with the highest expected risk-adjustedreturns. Access to finance is essential forbusinesses; however businesses in the informaleconomy lack access to financial markets and thecapacity to compete in product markets.Over 4 billion people globally are currently irrelevantto the banking system. Normally, accessto commercial banks by the low income andrural populations is limited in terms of physicaldistance to the closest branch of the bank andalso because of thresholds in account fees orminimum required balances. While large companiesare well served by existing banking system,low income and rural individuals, micro-entre-207

preneurs and small sector enterprises are particularlyunder-serviced by the financial industry.For instance, nearly 741 million Indians in ruralareas are poorly served, despite a huge demandfor financial services, including an estimated annualcredit demand exceeding US$10 billion. 25Similarly, those in the informal economy are notcovered by safety and health regulations and arenot, therefore, eligible for social security benefits,pensions or other forms of social protection.Enhanced access to basic financial services— savings, credit, insurance, pensions andtools for risk management — is a critical input foremerging and potential entrepreneurs to leverageeconomic opportunities and improve their qualityof life. The ability and willingness of private financialinstitutions to provide access to inclusivefinancial services would depend on appropriatepolicies, existence of relevant human and institutionalcapacities that would remove barriersto the market creation, as well as incentives topartner with the private sector to provide broadermarket access to the entrepreneurs who requiregreater facilitation and empowerment. At thesame time, the government should not hesitate tostep in through policies, regulations and incentivesto encourage private financial institutionsto garner savings, long term credit and marketbasedsocial protection instruments in rural andunderserved areas. 26 The regulatory structures,therefore, have to ensure broader access to financialservices, particularly for the poor, as well asa deepening of the financial sector and establishmentof greater accountability.Institutional ChangesThe higher the levels of inequities, the greaterwould be the propensity of the institutions andsocial arrangements to favour the interests ofthe influential and the privileged. Inequitableinstitutions generate economic costs, which areavoidable. It is therefore important to make surethat the business rights do not provide exclusivebenefits and are not enforced selectively, whichwould leave both middle and poorer groups withunexploited capacity.As the realms of institutional and economicdevelopment are reciprocally related, knowledgeof national and local contexts is critical. Therefore,international comparisons of ‘ease of doingbusiness’ need to take into account the realityof the nature, quality and experience of differentcountries. Although the private sector in developingcountries is largely comprised of informalbusinesses, the character and attributes of theinformal sector will most certainly vary from onecountry to the next. It would therefore appear thatthe effectiveness of recommendations on the convenienceof doing business should be measuredby the extent to which the proposed changesare mainstreamed and translated into improvedperformance of the institutions and their operatingenvironment. Without such measure, theexpected increase in foreign investment would beillusory.Because the informal economy and informal businessesare predominantly local, the criteria determiningease of doing business must incorporatethe needs of the informal businesses. Subsequentrecommendations should therefore encompassand be judged by the ability of the macro-levelchanges to the business climate to impact locallevelinstitutions and, therefore, businesses in theinformal economy.Improvement in the quality of institutions in aneconomy has to proceed simultaneously with thetransformation of its informal economy. Valuablelessons can be learned from the institution-buildingexperience of the industrialised countries208

and those in transition, as well as from otherdeveloping countries. There are good-practiceexamples from around the world that illustratehow constraints of informal businesses have beensuccessfully addressed through institutional andpolicy change. At the same time, national andlocal level institutional changes can be initiatedimplicitly by launching new economic activitiesthat provide direct and measurable benefitsto those who will be influenced by institutionalchange. As the process continues, the ability ofa population, impacted by institutional change,to realise tangible benefits will provide proof oftheir ownership. Over time, the economic activitybecomes an agent for and a catalyst of demandfor appropriate institutions. 27 For instance, economicempowerment based on economic activityis a step towards gender equality, 28 even if theyare not synonymous. Linking creative economicactivities with business rights in the informaleconomy has an added advantage in that it allowslearning-by-doing in implementing institutionalreforms. It also allows for synergistic linkages betweenreforms from above (including those initiatedby governments or promoted by internationalorganisations) with effective action from below(by civil society organisations and organisationsof the poor themselves).Pursuing the Agenda for ChangeThe emphasis of the document is placed oncreating larger options and opportunities forentrepreneurs and businesses in the informaleconomies to operate proficiently and equippingthem with capabilities, enabling environmentand equitable governance systems to make correctchoices to maximise their welfare. 29TheLegal Empowerment Framework does not look toformalising economies as the desired outcome;instead, it urges the creation of circumstances inwhich the ultimate benefits of the developmentinterventions will accrue in equitable manner tothe poor on a sustainable basis.An important focus of the paper on BusinessRights is the use of an evidence-based approach.It is anticipated that the analysis will establishempirical linkages to illustrate legal rights andempowerment of the poor by tackling the intricacyof the informal economy and proposing amethodology and sequence of actions to addressthe underlying complex issues of informal businessesand poverty alleviation.The ‘agenda for change’ proposes a comprehensivestrategy to address three inter-relatedcomponents that run the continuum fromthe informal to the formal end of the economy;they include:• Creating more entrepreneurship and businessopportunities by ensuring that those in theinformal economy are legally recognised; theyshould have legal social protection and riskmanagement options, equitable representationand voice, as well as and assurances that thenew enterprises do not have an incentive to bein the informal sector simply because of lowercost.• Enabling those enterprises currently in theinformal economy to move upwards along thecontinuum, through a context-specific mix oflegal policy frameworks that include incentivesand regulations, as well as assurances that theentrepreneurs have the capacity and flexibilityto do so.• Improving productivity, efficiencies and conditions,and increasing the returns for the businessesin the informal sector.It is obvious that the interventions under thethree categories will have common characteristics.The guiding principle would be to tackle theroot causes of informal businesses rather than209

negative manifestations of informal businessesand informalisation. Also, the changes have tooccur at the local level, which basically definesthe informal economy. Successful mobilisation ofbusinesses at local level, whether by the effortsof government, private sector or NGO, is a greatpromoter of equitable economic growth. Whilesuch interventions would be local in nature, theirimplementation recognises the global (universal)context that influences all development activities.In the end, the success and sustainabilityof any reform will depend on public recognitionand ownership of evidence-based transformationwithin the cultural, social and political milieu. 30To Sum UpThis introduction provided an overall frameworkon the legal empowerment agenda for businessrights and sets the stage for the sections thatfollow. We proposed that reforms can help thepoor and the disadvantaged with the legal andinstitutional environment and the rule of law.People would then be encouraged to developtheir capacities, energies and initiatives and toaccess livelihood resources, build assets andgenerate efficient and productive enterprises. Thenext section will look at informal businesses andenterprises within the context of the informal-formalcontinuum; it will examine the relationshipbetween the informal economy, poverty and productivity,and it will map the informal economiesthat involve women and indigenous people.2. Informal Economy andInformal BusinessesInformal-Formal ContinuumEven though any debate on ‘informality’ centreson the dichotomy between formal andinformal, the concept is a lesser representative ofdualism and embodies a continuum when viewedfrom any of the perspectives of activities, institutionsor contracts. The definition of informality,however, is ambiguous and informal economydenotes a plurality of activities that are also contextual.The term ‘informal sector’ is inadequatebecause it fails to represent the inherent heterogeneity,complexity and dynamism of this economyand its constituent activities. Also, the genderbias in the informal economy is probably underestimatedand women are more likely to be in thoseinformal activities that are under-counted, includingproduction for own consumption and paiddomestic activities in private households. Basedon the ILO’s classification, 31 the term ‘informaleconomy’ has come to be widely used to includethe expanding and increasingly diverse group ofworkers and enterprises in both rural and urbanareas, operating without recognition under legaland protective frameworks, and characterised bya high degree of vulnerability.The informal economy is differentiated in termsof production units as well as employment status.Informal may therefore refer to firm features oftypes of firms, or it may refer to employment. Itmay also be characterised as an activity or a typeof activity. On the one hand, it includes own-accountworkers in survival type activities, rangingfrom street vendors, cobblers and shoe shiners,garbage collectors and rag pickers, to the selfemployedentrepreneurs. On the other hand, therange of wage earners — from aid domestic work-210

ers employed by households, to ‘disguised wageworkers’ employed by sweatshops in productionchains — are also included as important constituentsof the informal economy.Not surprisingly, any discussion of the informaleconomy would include ‘small’ enterprises notregulated, as well as employment relationshipsthat are not legally recognised and that leavemuch to be desired (in terms of providing socialprotection and reduction of vulnerability). Wemay note here that issues relating to employability,productivity and flexibility of the labourforce and to their upward movement along theinformal-formal continuum are the subject ofChapter 3 of this report on Labour Rights. Thethrust of this discussion, therefore, will maintainthe focus on informal businesses and enterpriseswhich, for the purpose of analysis, include ownaccountoperators. We examine legal measuresthat include the presence of, and equitable accessto, effective judicial, political and economic,market and non-market institutions. These, wehave observed, make it easier for micro and smallenterprises to start up and grow in a manner thatallows them to adopt ‘high road’ strategies toenhance efficiency and productivity and providedecent jobs for its employees.Poverty and Informal EconomyIncreasing poverty spurs growth of the informaleconomy. In turn, the informal economy promoteseconomic growth, serving to reduce poverty. Theproblem here is that any reduction in poverty isinefficient, and lacks legal recognition, regulationand protection. Studies of countries that havesuccessfully delivered pro-poor growth suggestthat even though economic growth is extremelyimportant, it is unable, by itself, to address theeventual disparity in poverty reduction. It is necessaryto address the nature of inequalities whileaccounting for the resulting change, if any, ininequality from this kind of economic growth. 32Information and data on the informal economyin developing countries is sketchy since very fewcountries undertake survey of employment andengagement in the informal economy on a regularbasis. Even though nearly 75 percent of the poorpeople in developing countries live in rural areasand engage in informal economic activities relatedto agriculture, many countries exclude agriculturefrom their measurement of the informal economy.33An informal sector survey carried out by ILOin 1995 found that 41 percent of the workerswere in the informal economy because theycould not find any other work (including thosewho became involved following their retrenchment),30 percent because their family neededadditional income, 10 percent because of thefreedom to determine their hours or place ofwork, and 9 percent because of good incomeopportunities. 34 Although not all poor are inthe informal economy, almost all those who areinformal are poor. Urban areas of most developingcountries expose the contemporaneous existenceof informal workers’ shacks with the formal workers’more affluent homes. In the name of economicdevelopment and enforcement of propertyrights, the former are first to be destroyed by governmenteven though the services provided to theformal settlements by them are perfectly legal.Informal EnterprisesDespite the fact that the self-employed andemployers face many barriers to setting up andoperating informal enterprises, they account for70 percent of the jobs in sub-Saharan Africa andabout 60 percent in the other developing regions.In India, nearly 93 percent of the workforce is inthe self-organised informal sector, with nearly 10211

million persons and their dependents relying onstreet vending for their livelihood. 35Studies alsoindicate that in the absence of informal economies,a majority of private sector householdswould have fallen deeper into poverty. 36There is a prevalent assumption that informalenterprises exist by choice because of theowners’ preference to curtail labour costs andavoid payment of taxes. While this is true, it isnot the entire story. Many businesses in the informaleconomy have limited output, employment orincome to even be at the level of taxable entities.The root causes of the manifestation of informalenterprises encompass the legal and institutionalhurdles that make it difficult to become or stayformal. For instance, the regulatory environmentmay be excessively burdensome, overly punitiveand especially, in the cases of crises countries,non-existent. In addition, informal businesseshave little access to public infrastructure and dependon informal and unfair institutional arrangementsfor their essentials. Essentials could rangebroadly from credit, markets and non-marketinstitutions, training, developing skills and knowledge,to social protection, and even informationon demographic trends (including rural-urbanmigration and cross-border labour migration), andnational policies that constrain or limit employmentgeneration in the formal economy.Lack of registration and regulation of informalbusinesses and enterprises prevents informalworkers from enjoying the rights of the decentwork that may be accorded under their nationallabour legislation. The use of the term ‘informal’does not mean an absence of norms or rules foroperations of the enterprises. Businesses in theinformal economy have their own institutions,mechanisms, rules, financial arrangements, andsystems for accessing technology and markets,but they lack a common framework and it is unclearif they observe the fundamental and humanrights of the labour. Also a number of criminalactivities — money laundering, human and drugtrafficking, tax evasion, etc. — are in the informaleconomy, as they operate on the fringes of thelaw. This area, however, is beyond the scope ofour chapter.Informal Enterprises and ProductivityA large informal sector can be an indication ofhigh regulatory costs on business, raising doubtson the value of the regulations themselves. Studies37 have found that the size of the informalsector, also termed ‘shadow economy’, could beinversely related to Gross Development Product(See Figure 1). Informality restrains efficient useof resources and productivity. The inefficiency orsub-optimal productivity of the informal economyis therefore linked in part, to the absence of legalprotection, inability to enforce contracts and theneed for security that comes from the dearth ofproperty rights and decent work attributes. Theirability to organise for social protection is weak,with little or no voice to make their businessrecognised or protected. The lack of voice andparticipation in decision-making leads to nonexistenceof economic rights or opportunities toachieve their full economic potential.An economy with a large proportion of informalbusinesses functions below its potential, with alower rate of economic growth. 38 It also servesto point up systemic inequities in the abilityof entrepreneurs to access markets, resources,technology, information, public infrastructureand social services. However, the large number ofsmall firms in developing countries is not in itselfa sign of their underdevelopment, but, rather, areflection of their confinement to insufficientlyproductive activities.It is important to design policies and mechanisms212

Figure 1 GDP Per Capita and the Size of the Shadow EconomyGDP per capita (constant 1995 US$50 00045 000•40 000•35 000Norway30 000••25 000Belgum• • • • •20 000•15 000• UK •••10 000• •5 000Estonia Hungary• PeruGuatemala EgyptI I • • • ••• • • I••• • •• • •I •• • •• •I Tunisia • I I • • I• • I0 10 20 30 40 50 60 70 80Size of the shadow economy (% of GDP) Source: Erneste & Schneider 1998Figure 2 Indigenous private sector development and regulation in Africa and Central Europe:a 10-country studyGDP Per Capita growth rate against sum of policy and institutions to improve the enablingenvironment: 1995-1999GDP Growth rate 1995-19996%5%4%3%2%1%0%• Uganda• Poland• Latvia• HungaryMalawi•Ghana•• Tanzania4 I ZambiaSouth Africa• Kenya6 I •8 I 10 I 12 I 14 I 16 I 18 IPolicy and institutions Source: Bannock, G. et al. August 2002that enable the participation and access to benefitsfrom growth by the poor people. This requiresa conscious and sustained effort by governmentsto create necessary conditions for broad-basedgrowth in regions and sectors where the poor liveand work. 39 While it is not guaranteed that theadoption of the favoured institutional and policymix will bring higher GDP growth, studies showthat differences in policy and policy implementationare reflected in dramatically different rates ofgrowth of GDP per capita achieved. Appropriateregulatory and institutional environment has beenfound to be the single most important elementin an economic growth strategy. Even thougha country’s level of skills, especially technicalskills, is also strongly correlated with per capitaeconomic growth, interventions to improve thenational regulatory and institutional environment213

within which business operates offer far morerapid impact scenarios than those based on longerterm education and skills strategiesA Mapping of Informal Economies 40Although, the studies that describe countrylevel patterns and changes have at best beensketchy, given the complexity of measuring theinformal economies precisely, they are certainlyindicative. Over the last fifteen years or so, theinformal sector in Sub-Saharan Africa has apparentlyincreased from about two-thirds to nearlythree-quarters of non-agricultural employment. 41Street vending predominates, with women tradersforming the majority in many of the countries inthe region. Former retailing establishments oftenencourage informal economy operators to expandtheir markets to low income groups and ruralareas who can be reached most easily by itineranttraders and street vendors.Informal enterprises are small-scale enterpriseswith 80 percent classified as a one-person business.Businesses with more that one person weremainly found to be in transportation and construction.For women in this region, the informaleconomy presents 92 percent of the total job opportunitiesoutside of agriculture compared to 71percent for men. Almost 75 percent of these jobsare performed as self-employed and own-accountworkers, and only 5 percent as paid employees.Most small scale enterprises are without a formalestablishment: over 33 percent of the informalactivities take place within or beside the homeof the business operator; 20 percent are withouta fixed location; 10 percent are at a market, and10 percent are in the street or in an open space.The major sources of livelihoods, especiallyfor women engaged in informal activities (foodprocessing, handicrafts, hawking and vending),have been affected by trade liberalisation and bycross-border trading. Cross-border trading is verysignificant in the informal economy and is prevalentin South Africa and West Africa. For instance,a large number of temporary immigrants purchasegoods in South Africa to take back to their owncountries for sale. While normally the informaltrade is within the region itself, traders from WestAfrica travel as far as Dubai and China to purchasehigher quality goods that are cheap. 42 Also,vendors in Africa now have opportunities to link upwith bigger enterprises and transnational corporationsto become a part of their value chain. 43In Latin America, urban informal employmentincreased from 52 percent in 1990 to 58 percentin 1997 as a proportion of the total urbanemployment. 44 Not surprisingly, the increase wasalso observed in employment in micro and smallenterprises as well as growth in self-employment.A proportion of self-employment or own-accountworkers is an indicator of low job growth in theformal economy and a high rate of employmentcreation in the informal economy. Self-employmentrepresents nearly 32 percent of totalnon-agricultural employment worldwide, with 44percent in Latin America. 45 In poor countries likeBangladesh and Pakistan, the proportion of selfemploymentaccounts for nearly 70 percent ofthe total employment.In the transition countries of Central and EasternEurope and the countries of the Commonwealthof Independent States (CIS), the informal economyranges from subsistence farming, petty trade,undeclared and unregistered labour, unregulatedand unlicensed enterprises, the shuttle trade withneighbouring countries, to tax evasion. With thetransition of the region to a market economy, theinformal economy has expanded rapidly becauseof economics and social transformations, closureof many state- owned enterprises, increasedprivatisation, labour retrenchment and collapse of214

social insurance, and need for institutional, businessand labour reforms that have lacked enforcementand failed to keep in touch with changingeconomic realities.The expansion of manufacturing and industryhas led to a relative decline in the informaleconomy in China, Japan, the Republic of Koreaand Singapore. While the informal economy hadalso declined from 60 to 57 percent in Thailandfrom 1980 and 1994 because of the economicboom, with the effect of the economic recessionof 1997 it grew again to 60 percent. 46 Althougheconomic recession leads to an increase in‘survivalist’ economic activities suggesting thepoverty mitigating role of the informal economy,economic prosperity has also been directly relatedto an increase in the informal economy, asin Indonesia, because of increased opportunitiesand the ability of the informal enterprises to respondto new market opportunities. An expansionof the informal economy in the former circumstancesreflects marginalization of economic activitiescharacterised by low productivity, low incomesand low standards of living. 47 On the otherhand, expansion of the informal economy duringan economic boom is related to the expediencyof bypassing over-bearing bureaucratic processesand business practices that can constrain firmsin the formal economy from responding quickly tomarket signals and increasing demand.Women in the Informal EconomyWorldwide, women’s share of informal economyemployment has remained between 60 percentand 80 percent. Moreover, the number of femalesin the labour force is continuously on the rise andwomen in the informal economy most probablynumber much more than reflected in availablestatistics. (Girls, too, would be among their numbers.)They comprise most of the unpaid labour,are often home-based workers, and thus fall easilythrough gaps in enumeration as data and statisticson household level is still difficult to measure. Inmany countries, women are also drawn to the informaleconomy because they lack the right to ownand inherit property and are therefore obstructedfrom activity in the formal economy, as they donot have assets to use as security for credits, etc.A statistical snapshot of women in the informaleconomy around the world reveals: 481) Informal employment is generally a largersource of employment for women than for menin the developing world. Other than in the MiddleEast and North Africa, where 42 percentof women workers are in informal employment,60 percent or more of women workers in thedeveloping world are in informal employment(outside agriculture). The comparative figuresfor informal employment, as share of non-agriculturalemployment by sex and region, areas follow: in sub-Saharan Africa, 84 percentof women workers compared to 63 percent ofmen workers; in Latin America, 58 percent ofwomen workers, 48 percent of men workers,and in Asia, 73 percent of women to 70 percentof men.2) Although women’s labour-force participationrates are lower than men’s, the limited dataavailable points to the importance of women inhome-based work and street vending in developingcountries: 30-90 percent of street vendors,except in societies that restrict women’smobility; 35-80 per-cent of all home-basedworkers, including both self-employed andhome workers; and 80 percent or more of homeworkers — industrial outworkers who work athome).3) Although women’s labour force participationrates are lower than men’s, women representthe vast majority of part-time workers in many215

developed countries. In 1998, women were60 percent or more of part-time workers in allOECD countries reporting data. Women’s shareof part-time work for specific countries was ashigh as 98 percent in Sweden, 80 percent inthe United Kingdom, and 68 percent in bothJapan and the United States.Indigenous Peoples and InformalBusinessesAlthough the concept of social exclusion hasgained wide currency, over 370 million indigenouspeoples continue to be marginalized fromthe benefits of mainstream social and economicdevelopment. Indigenous peoples are over-representedamong the poor in over 70 countries.Lacking secure property rights hinders indigenouspeoples in obtaining compensation fromgovernment in cases of eviction and displacement.Usually, this is due to lack of evidence tosupport their property rights. They also face hugebarriers in obtaining legal protection (throughenforcement opportunities), access to resourcesand wealth creation. Due to past experiencesof bias and discrimination, many indigenouspeoples forgo formal justice systems; also, legalaid services are often not provided to those livingoutside the mainstream justice system. Lack oftitle to property is another barrier to economicempowerment. Traditional property rights systemsare being eroded as a result of neo-liberal,macro-economic policies. Indigenous peoplesmust therefore resort to finding employment inoccupations that are not formally paid, as mightbe the case in rotational farming, fishing andweaving. Illiteracy and impoverishment furtherlimit employment opportunities in low paid jobs.Indigenous women carry the burden of reproductivework, domestic work, child care and workingin the field.Distinct cultural identity and values: The indigenouspeople’s perspectives on property, povertyand development are different from mainstreamthinking and are not based solely on a marketcash-based economy. Many indigenous societiesexchange value (rather than money) by forms ofbarter, gift exchange, and other forms of reciprocalexchange. A better understanding of these‘principles of reciprocity’ would be needed tounderpin the work of the Commission. This maypose a number of binary oppositions, many ofwhich may be challenged and contested, including:spirituality vs. rationality, collectivity vs.individuality (competition, intellectual propertyclaims), sustainability vs. optimal productivity,traditional knowledge (e.g. trial and error) vs.empirical scientific methodology, subsistencevs. commerciality or markets, custom vs. state,rights vs. poverty, and inclusion vs. exclusion (orassimilation vs. integration).Indigenous peoples often employ innovativemethods to subsist, using traditional knowledgesystems. With the onset of globalisation, it atfirst appeared that a new environment would beopened to developing new approaches, but barriersto entrepreneurship remain.Micro-credit and micro-finance institutions areoften the only source of capital for indigenouspeoples and women in the informal and homebasedsectors. However, indigenous peoples’perceptions of credit and loans are often compromisedin the interests of entering the globaleconomy. Efforts to promote innovation andentrepreneurship in indigenous peoples’ territoriesshould seek to understand and assessthe systems of exchanging value in the society,sometimes based on complex kinship, culturaland other social networks.216

Box 1 Empowering Indigenouspeoples throughEntrepreneurshipThe ILO-INDISCO Programme was launched in thePhilippines in 1994 in collaboration with the PhilippineGovernment. It is a multi-bilateral technicalcooperation aimed at strengthening the self-relianceof indigenous and tribal peoples through entrepreneurialactivity. It has facilitated the operation of 12pilot projects in different parts of the country, whichinvolve indigenous communities in various stagesof development. Financial and technical assistancehas been provided to indigenous communities toengage in entrepreneurship.The main window of opportunity for income andemployment generation opened to community memberswas the Revolving Loan Fund, which providesassistance to groups and individuals for theirlivelihoods activities. Together with skills training ona particular trade the community wanted to pursue,plus appropriate equipment bought from projectfunds, members of several indigenous communitiesmanaged to improve their market access and economicstatus. Twelve communities with a combinedpopulation of approximately 90,000 people havebenefi ted directly or indirectly from these projects.An estimated 2,500 jobs in agriculture, traditionalhandicraft, fi shery, weaving and community serviceswere created. As a result of the new revenue-generatingactivities, the income levels of partnercommunities have increased by an average of 44percent. In recent years, the ILO has been providingtechnical assistance to some projects fundedthrough the Small Grant Fund from the Embassy ofFinland. The fund has supported various projectsproposed by the Indigenous communities.Source: ILOEmpowering Informal BusinessesClearly, the informal business economy also linksformal sectors to consumers. In fact it providesmany low and middle-income employees of theformal sector with goods and services and contributesto economic growth. Economic growth,while a necessary condition, is not a sufficientcondition for creating productive employment andpoverty reduction. As discussed earlier, an increasein economic growth does not usually resultin the alleviation of an informal economy or thetransition from informal to formal unless it alsobrings greater equity. A positive outcome wouldreflect an approach that regards people living inpoverty as creators of growth rather than merelyas recipients of benefits. 49 We should, therefore,focus on empowering the poor and the disadvantaged,whether as self-employed producersand entrepreneurs or as employees of a firm. Itis important that these economic actors participatefully and on an equal basis in the economicdevelopmentSome of the critical barriers faced by firms inthe informal economy include limited humanand working capital, limited access to markets,goods and services and to financial and businesssupport services, obsolete technology, complexand burdensome government regulations with poorenforcement, lack of economic infrastructure anda poor supply of public services. Given the impedimentsto operate businesses in most developingcountries, the opportunity costs of informalityappear to be much lower compared to operatingformally. It is therefore not surprising that informalnetworks also coordinate many transactionsamong the formal enterprises. Emphasis must fallon improving the business environment, and in amanner that it is particularly beneficial for enterpriseat local level, including the rural areas. Forinstance, India’s economic reforms, which alsocover the business environment, have generallyfocused on the corporate and the organised sectorthat provides employment to nearly three percentof the country’s work force, with another three to217

four percent employed in the public sector andgovernment. The balance, or roughly 93 percentof the workforce, which is essentially the self-organisedinformal economy, remains untouched bythose economic reforms. 50Accordingly, it is important to improve theeconomic governance structure that could allowsmaller formal enterprises to grow with greaterefficiency, productivity and quality working conditions.It is equally necessary to facilitate theproblems faced by informal enterprises in accessingproducts offered by financial institutions,such as the incorporation of security insuranceand the establishment of limited liability institutionsthat might encourage high return-high riskinvestment. Informal enterprises also need to besensitised to the requirements for improving employmentand working conditions so that they areable to access dual labour regulations and safetynets in meeting part of their own labour contributionswhile sustaining the business and generatingdecent employment. 51Similarly, efficiency among the formal enterprisesshould be improved comprehensively and in anintegrated manner by enforcing the rule of law.This would cover property rights and the reductionof corruption by lowering transaction costsof various activities. It would include reducingentry and operating formal costs, reducing growthbarriers and implementing cost-efficient andproficient policies, guidelines and procedures forenforcement of compliance. If a one-stop shopis a solution for reducing registration proceduresand costs, then it is vital that such facilities areorganised and available at different levels (local,municipal, district, national and regional).This would not only facilitate the availability ofrelevant information, but would also be a disincentiveto operate informally if cost was the solerationale for such an action.Awell-structured tax system that is understandableand transparent would also dissuadefirms from adopting the inefficiencies ofinformality simply to avoid taxes. Also, if locallevies translate into fees for enhancing access tocommunity resources as well as public serviceswith greater accountability, the attractiveness andlower opportunity cost of informal sector woulddiminish significantly.It would also be helpful to introduce propertyrights registration, contract enforcement mechanismsand clear policy guidelines to encouragemarket participation of street vendors, etc., ina manner that is participative, and incorporatesinformal and popular rules. By bringing diversegovernance structures within the purview of theformal judicial system in a manner that is accessibleand simple, it would increase the reach ofrule of law to all business operators and encouragethe efficient creation of informal-formalforward and backward linkages.Given suitable conditions, including provision forcapacity development, vocational training, andskill building, many informal enterprises mayeffortlessly glide into formal ones. This empowermentprogramme has to be an integral componentof poverty reduction strategies using incentivesbased on participation, a level playing field ofregulations, and enforcements thereof that, interalia, enhances efficient, affordable and reliableaccess to public infrastructure services.While legal identity has been linked to a greateraccess to basic goods and services and opportunities,it could catalyse inclusive developmentonce it becomes a constituent of a larger reformagenda. So, legal identity must be internalisedin policies and actions that target the integrationof markets of the poor with other formal markets,thereby enabling them to meet the unmet de-218

mand for affordable financial services. But, in theabsence of legal documents, it is very unlikelythat emphasis on legal identity would reduceexclusion. 52 Accordingly, the challenge to comprehensivelyaddress the inter-related componentsof the continuum from the informal to the formalend of the economy is not technological; it is instructuring institutions, capacities, incentivesand regulations to provide certainty to economicexchange and therefore to equitable economicgrowth. 53issues highlighted in this section, which also providedan overview of informal economies aroundthe globe. The next section on legal identity andbusiness rights discusses, among other issues,the need for an effective enabling environment,regulatory regime, commercial law and good economicgovernance that is required for businessto operate with equitable economic rights andwith guarantees of greater accountability in thegovernment’s ability to issue laws with the capacityto implement and enforce them.Economic growth draws upon activities that arecomplex, fluid and geographically dispersed. Theyrequire an elaborate and ever evolving division oflabour ranging from owners of formal and informalenterprises, producers, managers, and theiremployees, who are an integral component of thevalue chain. Such a large-scale division of labourrequires state-like institutions for public enforcementof laws and contracts 54 and for its efficientsustainability. Although the government takes thelead in creating regulations, it is important to engageother stakeholders, including the poor peopleas economic actors, as well as NGOs, localpublic governance structures, and informal labourassociations. This would ensure ownership by allrelevant actors and create inexpensive approachesto enforce compliance with the regulations. Itis the inclusive partnerships and a shared agendabetween small and large firms, governments at alllevels, civil society and the development agenciesthat will unlock new opportunities. 55To Sum UpIncreasing poverty is a key reason for growth ofthe informal economy and a main cause of theblossoming of informal enterprises strugglingto overcome legal and institutional hurdles thatmake it difficult prevent for businesses to becomeor stay formal. These are some of the broad219

3.Business Rights:Unlocking Barriers/Constraints to EmpowerInformal EnterprisesThe adverse effects upon the poor of living undera system of unequal opportunities of representation,political voice and power tend to reproducethemselves over time and across generations,setting into motion a classical poverty trap fromwhich relatively few can escape. In this chapter,the position is taken that promoting businessrights in the informal economy could helpto unlock pent-up talents and energies amongthe working poor and create an efficient andinclusive private sector. The view is that a keyto improving the quality of life of the poor andthe disadvantaged is the creation of an efficientprivate sector with a sound domestic macroenvironment, and replete with trade policies, institutionalfoundations and adequate capacity tomaximise benefits within a broader macro globalenvironment. Such a creation would dependupon good economic governance, enforceablelaws and regulations, effective institutions, practicesand dedicated people to support inclusiveand equitable development of the domesticprivate sector.This chapter therefore argues for effective andenabling environments, a regulatory regime,commercial law and good economic governance.It is expected that this process will empower thepoor to use law and legal tools to prevail overpoverty, while persuading government to equitablyenforce policies and regulations. This wouldreinforce the role of the civil society in implementinggreater accountability of all actors andat all levels. Sound economic governance is builtupon principles of equity and equality of opportunities.With public policies and supportingaction, assurances could be given about accessto and distribution of assets, economic opportunities,and political voice participation in decisionmaking— all of which can help to promote thecreation of sustainable enterprises. This is thepath to address the often-heard demands to ‘levelthe playing field.’It is therefore essential to build upon and refinethe above issues in the context of the work of theCommission and reform the development agendaby broadening the discussion of business rightsand the informal economy in a comprehensivemanner that goes beyond formalisation per se.In other words, the legal empowerment of theinformal business can generate sustainable livelihoodsonly by first addressing the constraints andbarriers that stifle their productive potential andencourage them to have a voice in all aspects ofpolicy making, implementing and enforcing andhave the ability to work with governments andother stakeholders to create new rights, capacities,and opportunities.The core set of legal enforcement componentsare presented in Box 2, below.Empowerment has to be specific to context,the social reality of different groups, locationetc. Policymakers and practitioners must tailorthe various elements from the framework to meetlocal circumstances. The example, below, demonstrateshow LE could address the specific conditionsof street vendors.Different levels of commercial rights are appropriateto the circumstances of different typesof informal businesses: notably, street vendors,informal manufacturers, informal transport providers,and small farmers. Commercial rights forinformal businesses can be stratified as follows:• Basic commercial rights: right to work, in-220

Box 2 Unlocking Barriers: Legal Mechanisms to Empower InformalBusinesses1) Legal and bureaucratic procedures that allow informaloperators or businesses to operate:• Simplifi ed registration procedures;• Simplifi ed licensing and permit procedures;• Identifi cation devices, including: ID cards for individualoperators, and business identification;• Legislation — e.g., municipal by-laws — that allowstreet vendors to operate in public spaces.2) Appropriate legal frameworks that enshrine the followingas economic rights:• Access to finance, raw material, and productmarkets at fair prices ;• Access to transport and communication infrastructure;• Access to improved skills and technology;• Access to business development services;• Access to business incentive and trade promotionpackages: tax deferrals, subsidies, trade fairs.3) Legal property rights:• Private land;• Intellectual property.4) Use rights to public resources and appropriatezoning regulations:• Use rights to urban public land;• Use to common and public resources: pastures,forests, and waterways;• appropriate zoning regulations where governing andunder what conditions informal operators or businessescan operate in central business districts,suburban areas, and/or industrial zones.5) Appropriate legal frameworks and standards forwhat informal operators and businesses are allowed tobuy and sell:• Appropriate laws and regulations regarding whatare legal vs. illegal goods and services;• Appropriate product and process standards: forexample, public health and sanitation concerns restreet food;• Marketing licenses for products and services.6) Appropriate legal tools to govern the transactionand contractual relationships of informal operators orbusinesses including:• Bargaining and negotiating mechanisms/power;• Legal and enforceable contracts;• Grievance mechanisms;• Conflict resolution mechanisms;• Possibility of issuing shares, right to issue shares;• Right to advertise and protect brands and trademarks.7) Legal rights and mechanisms to provide informaloperators and businesses with the following:• Temporary unemployment relief;• Insurance of various kinds, including of land, house,equipment, and other means of production;• Bankruptcy rules and default rules;• Limited liability, asset and capital protection;• Capital withdrawal and transfer rules.8) Legal right for informal operators and businessesto join or form organisations, legal recognition of suchand legal right of the organisations to be representedin relevant policymaking and rule-setting institutions• Membership in mainstream business associations;• Membership in guilds or other associations ofsimilar types of entrepreneurs;• Representation in relevant planning andrule-setting bodies.221

Street VendorsCommon issues and challenges faceInsecure place of work due to competition for urban space.Capital on unfair terms due to dependence on wholesale tradersUncertain quantity, quality, and price of goods due to dependenceon wholesale traders.Lack of infrastructure i.e. shelter, water, sanitation.Ambiguous legal status leading to harassment.Evictions and bribes.Negative public image.What Legal Empowerment can do for themSecure vending sites.Provide access to capital on fair terms: a loan producttailored to their daily need for working capital.Boost bargaining power with wholesale traders.Infrastructure services at vending sites i.e. shelter,water, sanitation.Licence to sell issue identity cards.Freedom from harassment, evictions, and bribes.Positive public image.cluding right to vend; right to a work space• Intermediary commercial rights: right togovernment incentives and support includingprocurement and the right to publicinfrastructure• Advanced commercial rights: those that arerelevant for larger, more advanced informalenterprises.These rights would then apply in different ways todifferent types of street vendors including:• Those who sell fruit and vegetables: theyneed basic and intermediate commercialrights;• Those who sell cooked food: they need basiccommercial rights and intermediate commercialrights but also need to be regulatedfor public safety concerns;• Those who sell small domestically-producedmanufactured goods need basic and intermediatecommercial rights and may alsoneed to be regulated to ensure the goods arenot pirated;• Those who sell more valuable imported manufacturedgoods need basic and intermediatecommercial rights and may also need tobe regulated to ensure that the goods arenot smuggled or pirated.The illustrations shown above would suggestconcerns about advanced commercial rights areessentially relevant only after the basic and intermediatecommercial rights are taken care of.Barriers and Constraints to BusinessRightsAddressing the issue of legally empoweringinformal businesses is critical to unlocking theproductive potential of individuals, communitiesand countries. There are significant barriers tobasic business rights, including the cost of, anddifficulty with repsect to accessing and obtaininglicenses or permits, the cost of forming legalentities or, in some countries, even of registeringas a person engaged in commerce. And, and ofcourse, there is also the weight of taxation.Cost-benefit analysis is influenced also by non-legalcosts. For example, if business people do nothave their basic human rights respected, the costof doing business rises. If the level of educationmakes counting difficult, that is a cost. If the levelof healthcare prevents people from using theirhuman capital, that, too is a cost. And outside theclassic human rights rubric, if public transporta-222

tion is inadequate or the roads are largely impassable,that too is an additional cost. And all thesecosts are effective barriers to exit from the informaleconomy, because they make all other costs,including legal costs, that much more onerous.Below is an elaboration of implications for thosecurrently doing business informally.Legal, Regulatory, and AdministrativeBarriersRegulatory barriers comprise inappropriate orrigid requirements and stem from a governmentpolicymaking environment that normally wishesto have a total control either for a political or socio-economicagenda. Many developing countriesare emerging from a history of heavy-handedregulation, with approvals required for even thesmallest activity, and authority overly centralisedand inflexible. This means they are hampered bythe legacy of a heavily regulated economy and acommand and control approach to administrationand enforcement. Poor quality law-making overthe years has created a tangle of complex andinconsistent laws that present a daunting regulatoryhurdle to the would-be formal enterprise. Assuch, the regulatory systems of these countriesare not well developed to support a flourishingmarket economy that will create growth andformal jobs. A study 56 carried out in 2002 foundthat the costs and barriers imposed by regulationin developing countries are not only higherthan they were in the developed world when itembarked on industrialisation, but are higher insome cases than in the advanced countries today.Taking business entry costs as a proxy for allregulatory costs, the report suggested that thesecosts in Africa (94%), in relation to GDP percapita, are much higher than those in other partsof the world — Central Europe (67%), IndustrialSouth Asia (19.80%), and for many advancedcountries (3%).The World Bank study on doing business usingindicators such as those in FIgure 3, 57 establishedclearly the correlation between the ease of doingbusiness and the size of the informal economy.Two methods were used to produce the ranking —one involved averaging out a country’s performanceacross the indicators, and the other used the rawvalues of indicators. Both regressions showed thatthere is a statistically significant correlation betweena country’s overall performance on the DoingBusiness indicators and the size of its informalFigure 3 Regulatory Burdens Impacting on Informal Enterprises (World Bank, 2005)Starting a BusinessNumber of ProceduresTime (days)CostMinimum CapitalRegistering PropertyNumber of ProceduresTimeCostHiring and Firing of WorkersDiffi culty of hiringRigidity of hoursDiffi culty of fi ringRigidity of employmentFiring costsGetting CreditCost to create collateralLegal rights of borrowers and lendersCredit informationPublic registry coveragePrivate bureau coverage223

Box 3 Most Difficult Places toDo Business(by specific category)Starting a Business• 17 Procedures in Uganda/Paraguay,• 694 days in Suriname• 1,194 percent of income per capita required as costin Sierra Leon• 4,233 percent of income per capita minimum capitalrequired in SyriaDealing with Licenses• 186 Procedures in Egypt• 668 days in Iran• 5,869 percent of income per capita required as costin MontenegroRegistering Property• 16 Procedures in Nigeria• 683 days in Haiti• 28 percent of property value as cost in SyriaEmploying Workers• On diffi culty of hiring index (100=worst) in Morocco,Nigeria and Tanzania• On diffi culty of fi ring index (100=worst) in Boliviaand Egypt• 329 weeks of salary as fi ring cost in Sierra LeoneTrading Across Borders• 16 number of documents required to export inZambia• 20 number of documents required to import inRwandaGetting Credits• 0 Strength of legal rights in Cambodia, from an Index0-10 (0 is the worst)• 0 Depth of credit information in 48 countries, froman Index 0-10 (0 is the worst)Paying Taxes• 130 times payment per year in Uzbekistan• 291 percent of profi t as total tax rate in GambiaClosing a Business• Takes up to 10 years in India• Cost (percent of estate): 76 in Lao PDRSource: World Bank: Doing Business 2007(prepared by Mahmood Iqbal)economy; a worse environment for doing businesscorrelates with a larger informal economy. Theanalysis also examined the relationship betweenthe individual measures of ease of doing businessand the size of the informal economy.The World Bank has conducted a comprehensivestudy, 58 in identifying and quantifyingthe cost of barriers for all regions of the worldand individual countries. The extreme cases aresummarissed in Box 3.The World Bank study also shows that regulatoryenvironment and informality are highly correlated:the greater the difficulty in business operation,the larger the size of the informal sector. In otherwords, barriers or extent of difficulties in doingbusiness force many operators to take the informalroute.Administrative barriers are the bureaucraticrequirements that flow from regulations, their implementationand enforcement. A regulation maybe well-designed, proportionate and efficient, butits true effect on enterprises comes from the wayin which it is administered. Administrative barriersare the hassle that dissuades informal enterprisesfrom wanting to interact with governmentofficials; 59 they include excessive paperwork; civilservice inefficiency leading to delays in decision-making;low levels of civil service capacity,i.e. poor skills levels so that mistakes are made,and too few people and access points providingservices; inaccessibility, as when there is too littledelegation to the front-line and decisions have tobe referred up to the management chain; generalbureaucratic obstruction (perhaps stemming frominherent distrust of the private sector by officials)contributing to delays, and abuse of position(linked to corruption).The time and money spent complying with governmentregulations impose significant transac-224

Figure 4 Regulatory Environment and InformalityGreater ease of doing business is associated with less formalityInformal sector (share of GDP)HigherImplied cut in the informal sector from improving tothe top on ease of doing business40%30%20%}Implied cutImpliedshare aftercutLower10%Least difficultMost difficultCountries ranked by ease of doing business, quintilesLeast difficultNote: Relationships are significant at 1% level and remain significant when controlling for income per capita.Source: World Bank (2005)Most difficulttion costs on businesses. In addition, the directcost of payments, such as licensing fees, alsorepresents a significant cost of doing business.Conversely, payments made to avoid detectionof non-compliance, or payoffs to government officialsare the costs of operating in the informalsector. The regulations imposed on business fallinto several categories. Some regulations governingbusiness start-up raise the costs of enteringthe formal sector, others govern ongoing businessactivity, and additional regulations are dictated bythe central authority or by regional or municipalgovernments. Furthermore, small businesses facegovernment-imposed costs in the areas of labourpractices, payroll charges, health and safety standards,taxation, and foreign trade.Governance Issues: In many developing countries,corruption and rent-seeking reduce informationflows and weaken contract enforcement, reducingeconomic activity, especially foreign investment.Every major study on barriers to formalisation andindeed on barriers to growth generally, refers tothe problem of corruption.Often it is not the financial cost itself thatcreates the largest transaction cost obstacleto setting up a small business, but rather thetime and energy required to navigate the bureaucraticmaze, along with the opportunity costsinvolved. A well-known example was provided byHernando de Soto when he measured the cost ofestablishing a small garment manufacturing enterprisein Lima, Peru. He found that it requiredmany different steps over an extended periodof time to set up a small formal manufacturingcompany. 60 Although Peru has substantially reformedand simplified the process of setting upa small business, de Soto’s overall conclusionsremain as valid for many other Latin Americancountries today as they did in Peru in the late1980s. This is why entrepreneurs frequentlyresort to bribes or professional ‘fixers’ in order toexpedite the registration and licensing process.Fixers’ fees to establish a company range fromUS$600 to US$800 to establish a company inmost Latin American countries; they rise quitesharply as the size of the firm increases.225

Case Study:Ukraine and Private Business DevelopmentThe dimension of the problem: A 1999 surveyof businesses and households suggested that,there were 3.073 million businesses in Ukraine,of which 2.651 million (86%) had no employees.Comparing the official figures of smallfirms (with fewer than 50 employees) suggestedthat over 80 percent of these 2.651 million, ortwo million businesses were unregistered andinformal, which is, strictly speaking,, illegal, inUkrainian terms.Key problem: Corruption and other rent-seekingbehaviour. It is widely agreed that the biggestissue for the regulatory environment for Ukrainianbusinesses is its unpredictability. Regulationsare often confusing or unclear, many regulatoryactivities lack a comprehensive legislativebasis, information is lacking and procedures areunnecessarily complex. Rules change frequently— for example there were 34 amendments tokey tax laws in 2004. The lack of clear and accurateinformation for businesses on the currentstate of the law assists rent seeking behaviourby corrupt officials.Inspections are still the biggest problem facedby Ukrainian business, but the problem appearsto be decreasing slowly. In 2001, 94 percent offirms were inspected at some time during theyear (a figure which had declined by 20 percentsince 2000) with the average firm receiving11.7 inspections. In 2004, 78 percent of firmssurveyed were inspected. The typical smallfirm spent 22 days dealing with inspections in2001, compared to 27 days in 2000. There isno comparable figure for 2004.In 2001, 40 percent of all firms surveyed madeunofficial payments to inspecting bodies, and28 percent in 2002. In 2004, this figure appearedto have dropped to 20 percent.Key problem remaining: Current legislativeframeworks are too complex, confused andscattered. As a result of reform and donor assistanceover several years, the 140 steps thatbusinesses had to take for full registration havenow been decreased to 70. Needless to say, thisnumber still is very high.(Source: A Review of the Development of the Private Sector in Ukrainesince1998, and an Evaluation of the Contribution of DFID. DFID 2006)Corruption deters formalisation as businesses stayoff registries and tax rolls in order to minimisecontact with corrupt public officials. One broadstudy of 69 countries found a direct link betweendecreasing corruption and an increasing formaleconomy. 61 In a study of the informal sector inUkraine, 82 percent of businesses believed thatbribes to officials were necessary in order to continueto operate. 62 The smallest businesses suffermost from paying bribes, because these sumsdecrease the paltry profits made by thm.Financial Barriers: Financial institutions dependon the credibility of formal documentation toprovide the security and enforceability necessaryto extend credit. As informal businessescommonly do not possess land title or a standingrelationship with a bank, the most prevalentforms of loan guarantee, real estate and fiduciarycollateral, are generally unavailable. Formallenders typically require borrowers to providefinancial statements and credible documentationrelated to the lender’s recent operations (bank226

statements, invoices, etc.). Accordingly, informalentrepreneurs unaccustomed to separating theirbusiness and personal transactions or recordingand maintaining the firm’s information, or whouse informal suppliers who are unable to providedocumentation as solicited by the lender, will berequired to make significant adjustments to theirdaily operations.The greater the exposure to risk that a bankinginstitution assumes due to lack of credible documentationor an unreliable legal framework, themore it needs to charge higher interest rates andguarantees to loan ratio requirements. Thus, inmany developing countries, bank loan portfoliosare often over-collateralised (guarantees to loanratios of greater than one), which further limitscredit access. In Honduras, creditors ask for aguarantee of 150 percent of the value of a loan.The low access to credit in the developing worldalso relates to limited competition in the financialservices industries of many countries and thestate’s imposition of high licensing requirementson financial intermediaries. There are also fundamentalproblems of scale in lending that do notfavour those with meagre assets.Innovative lending schemes such as the grouplendingschemes pioneered by the Grameen Bank,BRAC 63 in Bangladesh, and NGOs in some othercountries, have been able to somewhat circumventthe problem of limited access of the poor tocollateral. By tying each group member’s abilityto receive loans to the repayment of other members(i.e., one member’s failure to make a loanpayment results in the loss of credit for the othermembers), loans are essentially secured by peerpressure. However, such lending schemes shouldnot be considered a replacement for traditionalcredit providers, as their small lending portfolios,often prohibitively high interest rates, and relianceon external funding limit the potential reach.Costs of InformalityThe barriers discussed above clearly establishthe reasons why the poor opt to remain ininformal businesses. Informal enterprises oftenhave limited access to broader economic opportunitiesand are especially vulnerable to the uncertainties,the corruption and even violence prevalentoutside the rule of law and have few meansto settle disputes apart from bribery or violence.Without legal rights or protection, they are in acontinual state of legal and political vulnerability.Small informal businesses assume larger risks(than the larger and usually formal firms) andspend more time and resources to monitor theiragents and partners (which explains why theyusually hire relatives and close friends). Theychoose low-risk businesses that often yield lowreturns. They operate with a limited amount ofcapital and as a result, they are forced to dobusiness at a very small scale. Since they hardlyaccumulate capital, it is very difficult to leaveor sell the business to pass on benefits of bothtangible and intangible assets. 64The relationship between poverty, informality andpolitical alienation leaves the poor especially vulnerableto organised crime and other unscrupulousparties that rise up to fill the gaps. Making formalitymore accessible could legally empower the poorto grow their businesses, enjoy the appreciation oftheir assets in formal property markets, and accesscredit more easily. This is the vision of the Commissionas a means to alleviate poverty. 65The benefits that a business person would obtainby going into the formal economy, would be thatregistration of ownership rights in property wouldmean having capital to collateralise; there couldbe state support for collection of obligations;greater ease and record of transactions and hopefully,increased protection for intellectual property227

The Chart below captures broadly the costs and benefits to businesses of being formal versus informal.INFORMALITYCostsFewer mechanisms for dealing with risk and uncertaintyBribe and CorruptionLack of identityLimited access to economies of scale and scope (markets are limited to family circles)Impossibility of diversifying risks and investmentsHigher transport costsRisk of losing family assets, unlimited liabilityLess access to market knowledgeDiffi culty to establish business hierarchies different from the family onesDiffi culty to divide and specialize labourEnforcing contracts only by forceLimited Access to capitalShort-term fi rms and investmentLosing the advantages of advertising because they have to hide their businessUnpredictability (inspections, laws, etc)Higher credit costsBenefitsAvoiding the costs offormality (taxes, permits,regulations)FORMALITYCostsAdministrative PermitsTaxesProduct RegulationsLabour Regulations228BenefitsLimited LiabilityShielding the fi rms from shareholders & creditorsEnforceable rules and agreements among partners Predictable rules to withdraw capitalfrom the fi rmThe possibility of issuing shares that facilitate the perpetual succession of the firm, canbe used to raise capital, transmit info about the business and represent rights over theenterpriseAccess to business identification mechanisms that transmit information about the nationalidentity, address, the assets they own, their financial history, etc.Access to rules that establish enforceable standards of responsibility among partners,administrators and workers, allowing a more efficient division and specialization of labourand achieving economies of scaleEnforceable contracts, Access to formal conflict resolution mechanismsLegally advertise and protection of brands and trademarksPredictable and speedy rules for closing of business,Default rulesMembership of trade associationsPermits to use public land, resources and utilities.Access to incentives packages such as tax rebates, exports licenses and trade fairsFlexibility

ights. Other benefits would include a potentiallylarger market, or at least easier access to largermarkets. Although business persons in the informaleconomy routinely trade across borders, inAfrica, only the people in the formal market areable to import or export through major ports or anyother major transit areas, given the presence ofcustoms and other border officials. A benefit of beingin the formal market, therefore, is the potentialto grow a larger business and to get out of poverty.As discussed in the next section, this costbenefitanalysis highlights the areas wherethe law can make the transition from the informalto the formal economies easier. The role for thelaw, then, is to reduce the costs and enhance thebenefits of entering the formal economy. Becausethe process may be long, and because theexistence of the informal economy is an adaptiveresponse rather than moral failure, the law shouldnot seek to force the poor out of the informaleconomy by increasing costs or reducing benefits.The point is to empower the poor to leave theinformal economy and to provide incentives forthem to choose to do so.Rights-based Legal EmpowermentMost people enter the informal economy not bychoice but out of a need to survive. The decentwork deficits are most pronounced in the informaleconomy, where the majority of informal businesseshave little or no social protection andreceive little or no social security. Poor respectfor, or lack of freedom of association, make it difficultfor workers and employers to organise in theinformal economy. 66In 2001, an ILO Conference concluded thatinformality is principally a governance issue and itencouraged employers’ and workers’ organisationsto extend their representation throughout the informaleconomy. The growth of the informal economycan often be traced to inappropriate, ineffective,misguided or badly implemented macroeconomicand social policies, often developed withouttripartite consultations among workers, employersand governments. Workers’ representatives on thecommittee forcefully stressed that informality isnot a solution to unemployment and the resultingreport called on governments to provide conducivemacroeconomic, social, legal and political frameworksfor the large-scale creation of sustainable,decent jobs and business opportunities.However a fundamental concern in the recognitionof rights is the need for individual legalidentity, as expressed by M. Woolcock: 67To the extent there is now a broad scholarly andpolicy consensus on the importance of propertyrights for development — i.e., for encouraginginvestment by the poor (and others) insmall business ventures; or, concomitantly, arecognition that endemic corruption, costlybureaucratic delays and weak contract enforcementall undermine capacities and incentives tomake such investments — it is also importantto appreciate that responding effectively tothese concerns is not simply (or only) a matterof encouraging policymakers to ‘grant’ propertyrights, ‘stamp out corruption’ or make relevantline ministries ‘more efficient.’ In the mostelementary sense, property rights must be givento actual people, who themselves — in order toadvance and defend their personal status andidentity. A crucial prerequisite, then, to enhancingthe quality of property rights is ensuring thatresidents/citizens have recognised documents(such as birth, death, marriage and divorcecertificates) verifying such basic information astheir name, age, sex and marital status.To balance between rights and market-basedapproaches, emphasis should be laid on programmesproviding increased wages, governmentassistance, education, land reform, labour monitoring,and access to credit, which are good starts229

in helping the poor create wealth. However, institutionalreform is needed to eradicate poverty, attaindevelopment, and successfully transition to freemarket economies. Reforms that reduce bureaucraticred tape and bring the cost of legal complianceunder that of extra-legality are necessary toformalise those who were previously excluded.Such reforms should also create greater regulatorytransparency, allow for citizen input, and aim atfighting corruption and inefficiency. When tailoredto local circumstances, titling programmes thatturn dead assets of the poor into useable capitalare great tools for poverty reduction, development,and attaining legal inclusion for informals. 68To Sum UpThe constraints and barriers discussed in thischapter clearly establish the reasons why the pooropt to remain in informal businesses. Informalenterprises often have limited access to broadereconomic opportunities and are especiallyvulnerable to uncertainties, corruption and evenviolence which is prevalent outside the rule oflaw. They have few means to settle disputes apartfrom bribery or violence. Without legal rights orprotection, they are in a continual state of legaland political vulnerability. Thus making formalitymore accessible could legally empower the poorto grow their businesses, enjoy the appreciationof their assets in formal property markets, andaccess credit more easily. This is the vision of theCommission as a means to alleviate poverty whichhas been the focus of this as well as the followingsection which highlights the importance of accessto markets, goods and services and infrastructure.4. Empowering InformalEnterprises through accessto markets, goods andservices, and infrastructureImproving the functioning of marketsThe close correlation between being poor andoperating in the informal economy in the ruraland the urban sectors is conspicuous. Also, highbusiness costs and the informal economy movein parallel in response to ill-designed, unstableand non-participatory rules and regulations, lackof secure property rights, inadequate governmentcapacity and resources to enforce laws and regulations,a lack of transparency, accountability andautonomy of judicial process as well as high degreeof macroeconomic instability and corruption.Inadequate access to markets, and poor quality ornon-existent basic public services and infrastructurefurther lead to low productivity, particularlyfor informal businesses.Agriculture accounts for a large share of grossdomestic product (GDP) and employment inSub-Saharan Africa. It is primarily a family activity,a component of the informal economy with themajority of farmers being small holders owningbetween 0.5 and 2.0 hectares. Women providenearly 50 percent of the labour force and producemost of the food crops for the family. The recentreview by the Independent Evaluation Group ofthe World Bank assistance to agriculture in Sub-Saharan Africa makes a pressing case for thenecessity of access to credits and markets, roads,fertilisers, seeds, water, etc. by the impoverishedfarmers to sustain their lives and livelihoods.Given that poor households are concentratedin agriculture, any improvement in their livelihoodswould necessitate entail in part in making230

agricultural activities more productive. Improvedaccess to markets and technology are thereforeimportant as is the need to strengthen propertyrights and create better methods of risk management.At the same time, well over half of the 1.1 billionpeople projected to join the world’s populationbetween now and 2030 may live in under-servicedslums 69 thereby raising the urban population,including those living in poverty, well abovethat of rural areas. Additionally, conflicts andnatural disasters are causing migration fromthose areas to developing countries with relativelygreater economic strength in order to seekout entrepreneurial and business opportunities.These migrants glide into the burgeoning informaleconomy of the countries of destination and inthe absence of inclusive development processes,the informal economy would continue to expand.Of the three billion urban dwellers today, onebillion live in ‘slums’ i.e. in areas where peoplelack access to key necessities such as potablewater, sanitation, basic energy services or durablehousing. 70 For the slum inhabitants, disease andviolence are threats faced on a daily basis andhealth care and education for the children are adistant hope. As the pro poor growth reform mustincrease the utilisation of the marketable assetsof the poor, it is vital to ensure that markets forthe poor are better integrated in to the economywith efficient backward and forward linkages.Accordingly, targeted public investments needto be stepped up in education, healthcare,water and sanitation and energy services, andinfrastructure 71 for enabling entrepreneurship andgenerating sustainable livelihoods. Also publicinvestments are crucial for the ‘private-basedeconomy’ to prosper and to allow the private sectorto create employment and sustain long termSustainable LivelihoodsFrameworkA livelihood is sustainable if it can recoverfrom stresses and shocks while maintainingor enhancing the necessary capabilities andassets. The interventions for engaging theprivate sector would reduce the vulnerabilityof the poor and increase their resiliencethrough investments in enhancing accessto resources, building assets for them, andimproving their skills and capabilities tosupport livelihood opportunities and designa living. Income generation is the foundationof a sustainable livelihood. Access to basicservices like energy, water and sanitation,housing and healthcare is fundamental to enablepeople to seek, maintain and continueto work. For a livelihood to be sustainable,it must lead to a surplus beyond immediateconsumption requirements to allow additionalresources for overcoming shocks andstresses, when required.economic growth. In the absence of adequateinfrastructure, health services, education, inclusivefinancial services, etc., market forces alonecan accomplish little.However, these basic and necessary services represent‘missing markets’ or ‘incomplete markets.’While the demand clearly exists, it is not communicatedthrough conventional market characteristicelements because of asymmetric informationand regulatory and transaction barriers to marketaccess and market creation for new productsand services. These, in turn limit the supply ofthese goods and services. Additional supply-sideconstraints include the reluctance of the privatesector to invest in measuring the demand for newproducts and services because of new and rela-231

tively unknown markets that require innovativemarketing mechanisms including multi-stakeholderpartnerships.Increasing Access to Goods andServicesMarkets have to be created to target the groupsthat are currently excluded from them. Forinstance, well focused and participatory policiescan lead to the evolution of markets for goodsand services through improvements in production,distribution and storage components of thevalue chain and mitigating the risk of starvation.As discussed earlier, lack of access to potablewater, basic sanitation, energy services, and solidwaste management services adversely affects thelives and livelihoods of poor people directly andhas a devastating impact on efforts to engagein trade and business. The poor pay many timesmore for water (of questionable quality) and otheressential services than the rich. 72 While in therich countries, public spending on health is nearlyUS$3000 per capita, the poorest countries canafford to devote barely US$10 per capita or soto public health per year. 73 At this level of investment,it is not possible to operate and manage aCase Study:New markets lead to new opportunities for rural informal businesses— VegCARE, KenyaLess than a year ago, Mutulu was living belowthe poverty line, along with three-quarters of thepopulation of Makueni district in eastern Kenya.Now, he is one of more than 400 farmers sellingvegetables in supermarkets in the UK suchas Tesco and Sainsbury’s.‘Before, I cycled 10 km each day to sell myproduce to middle men and they gave me lowprices and sometimes did not even buy myproduce.’ Now Mutulu educates his childrenand is saving money thanks to VegCARE — abusiness partnership that has helped over 400farmers gain access to markets and, on average,doubled their incomes in six months.Their baby corn is sold in Tesco and Sainsbury’sand their aubergines, chillies and okra aredestined for the tables of the Asian communityin the UK.’When VegCARE came and said thatthey would market our produce for us, mostpeople doubted them. I was one of the first inthe Kwa Kyai scheme, which now has over 300farmers who decided to join VegCARE.’The partnership’s roots are in a project, initiallypiloted by CARE, which showed that if smallholderswere given access to markets they couldand were willing to invest in farming. The projectwas a success but not commercially viable,so CARE linked up with Vegpro, the third largestvegetable buyer and producer in the region .Asa result, Vegpro’s supply to the market fromsmallholder farmers increased as their incomesand livelihoods improved.Initially Vegpro bought the produce and did notget involved in production. CARE pre-financedthe production and provided technical supportto the farmers. Now a rural enterprise, knownas VegCARE, has been formed to take over theactivities. It is a new type of partnership, bornout of an aid project that was aimed at helpingfarming communities in the long term — andgiving them ways of making a sustainable livingfor themselves, their families and their communities.Source: CARE Canada, 2007232

primary health system. Similarly, it is estimatedthat achieving the Millennium Development Goalsfor water and sanitation would requires additionalannual funding of US$10 - US$25billion; an estimatedUS$700 billion of investment is required tobring electricity to an additional 1.4 billion people.There is need across much of this world forgreater resources to effectively deliver basicservices to the poor. While increased financingis a necessary condition, it is not sufficient toensure that the unmet needs of the poor and thevulnerable are fulfilled. In the case of educationand health services, lessons learnt from a numberof developing countries have shown that increaseof funding in any given sector does not alwayslead to delivery of enhanced access and improvedquality of service. Increasing public expendituresmay not lead to anticipated outcomes if the institutionsand professionals responsible for deliveryof integrated services have inadequate capacityand are not accountable. Accordingly, capacitydevelopment, participation, transparency and accountabilityare mandatory to ensuring that fundsallocated to public service for equitable developmentreach their intended targets.Investments in health, education and basic services,like energy, water and sanitation, involveincreasingly both the public and private sectors.In many countries, such services are in part beingdelivered through private initiatives that includecooperatives, communities and independentnetwork providers. This in turn has given rise toexperimentation with privatisation of core functionsof the state (services delivery, for example)and increasing participation of delivery throughoperators in the informal economy. Privatisationhas not yielded many positive results as itreduces the ability of the state to define an activesocial and economic agenda. Informal operatorsrequire regulation as well as capacity development,particularly form the perspective of qualitycontrol and also for consumer protection.But, since the poor interact with the privatesector, both as consumers and entrepreneurs,the private sector can play an important role indelivering goods and services for developmentand poverty alleviation. This would work best inpartnerships that also include civil society organisations,because they are vital in assuring theparticipatory and accountable approaches neededfor improving the quality of life of the poor.At the same time, governments are increasinglyrecognising the benefits of decentralisation inmaking the delivery of services more effective.For local communities to take advantage of thebenefits of decentralization, it is critical to putinstitutions in place for enforcing accountability,reducing costs of varying kinds (for transactions,negotiations and enforcement of contracts), andfor developing adequate capacity to facilitatecoordination among public agencies, private enterprises,NGOs, and civil society organisations.Multi-stakeholder partnerships in public servicedelivery involving state and non-state actors cancontribute to mobilising their competitive advantagein terms of capacity and resources from variouspartners and supplementing traditional directpublic delivery of services.Well-trained and motivated service providers,whether from public, private, or civil societycommunities, and adequate institutions withtransparent procedures and responsive accountabilitysystems, are important constituents ofeffective public service delivery. Involvement ofthe poor themselves in setting service deliverypriorities, infrastructure investment planning,level of service and oversight, responsive feedbackmechanisms, and accountability, is criticalin determining the quality of service provided.233

Case Study:Linking Markets: Promoting sustainable tourism development with indigenousand rural communities in Latin AmericaAiming at supporting grass-roots initiatives andsmall and community based enterprises consolidationin the tourism sector, the ILO has beensupporting a programme in Latin America, themain purpose of which is to assist rural andindigenous communities usually engaged inwork in the informal economy, to gain greateraccess to new markets and business developmentservices.Operating since 2000, REDTURS is nowpresent in seven Latin American countries; itrelies on a network of communities, institutions,and resources devoted to encouraging thedevelopment of sustainable tourism keeping inmind economic productivity, social equity andcultural identity. REDTURS has encouraged thecompetitive advantages of these communitiesin fostering quality job creation and productivityincreases mainly through three strategies: a)improving the service supplied by making themost out of existing social capital and trainingthe community’s labour force; b) gaining marketshares by applying a five-point marketing strategy;and c) establishing strategic cooperativealliances involving other networks and internationalagencies. By promoting participatorymechanisms for dialogue and capacity buildingfor local partners, REDTURS supported thecreation of four national community tourismnetworks that have benefited several indigenouscommunities. Source: ILOThe provision of efficient, reliable and affordablepublic infrastructure services should work as acatalytic incentive encouraging enterprises inthe informal economy to move upwards along thecontinuum towards greater formalisation.Inclusive financial servicesLimited access to working capital and financialservices including risk management services isresponsible for holding back the growth potentialof informal enterprises. Micro-entrepreneurs inthe informal economy regard the need for financeas a top priority. The ILO’s Global Agenda forEmployment identifies the constraints on thedevelopment and growth of efficient and competitiveenterprises as ‘a wide swath of policy areasparticularly those arising from difficult accessto credit and other financial markets.’ 74 Financecan be a dominant tool to initiate and reinforceself organisation among those in the informaleconomy. It is often the monetary transactionsthat catalyse the formation of joint liability andsolidarity groups, some of which develop multipurposeself-help organisations.Access to finance is essential for creating anenterprise and keeping it going. A considerableexpansion of rural bank branches in India promotednon-agricultural output and enhanced economicgrowth. Additionally, the expansion of bankbranches led, indirectly, to an increase in agriculturalwages and reduction of rural poverty. 75But, it is often the case that access to credit inconjunction with macroeconomic policies relatingto trade, may work to further strengthenthe larger enterprises while preventing smallerones from gaining access to global markets. Forinstance, export promotion policies favouring thecoir industry in Sri Lanka directed a shift in thesupply of coconut husks to mechanised units234

(owned by men with access to credit), and awayfrom manual units owned by women who hadlittle access to credit. 76While the availability of credit is a concern, what isequally important are the terms on which it is availableand whether they are within the reach of theexisting and potential entrepreneurs. Most micro,small and medium enterprises need small loansand small-scale deals that banks, in general, areeither unable or sometimes unwilling to provide.At the same time, self-employed workers in theinformal sector do not have collateral to offer as aguarantee. Most operators in the informal economytherefore look to informal financial sources.Micro-finance‘The poor are bankable’ is the important lessonwe have learnt after nearly three decades ofCase Study:Alternate Model of Informal Credit: SMEs Helping Informal Enterprises in PeruVincent Sanchez lives in the community ofSan Martin de Porres, with his wife, Ruth, andtheir two kids. This is a semi-formal settlement,where an association, rather than the city ofLima, provides electricity and water. Vincent has15-years experience in the metal working businessand lives in San Martin de Porres whichmeans he is not able to qualify for a loan fromthe bank. As part of a credit programme operatedby the medium-sized enterprise, Promac,he was recently able to purchase a large metalworking machine (valued at approximatelyUS$5000). Vincent and his wife, who is also amicro-entrepreneur, now make enough moneyto support their family, for their kids to attendschool, and to pay off the loan on the machine.Before negotiating the loan for the machine,Vincent commuted an hour and a half each wayto work. Now, he only travels once a week tothe informal market to sell the metal pieces hemakes, and market demand is now outpacinghis production capacity. Vincent does not have atax number, and he pays no taxes to the federalor local government.Approximately 15 percent of Promac’s clientshave a private loan arrangement, similar to theone Vincent has. Segundo, Promac’s founder,says that a typical growth path for a businesslike Vincent’s would be to outgrow his homebasedoperation within two to three years, andto move into the industrial zone of the city. Bythis time, Vincent should be able to engage witha few larger clients who would no doubt insiston formal tax receipts, eventually warranting theexpense of registering the business. Once hemoves into the industrial area, Vincent says hewill register the business with the appropriatelocal municipal agencies to avoid some of thecurrent hassles and to access larger loans fromthe banks. Hassles include intermittent electricityloss within San Martin de Porras, which hasthe potential to affect Vincent’s ability to re-payhis loan on time. In urban areas, 95 percent ofhouseholds have electricity, however this dropsto just 86 percent in the lowest economic quintile(Sociometro, 2007).Promac has a loan repayment rate of 100percent. Some clients are late with their paymentson occasion, but the company also offersa work-repayment option, where clients work inthe Promac factory on an hourly basis as a wayof paying off the loan. Promac credits its successto a hands-on approach and a keen senseof the potential in its clientele.235

micro-finance activities. Micro-finance plays apivotal role in providing sustainable livelihoods bystimulating small businesses. Although microfinance77 is becoming increasingly available tomicro-entrepreneurs, frequently their only optionsfor access to capital are through informal financialarrangements with priced transactions, rotatingsavings and credit associations (ROSCAs),or moneylenders who usually provide emergencyloans, often on usurious terms. The latter may notbe able to lend as per the needs of the growingenterprises. Furthermore, despite the positiveresponse to the progress of micro-finance, therehas so far been little involvement by the world’slargest financial institutions in micro-financesuccesses. To be sure, there are currently examplesof large private sector banks entering intorisk-sharing partnerships with NGO micro-financeinstitutions that merge the social mobilisationskills and rural presence of NGOs with the capitalresources and financial credibility of the bank.These efforts, however, need to be leveraged toenhance access to financial resources by microand small enterprises. The commonality betweeninformal finance and micro-finance is in that theyconsider the households and the enterprise as aunit and are usually not concerned with how theloan is used — whether for consumption, productiveinvestment or saving.Related to the issue of exploring the integrationof micro-finance with the financial sector andthe roles of the private and public sectors, it isimportant to analyse the impact of policies 78 thatwill encourage greater financial sector involvementwith the markets and with demand by the poorand the disadvantaged. The micro-finance institutionshave induced more competition in the creditmarket and therefore lowered the credit interestrate that poor people have to pay. Currently theseinstitutions are unable to meet requests for sumsneeded to take micro-enterprises to a larger scale.SavingsIt is now widely recognised that the poor havea high propensity to save and that there is aconsiderable demand for savings instruments andinstitutions. The creation over time of smootherflows of income can work to form the basis of anon-contractual insurance against natural, socialand physical shocks and stresses. In West Africa,in most savings-based micro-finance institutions(credit unions, village banks or savings, andcredit cooperatives), nearly six times as manypeople make deposits as take out loans at anypoint in time. 79Micro-insuranceEven though there are important links betweenmicro-finance and micro-insurance, a related‘mantra’ that the poor are uninsurable still persists.Increasingly micro-insurance is a part of thedeveloping micro-finance systems.Most entrepreneurs in the informal economy,particularly micro and small entrepreneurs, donot have access to risk management and safetynetmechanism tools that large private firmsdo. These tools include a range of savings andinsurance products as well as more sophisticatedproducts that minimise risks from macroeconomicvariability, such as inflation, as well as shockand stresses from natural hazards and disasters.However, informal mechanisms such as savingsand other traditional risk management structures,80 have proven very expensive and thereforeunsustainable as long-term coping strategies. 81Access to insurance by the poor reduces thevulnerability of households and increases theirability to take advantage of opportunities. Eventhough micro-insurance is a nascent market, it236

provides protection to low-income people againstspecific risks and hazards in exchange for premiumpayments proportionate to the likelihoodand costs of the risks involved. 82 By reducing theimpact of household losses that could exacerbatethe poverty situation of households, micro-insurancecan enhance their stability and profitability.However, these insurance instruments are notwidely available for managing risks for populationswith low incomes. If this kind of insurancecould be delivered cost-effectively through microfinanceinstitutions (MFIs), it could represent aprofitable segment for the insurance industry.While previous attempts to launch such productshave not been entirely successful they have pointedthe way to eventual growth. There definitely isa need to be filled that would allow the poor toalleviate the economic impact of natural disasters.Also, micro-health insurance schemes offerreasonable guarantees of loan repayment sincethe insurance would provide for adequate medicaltreatment to the borrower in the event of serioushealth problems. Additionally, micro-insurancehas the potential to be used as collateral for borrowingadditional credit for business enterprises.Herein lies an important tool for the promotionof equitable growth: enhanced access by thepoor to inclusive and gender-responsive financialproducts and services (like micro-insurance),supported by policies, social institutions and newtechnologies that reduce market barriers andtransaction costs. These interventions togetherwith capacity development at human, institutionaland system-wide levels, show the promiseof reducing vulnerabilities among the poor byassisting them in creating assets, promotingentrepreneurship, improving service delivery, andstrengthening livelihoods.The private and formal sectors are capable ofproviding micro-insurance products, as they candesign and offer sustainable and long-term riskreduction strategies that are also profitable. Thisrole is being explored comprehensively, both as abusiness model and as an intervention for socialprotection. In the process, it will be important tolearn just how micro-insurance relates to governmentpolicies, role of government, and thepublic sector. For now, it is encouraging that asignificant number of insurers are keen to explorethe low-income market; in time, the viability ofa micro-insurance product will be determined bythe demand and its attractiveness, as well as bythe number of potential clients. Currently, theability to pay and incentives to fill the demand forthe insurance products are common barriers forconsumers and suppliers. There is anticipationthat these barriers can be overcome, in part, byproviding an operational linkage between microinsuranceand remittances.RemittancesWhile the search for a better life and livelihoodsdrive rural-urban migration, the root causes ofinternational migration derive from the majoreconomic, demographic, and social disparities aswell as conflicts, climate change and environmentaldegradation or disasters. Remittances constitutethe most tangible contribution of migrants topoverty alleviation. A better understanding of howremittances are used would inform public policyand development interventions for migration andfinancial services and for enterprise development,livelihoods strengthening and provisions of otherbasic services. It is equally important is to ensurethat the money reaches rural areas as well asother areas where large populations are still outsidethe banking system with no access to diversefinancial goods and services that can improvetheir quality of life.237

Remittances — the transfer of funds fromone place to another, from urban to ruralareas or by developing country nationals sendingearnings back home — can play an instrumentalrole in providing greater access to resources andto safety- net mechanisms for entrepreneurs atthe bottom of the pyramid. Remittances constitutethe second largest capital flow to developingcountries. It is less than capital that is investeddirectly by private companies but more thanofficial aid. In 2006 remittances in the developingworld amounted to about US$206 billion. Inmany developing countries, amounts sent homeby migrants supporting family and friends weremany times the value of official government-togovernmentaid flows.If the transaction costs of remittances can bereduced, formal channels will substitute informaltransfers. 83 Fundamental issues involved in makingthis change range from accessible technology,hours of availability, and efficiency of transactionand regulations, to the profit margins by the institutionsengaged in the process. 84 While it is expectedthat the technology would play an importantrole in lowering the cost of remittances, newbusiness models and a regulatory environmenthold the key to greater access to the services, andefficiency of the transfer process. Better servicecan provide greater profits by integrating remittancesmore fully into financial services offeringsfor migrants and their families. Although theissues are complex, remittance are important fordeveloping countries as the amount can provideaccess to additional financial resources andultimately to the creation and sustainability oflivelihoods.Case Study:Construmex (Mexico) — HelpingMigrants with RemittancesOverview: Construmex helps thousands ofMexican migrants in the U.S. purchase andbuild homes for themselves and their familiesback in Mexico.Constraint: Construmex recognised that itsearlier model of serving low-income clientsin Mexico would not work for migrants inthe U.S., as the latter approached commercialtransactions with extreme caution. Thecompany lacked adequate market researchto determine how best to proceed.Solution: Construmex partnered with Mexicanconsulates in the U.S. to conduct marketresearch on the needs of the migrant population.Following these surveys, it developed anew ‘cash-to-asset’ transfer service that wasoffered through migrant associations.Source: UNDP, ‘Growing Inclusive Markets — Business Works forDevelopment- Development Works for Business.’ June 2007There are several ongoing initiatives at this timeundertaken by different countries, developmentagencies and institutions, and the learning isevolving. The governments of origin and destinationhave to work together with multilateralorganisations, private sector, and diaspora andother stakeholders to create options, tools andincentives to maximise the development benefitsof remittances. These incentives and tools can belinked to the transfers themselves (e.g. throughsavings, credit, micro-insurance and micro-pensionschemes) or focus on mobilising savings generatedby remittances towards productive investments(made by the migrant, the recipients or a localentrepreneur). This would buttress streamlinedand gender-responsive remittance policies andregulations, and strengthen capacity developmentat human, institutional and system-wide levels.These collaborative efforts can also catalyse public238

private-partnerships (PPPs) that can lead to innovativedemand-based products and services formeeting the needs of the poor people.To summarize: an enabling environment, capacityand institutions that will enhance access tofinance and safety net mechanisms are criticalfor the entrepreneurs at the bottom of thepyramid and require innovative approaches.Remittances can be an attractive business formicro-finance institutions and a valuable additionalfinancial service for current and potentialmicro-finance clients. Also, micro-insurance canassist in increasing the demand for micro-financeand potentially take micro-finance activities to alarger scale.Public-Private PartnershipsThe informal economy is particularly dynamic anddemands a high level of responsiveness from thestate. Even though globalisation is significantlychanging the traditional role of the State, the roleof the government must remain central in the developmentchoices. One compelling reason is that‘in most reforming countries the private sectordid not step in to fill the vacuum when the publicsector withdrew.’ 85At the same time, developing countries arerecognising the importance of markets and theyunderstand that markets have to be created andgoverned. And sometimes the private sector hasto be motivated to do what needs to be donethrough the strengthening of the policy environment,and through incentives and removal ofbarriers for market creation. An efficient privatesector depends on a sound domestic macroenvironment that fosters good trade policies andinstitutional foundations, and adequate capacityto maximise benefits from the macro globalenvironment and to promote distributional equity.The private sector is keen to harmonise privateinterest with public interest because, inter alia,it has started recognising the potential businessopportunities. Accordingly, the private sector isactively promoting new approaches to alleviatingpoverty, opening opportunities for all concerned,including the poor people and the private sectorcompanies. While private financial institutionsare willing to develop innovative partnershipmodels to provide access to inclusive financialservices, they need assistance in formulatingappropriate policies and strengthening capacitiesthat would remove barriers to market creationand expansion of market access to entrepreneursat the base of the pyramid. Governments, meanwhile,should be encouraging private financial institutionsto garner savings, long-term credit andmarket-based social protection instruments in ruraland underserved areas, 86 hence the emphasison public-private partnerships. Also, partnershipwith the private sector is no longer simply aboutmobilisation of resources; it is also about actingon knowledge gained from the wealth of collectiveexperience about entrepreneurship, managementskills and global networking.The challenge to make the ‘missing markets’play an economic role in job creation andservice delivery lies less in finding technologicalsolutions to production and distribution and morein structuring institutions, capacities, incentivesand regulations. And, if sustainable, high qualityand affordable basic services are actually to bedelivered to the poor and disadvantaged, capacitiesmust be built to engage the talents and energiesof the greater community and to allow forreal and meaningful ownership of the activities ofthe different stakeholders.Public-private partnerships hold great promise inthis endeavour, especially if they were given anenabling environment that removed barriers tothe entry by the smaller and community-based239

Case Study:Durban: A Heterogeneous Solution Through Public Private PartnershipThe city of Durban in South Africa, took anon-restrictive approach to street vending. Itdemarcated sites throughout the city; changedthe legal framework that governed street tradingfrom criminal to administrative law; decreasedthe cost of trading spaces; and guaranteed servicessuch as basic shelter, solid waste removal,water, toilets, lighting, and storage facilities.The city also created an appeal committee offive members, of whom at least one was requiredto be a street vendor, where municipaldecisions can be reviewed.However, as the majority of informal businesseswere in the traditional medicine sector, it wasnecessary to provide access to market. Over30,000 people, mostly women, worked in thissector. Through direct intervention, Durbanbuilt a dedicated market for traditional medicinetraders with shelter, storage, water, andtoilet facilities. It also trained gatherers on cultivatingproducts and sustainable harvest techniquesand is currently planning to establisha company to procure materials from growers,process them in partnership with a pharmaceuticalfirm, and market the products.(Source: Lund and Skinner, 2005.)Case Study:Buy-back Centres for Waste Collectors:A Public-Private-Community Partnership ModelWaste collectors are amongst the poorest ofthose working in the informal economy. In SouthAfrica, since legislated racial segregation ofurban areas was abolished, there have beenincreasing numbers of waste collectors operatingthroughout its cities. They are largely blackwomen whose incomes are extremely low. In themid-1990s the Self Employed Women’s Union(SEWU) organised cardboard collectors in theinner city of Durban/Thekwini. The union foundthat these collectors were innumerate and oftenexploited by unscrupulous middle-men, and itlobbied local government to assist them.Through SEWU’s activism, and the understandingby the City Council that waste collectionprovided a livelihood for many residents, a buybackcentre was established in the inner city.This is a public-private-community partnership.The Council provided a small plot of centrallylocatedland that was converted into the centre,and a large private-sector recycler provided thescales, storage containers for the cardboard andtrolleys for the collectors. SEWU worked alongsidecity officials to design the interventionand trained the cardboard collectors on how toweight their cardboard. Through this intervention,the collectors sold their cardboard directlyto the recycling company. This has substantiallyincreased the (albeit still low) incomes of thesewaste collectors. The success of the inner citybuy-back centre has led to the Council establishinga number of similar centres throughoutthe city. (Source: Mgingqizana, 2002.)240

enterprises. Developing effective skills for nurturingpartnerships, enforcing transparent rule of law(including efficient contracting and procurementprocesses), and improving managerial capabilitycould go a long way to encourage the creationand then to sustain such PPPs. Their energiescould be tapped to meet the needs of the poor forbasic services. For instance, it is estimated thatthe achievement of the MDG goals for water andsanitation will require enormous annual budgetaryoutlays. A very different and more manageablescenario is foreseen if efforts to achievethese targets were supplemented by servicedelivery through PPPs, particularly if the localcommunities were empowered to manage theirneeds through effective value-chain strategies. Ifeffectively formulated, PPPs would generate benefitsbeyond the obvious ones of providing jobsand livelihoods. Health in the communities couldbe improved and children could have greater opportunitiesto attend schools.Economic success requires getting the balanceright between the government and the market interms of who should provide the goods and servicesand how they should be provided. The balanceis, of course, country-specific and dependson the level of development. While recognisingthe critical role of governments in creating foundationsfor a healthy and dynamic private sector,it is vital to develop innovative models of PPPsboth at the local levels as well as national levels,to harness resources, capacity and skills of theprivate sector to benefit national development. 87influences all development activities. At the sametime, assurance is needed that the supportingstate and public policies are functioning, that thenecessary regulation for creating greater equity isin place, and above all — that the arrangementworks.To Sum UpThe discussion in this section has focussed onsound economic governance that provides policies,laws, regulations, institutions, practices,and individuals to support a strategic partnershipof government, private sector and civil society fordelivery of basic goods and services and accessto markets. In addition, issues were explored concerningaccess to finance and safety net mechanismswhich are critical for the informal entrepreneurs,particularly micro-finance, micro-insuranceand the matter of remittances and savings amongvarious other financial services and portfolios.The next section focuses on solutions that authoritiesand businesses (i.e., bottom-up and viceversa) have developed based on real life problemsand experiences. Experiences and solutions comefrom all aspects of business life and several differentcountries. An advantage of evidence-basedsolutions is that measures successfully adoptedby one country may be replicated in others, withnecessary modifications.Successful mobilisation of the communities,whether through the efforts of the government,the private sector or NGOs, represents collectiveaction at the local level. Though the interventionsinvolved in working for new economicgrowth outcomes reflect local interventions, theirimplementation recognises a global context that241

5. Institutional changesand legal toolsmaking a difference forinformal enterprises —an evidence-based approachIn the earlier sections of this chapter, we referredto constraints and barriers businesses have facedin their operations, as well as the need to broadenaccess to markets, services and infrastructure.We now focus on solutions that authorities andbusinesses have developed based on real-lifesituations, problems, and experiences. Experiencescome from a number of countries and fromall aspects of business life.The main advantage of evidence-based solutionsis that measures successfully adopted byone country can — with necessary modifications— be replicated in others. Instead of academicdiscussions, realities exist on the ground and canbe borrowed and implemented.The format we adopt for evidence-based solutionsare the same — from business start-up tobusiness exit — as described in our discussion ofbarriers and constraints to keep conformity andmaintain the linkage. We also present cases ofreforms that have taken place both from theperspectives of the top (due to sustained pressuresfrom the bottom) as well as initiativesundertaken at the local/grass-root level or by theprivate sector.Improvement in the quality of institutions in aneconomy has to proceed simultaneously with transformationof the nature and efficiency of its informaleconomy. Learning from the institution-buildingexperience of the industrialised countries, andthose in transition, as well as from other developingcountries, can be valuable. There are severalgood practice examples from around the world toillustrate how constraints of informal businesseshave been successfully addressed through institutionaland policy changes. At the same time, nationaland local-level institutional changes can beinitiated implicitly by introducing new economicactivities to provide direct and measurable benefitsto those who will be influenced by the institutionalchange. Ability of the population impacted bythe institutional change to recognise the tangiblebenefits provides ownership. And, the economicactivity becomes an agent for, and a catalyst of,derived demand for appropriate institutions. 89 Forinstance, economic empowerment based on economicactivity is a step towards gender equality, 90even though these are not synonymous with it.Linking creative economic activities with businessrights in the informal economy has an addedadvantage in that it allows for a learning-by-doingapproach to implementing institutional reforms.It also allows a synergistic linkage betweenreforms from above, including those initiated bygovernments or promoted by international organisationswith effective action from below — forexample, by civil society organisations and theorganisations of the poor themselves.Legal empowerment entails making laws andregulations appropriate and relevant to the realitiesof informal businesses. Some successfulinnovations are discussed below. It also requiresa just and fair system of enforcement of laws.Specifically, it implies:• A competent, independent judiciary, applyingthe law equally and evenly on all members ofthe community. Essential are education of thelegal profession, full publication and disseminationof legal texts including judicial decisions;• Transparent, coherent laws, including laws for242

Case Study:‘Tell us how to make legal mechanisms and tools workfor informal businesses.’ President Benjamin Mkapa, TanzaniaIn 2005 President Benjamin Mkapa of Tanzaniaproposed that the next government should speedup the process of bringing informal businesseswithin the legal ambit to shore up achievementsrecorded and spur further the country’s economicgrowth. The president made the remarks whenhe launched a report on the Diagnosis Phase ofthe Property and Business Formalisation Programmefor Tanzania. Quoting the 2005 GlobalCompetitive Report released by the World EconomicForum, Mkapa noted that Tanzania hadclimbed 11 places above last year’s rating andovertaken Uganda and Kenya partly because ofthe contribution by informal businesses. In orderto take Tanzania to the next level of development,the President specifically sought answersto the following:a) How are we going to turn all this recognitioninto something accessible and beneficial tothe 98 per cent of business operating outsidethe legal system?b) How can we enable people to leverage theirparticipation in this competitive environmentwhen probably 89 percent of their assets areheld in the extra-legal sector?c) What legal reforms should be instituted torecognise, protect and ’formalise’ of the informaloperators’ assets?d) What needs to be done to ensure our peoplebenefit from the growing formal and marketeconomy?e) Due to lack of recognition legally, informalentrepreneurs have created their own mechanismsof documentation, registration, fungibilityand collateral, and testament.These informal entrepreneurs have developed archetypesof business organisations and expandedmarkets outside the legal sector,’ he added.‘How can we bring these organisations into themainstream and provide recognition? And thereal challenge is to use these archetypes as abasis for a new system wherein people can relateto and access, and thus bring down the barriersthat stifle entrepreneurship. How to remove thosebarriers that exclude them from participating inthe markets we seek to create, and that retardour poverty-reduction efforts. Mkapa said Tanzaniacontinues to be excluded from the benefits ofan expanded market economy, and it was time tobring them in. He called for support from stakeholdersand development partners, non-governmentalorganisations, financial institutions ,andothers in the protection and formalisation of thehard-won assets and business of the majority ofpoor Tanzanians. Source: Guardian, 2005-10-06the protection and facilitation of business;• Freedom of the press, and adequately paidjournalists to shelter them from bribery;• Enforcement officers who apply the law uniformlyto all;• Ease of entry into formal business so that variousbusiness forms are quickly and cheaplyformed, some to limit the owners’ liability totheir investment in the business;• Significant effort to reduce grand corruptionand, ultimately, to reinforce social norms thatconstrain petty corruption.Of the emerging business laws in some Africancountries, 91 are an example of an important243

step toward this kind of structure. They do not,however, fully protect transactions from distortionswithin the national judicial systems, andthey have not yet generated the transparencythey are designed to provide as neither the decisionsnor the filings have yet been systematicallycomputerized. The laws also do not address whocontrols the military. They do, however, create avocabulary and a virtual forum for discussion oflegal predictability and, generally, of the rule oflaw; in this way the laws have facilitated discussionsamong actors in the formal economy,including business people as well as lawyers,academics and judges. The same vocabularyand forum allow social norms underlying formallaws to influence the informal economy, too, forexample when business people with one foot ineach economy are vectors for transfer of information.The appearance in the informal economy ofrelationships and documents mimicking those inthe formal economy suggests the power of suchtransfers from the formal economy.Innovations which DemonstrateBusiness Rights and LegalEmpowermentWhile business regulations vary from country tocountry, and from municipality to municipality,they usually include most of the features bulletedbelow. Responses to the obligations thatfollow from such regulations are appropriate tothe circumstances of the informal entrepreneursand may be termed ‘empowering’. Most countrieswould expect the following from a formally recognisedbusiness:• Incorporation of the business as a legalentity.• Inclusion in a business registry at the national,regional, or municipal level.• Registration with the national tax authority.• Registration of employees in pension/health/other national social security schemes.• Acquisition of building permits, at the municipallevel.• Acquisition of operating and other licenses,at the municipal level.• Approval of health officials upon inspection(especially for sales of food), at the nationaland/or municipal levels.• Safety approval from local fire officials.Starting a BusinessSome of the best practices 92 adopted across theworld to simplify business start-up formalitiesand registration are as follows:1. Diagnose the problem:Australia: A taskforce was created to measure theadministrative burden, resulting in the establishmentof a Business License Information Systems(BLIS) as a one-stop-shop service designed to deliverpertinent governmental information to smallbusinesses regarding licenses, application formsand contact details. The results of BLIS are veryimpressive. They have reduced the administrativeburden for business by reducing the informationsearch cost incurred in trying to establish theirregulatory compliance obligations. Furthermore,15,000 people use this system every year; and inthe nine months between September 1999 andMay 1999, BLIS generated more than 13,500fact sheets and reports for new and existing businessvia the Internet alone.Mexico: a special deregulation unit was set upunder the Ministry of Industry and Commerce toreview all existing business formalities, includingstart-up requirements. The comprehensiveness ofthe approach led to a more fundamental reformthan if the government had sought fast results.2. Provide adequate training and resources to244

Case Study:Business Registration Reform in UgandaIn Uganda, firms must apply for annual ‘tradelicenses’, which combine basic registration oftheir status with other approvals. This processis a major deterrent to formalising businesses.It takes an average of two days to obtain thelicense at an average compliance cost of about20 percent of per capita GDP. Administrationincludes cashiers for fee payments, registrarsfor reviewing paperwork and issuing the license,a site visit by a health and safety inspector, andapproval by the Local Chairman.Little of this is really necessary, except for afew firms which pose significant risks to publichealth or security. The DFID project introduceda simplified trade licensing process in Entebbemunicipality, involving only provision of basicinformation by the entrepreneur, payment of afee, and immediate issue of the license document— all in one stop. This reform was foundto have brought the following benefits:A cheaper & shorter process: compliance costdropped by 75 percent and is now estimated at2 percent of per capita GDP. Average registrationtime is now 30 minutes, down from twodays.Better business-government relations: businessesfeel that the attitude of the registration staffis much more positive and pro-business.More businesses registered: registration levelshave improved by 43 percent. In the first year,four times more businesses registered than inthe previous year.More government revenue: total revenue collectionhas increased by 40 percent through moreregistrations. Individual businesses pay less onaverage.Reduced administrative costs for government:Entebbe municipality estimates a 10 percentreduction in administrative costs. Administrativetime effort by staff is down by 25 percent.There are reduced waiting lines and hassles forbusinesses.Health & safety inspections more targeted &prioritized: inspectors can now target their visitson high risk businesses.Better knowledge of business profiles/sectors: anew computerized system and improved compliancegives the local authority better information.These reforms were implemented withoutchanges to national level legislation whichwould have been very difficult and slow toachieve. Instead, other legal means were foundto make change. In cases such as this, regulatorybarriers to formalisation can be reducedwithout large-scale legal change, but ratherthrough small incremental change. The Entebbeexperience is now being replicated in other localauthorities in Uganda.licensing authorities:Australia: Training to licensing authorities on theuse of new technologies for business registration,having the greatest positive effect on small businessesand micro enterprises, which generally donot have resources to spend on legal assistance.Ceará, Brazil: Technical assistance given to applicants,many of whom are illiterate or semi-illiterate.Government prepares material for SMEs,which explain their rights and responsibilities on245

key topics in simple and clear language.Eritrea: Legal assistance provided to SMEs tomake better use of their rights and instruments.3. Business Help Centres (BHC) - Create singleaccess point for business for entrepreneurs:Turkey: a one-stop registration launched in June2003 by combining seven procedures into a singlevisit to the company registry. The time to start abusiness was cut from 38 days to nine. In addition,application forms were unified and shortened, andregistry officers were trained in customer relations.The cost fell by a third and the number of registrationsshot up by 18 percent, almost halving thetime to start a business — from 23 days to 13.Portugal: at the Centro de Formalidades deEmpresa all company registration procedures areperformed in only three visits.4. Introduction of standardised forms resulted insignificant reduction in rejection rates:In the United Kingdom rejection rates went downby eight percent, in Malaysia by 11 percent andin Costa Rica by 14 percent. These can cover allbusiness forms: sole proprietorship, partnership,limited liability, or corporation.5. Electronic registration, online forms and registrydata base in Denmark, Italy, UK, and Norway:electronic registration, an innovative and efficientprocedure, has become norm.Australia and Canada: The Internet can be usedto file business registrations, which cuts the administrativecost by more than 50 percent.Netherlands: the Ministry of Economic Affairshas launched a programme of ‘Forms on Line.’Forms are unified under this programme. Registrydatabase should be updated continually andaccessible by the Internet. A system should bein place for real time access to the database byinspectorates and others who need the information,such as tax, customs, pension, and socialsecurity authorities.6. Cut the newspaper publication requirement:Serbia and Montenegro abolished the requirementto publish a notice in the official gazette.Instead, companies announce their formation onthe registry’s website.7. Allow businesses to start activities immediatelyafter registration:Germany and Italy allow companies to beginactivities as soon as they file the required information(as long as it does not involve dangerousactivities). This eliminates ex ante barriers tostart-ups.México: the government created the Sistema deApertura Rápida de Empresas (SARE), which reducedthe number of federal formalities to open alow-risk business for individuals (tax registration)and for business (tax registration and enterpriseregistration). Under the SARE system, it takesone working day to comply with federal startupformalities for low-risk activities (specifiedin annex to the decree). As of November 2002,more than 226 000 individuals and 1,400 legalentities have received their tax and enterpriseregistration under this scheme.8. Impose a ‘silence is consent’ rule:This means that once the deadline had passed,the business is automatically considered registered.This approach, pioneered in Italy, iscurrently enforced in Armenia, Georgia, andMorocco. All four are among the world’s fastest20 percent for registering a business.9. Reduce or scrap the minimum capital requirementfor private limited liability companies:In Bosnia and Herzegovina the capital requirementhas been reduced by half.In France, the requirement was abolished.246

10. Establish a single business identificationnumber to expedite and track the processing ofofficial requests:Oregon: the single business identificationnumber is used when reporting, paying, makingenquiries about employment-related obligations— such as withholding, unemployment, andtransit taxes — and worker’s compensation assessments.Ireland: brought together tax registration detailsfor income, social security, and value-added taxesunder a single registration number. This practicehas also been introduced also in other Europeancountries.11. Involve the private sector in registration:Serbia: the independent agency registers businessthrough a network of service centres strategicallylocated around the country, and throughon-line and mail registration.Italy recently eliminated the role of the courtsaltogether and enjoys substantial efficiencies asa result. The trend in Europe is toward administrativemanagement of registries and away fromlegal process involving courts and notaries.(A recent study 93 for the European Commissionfound that key drivers of good registration areimprovements in internal efficiency in public bodiesthrough better management techniques andperformance measures, accountability, and userconsultation, which implies a client-orientationfocused on business needs. The study found thatreduction in the involvement of court notaries andother legal bodies were associated with substantialefficiency improvements.)12. Licensing Reforms — rationalisation:Russia: the new law on licenses significantly reducedthe number of activities subject to licensing,reduced the license fee, and extended theterm of validity of a license to at least five years(from three years). After the adoption of the newlaw, the percentage of the enterprises that appliedfor licenses and permits dropped by a third.13. ‘Get out of the Courts.’ Eliminate the needfor mandatory use of both notaries and judgesfrom registration:Bosnia-Herzegovina will make registration anadministrative process, without resorting to thecourts. Also eliminates the need for judges.Italy: registration was taken out of the courts,saving three months.Serbia and Montenegro adopted legislation to dothe same in May 2004. The benefits are large.Entrepreneurs in countries where registrationrequires a judicial process spend 14 more days tostart a business.Operating a Business1. Reduce the number of inspections by governmentauthorities with the exception of those areaswhere regular inspections are needed due to thenature of transactions. Inspections, in general,are based on ad hoc system in terms of documentrequirements, interpretation of documents,and intention of inspectors. They usually lead tobribes and corruption:Russia: According to a new Inspection Law, anyone state agency can carry out no more than oneinspection of one and the same firm in two years.The number of inspections dropped by a third.2. Private inspections and certification —alternatives to administrative regulation:Australia: a model involving private and third-partycertification of building compliance by competentbuilding professionals has been incorporatedat the national level. It involves the developmentof a model of rational building legislation devel-247

oped as part of a long-term regulatory harmonisationprocess in this area.Dubai has implemented this system, while Japanand Malaysia have expressed considerable interest.Finland introduced several types of privateinspection in 2004, such as for foundation, steelworksand electrical work. All Nordic countries aswell as Australia, Canada, Ghana, Kenya, SouthAfrica, Uganda, the United Kingdom and Zambiahave adopted risk-based inspections.3. Simplified and transparent taxation system:Uzbekistan: which used to have a complex andfrequently changeable tax system, recently introduceda fixed simplified taxation system for SMEs— a great benefit to individual entrepreneurs,micro-firms, and small enterprises. Instead ofvarious national and local taxes, they pay either afixed or a unified tax.Russia: the new Taxation System Law gave firmsincentives to use a simplified tax system. Insteadof VAT, profit, sales, and property taxes, smallenterprises can pay one unified tax. (Accordingto the old 1995 Russia law, SMEs had to pay 10percent of profit for federal and 20 percent for regionalbudgets; 3.3 percent of revenue for federaland 6.7 percent for regional budgets, if revenuewas below 7.5 million roubles and employmentbelow 20 people. The new Russia law requires15 percent of profit or six percent of revenue, ifrevenue is below 11 million roubles and employmentbelow 100 people.)4. Tax Identification Numbers:Australia: introduced ID numbers in real estatetransactions and banking and financial activities.The aim is to reduce tax evasion and unreportedactivities by employing computerised tax officesand management information systems, setting upregional information and audit centres and establishinga system to track unpaid taxes.5. Electronic Tax declarations:Mexico is using instruments such as electronicfunds transfer submission of declarations throughthe Internet instead of paperwork. The resultsof this practice have been astonishing: reducedpaper; expanded customer service coverage; itiseasier for the Ministry of Finance to identify theorigins and the destination of payments; and lesstime spent in tax compliance.Egypt established a Model Tax and CustomsCentre in 2003. The Centre has brought togetherthe three revenue generating departments in onebuilding with one tax and customs file for everytax payer. Efficiency in collection and avoidanceof double taxation were evident in tax with payers’compliance with the new system.6. Establish a flat tax and cut back special exemptionsand privileges:Estonia: 1994 reform replaced a concessionladensystem with a single flat tax offering noexemption. The country’s tax base broadened,and revenues have not suffered.Slovakia: in 2003 streamlined its convolutedincentive schemes into a single flat tax, withsimilar results.Colombia, El Salvador, Indonesia, Jamaica ,andMexico: eliminated distortions by cutting ineffectiveincentive schemes — and increased revenuesin the process.7. Increase revenue by keeping rate moderate:Russia: reduced corporate tax rate from 35percent to 24 percent in 2001, resulting in anannual average revenue growth of 14 percent overthe next three years, the lower rate resulted inincreased tax compliance.Egypt: reduced the corporate tax rate from 40percent to 20 percent in 2005. Indications showthat there is an increase in tax compliance.248

Expansion1. Distribute both positive and negative credit informationin the registry sharing credit information:There is a need to put more emphasis on positiveinformation like outstanding loans, assets, landpayment behaviour on accounts in good standing.The public registries in Belgium, Brazil, andTurkey began sharing more positive information.Backed by new laws, the Greek and Hong Kongprivate bureaus did the same. In Greece, thenumber of bureau consultations grew by morethan 50 percent and several new products forlenders were launched. In addition, negativeinformation like defaults and arrears should alsobe displayed.2. Improve data quality (reforms on registries):Bangladesh: the public registry raised the penaltyfor banks that withhold data from 2,000 takasto 500,000 takas and the penalty for disclosingcredit information to unauthorised parties from2,000 takas to 100,000 takas. As a result, theshare of banks submitting data on time jumpedfrom 25 percent to 95 percent.Mozambique: quality shot up after new regulationsallowed the registry to fine banks forproviding incomplete information. More than adozen countries are improving data protectionlaws, which include incentives and safeguards forquality.3. Make credit registry electronic:Pakistan: an online system has been implementedto improve credit registries. Providingonline access is associated with more credit. Inaddition, this system might help spur commercialbanks to adopt credit-scoring technology, whichboth speeds up the lending process and reducesopportunities for gender bias. Creditors can nowobtain information instantly.4. Introduce universal security for debtors andcreditors:Slovakia permitted debtors to use all movable assetsas collateral — present and future, tangibleand intangible, and abolished the requirementsfor specific description of assets and debts. Sincethen, movables and receivables secure more than70 percent of all new business credit.5. Permit out of court collateral enforcement:Spain: introduced out of court enforcementthrough notaries execution, allowing debtors andcreditors to agree on enforcement methods. Timeto enforce was cut from more than one year tothree months.Slovakia: the gains from reforms were even larger.It took 560 days to enforce a mortgage throughthe old system. Now it is possible to enforce it in45 days.India: state-owned banks which account for 90percent of lending, were permitted to enforcesettlement out of court. On default the bank mustnotify the debtor. After a 60-day grace periodthe bank can seize the assets directly and sell bypublic auction. Creditors can expect to enforcewithin nine months.Ukraine also expanded the scope of assets thatcan be used as collateral, and gave secured creditorsfirst priority to their collateral and its proceeds.In addition, it gave creditors the ability toenforce collateral privately, bypassing the lengthycourt procedures required before.Croatia cut several months from enforcement bymaking it harder for debtors to delay the enforcementprocess. Movable collateral can now beseized and sold not just by the courts but also byauthorised private firms.Poland changed its bankruptcy laws in 2003.Previously, employees and taxes were paid beforethe secured creditors upon liquidation. Now, se-249

cured creditors have priority to the proceeds fromthe sale of their collateral.Armenia: since March 2004, the debtor automaticallyloses control of his or her property to anadministrator on bankruptcy, increasing creditorrights.6. Introduce a new Leasing law:The development of leasing as a complementarytool to bank loans provides an alternative solution,which can significantly expand access tocapital for business.Benefits are: (a) an effective tool where capitalmarkets are less developed; (b) security arrangementsare simpler as it is provided by the leasedasset itself; (c) little cash is required, allowingthe lessee to conserve cash or use it as workingcapital; (d) tax incentives often make it possiblefor SMEs to reduce income before taxes; and(e) promotes investment in capital equipment,increases competition in the financial sector, andfacilitates the transfer of new technology.Serbia and Montenegro: since passing a new leasinglaw in May 2003, nine new leasing companieshave opened for business. They expect toissue US$170 million in leases this year, roughlyhalf of all SME finance in the country.Uzbekistan: the level of leasing transactions wasextremely small, now there are 23 leasing companiesfinancing SMEs.Kazakhstan: after amending the tax law in 2003,six new lessors opened: leasing deals grew fromUS$57 million to US$89 million within threemonths of the introduction of the new legislation,and the average deal size fell from US$190,000to under US$90,000, bringing leasing withinreach of more SMEs.Egypt: lease law introduced in 2000. Seven leasingcompanies cover most sectoral activities andmore than $5 billion of financial leasing activitieswere introduced in the financial market.7. Repeal the normative acts, which authorisebanks to carry out functions that are not appropriatefor financial intermediaries:Uzbekistan: banks act regularly as tax agents totrack timely tax payments and other mandatoryreturns by SMEs and to withdraw the outstandingamount of taxes and other payments owed tothe authority. Obviously, SMEs do not view banksas effective financial intermediaries. As a result,there is a need to repeal the normative acts,which authorise banks to carry out functions, thatare not appropriate.Enforcing Contracts1. Summary proceedings:Russia: the most popular reform in 2003 was theintroduction of summary proceedings for the collectionof small debt and other smaller commercialdisputes. In late 2002, 60 percent of debtcollection cases in Moscow used this procedure.A summary procedure typically takes two monthsfrom start to finish, nine months less than a generalprocedure.2. Introducing case management:Case management can be described as a procedurein which the judge follows the case fromstart to end, reduces delays and increases usersatisfaction. In addition, this is very important forcollection of debt. The average duration of debtcollection is five months in rich countries wherejudges actively manage the case, and nearly 18months in rich countries where judges don’t.Finland: an electronic system of recording waspart of the case management. A judge can followeach case at any moment, reducing the time ittakes to reach resolution.Slovakia: this system has been implemented250

successfully without much additional cost. Theaverage time between filing and the first hearingwas cut from 73 days to 27 and the averagenumber of procedures from 23 to five, as judgeswere randomly assigned and could schedule thehearings without the need for consultation withcourt clerks and other judges.3. Privatise enforcement process and make itcompetitive:Private enforcement or specialised public collectionagencies to collect debt are more effective.The best way to speed the recovery of overdue debtis by allowing competition in enforcing judgments.Colombia scrapped the monopoly of the courts toenforce judge’s ruling in 2003. Private companiesquickly moved into the business. As a result,time was cut by nearly two months.Hungary and Slovakia also introduced privateenforcement.ExitWith higher recovery rates, banks are more willingto lend and more money goes to new businessventures. The freedom to take on new ventures,and do so through an efficient process, ensuresthat a country’s people and capital are put totheir most productive uses.1. Specialised expertise:Provide specialised judges who deal with foreclosureor bankruptcy cases. In developing countriesthis can be achieved by establishing a specializedcommercial section in the general court or in anadministrative agency.Peru: Its clerks and judges deal only with bankruptcyand debt recovery issues and not withdivorce or criminal cases.2. Limit appeals:Appeals are needed to resolve legitimate disputes.But too often they are abused and invokedfor frivolous reasons thus delaying an efficientoutcome. Limiting appeals, both at the outsetand during the procedure, increases recoveryrates.Australia, New Zealand and the United Kingdom:In foreclosure proceedings, the creditors needonly to prove that a payment is overdue. Appeal isnot possible.El Salvador: in contrast, the debtor can appealforeclosure and delay its start by up to 16 months.Appeals delay liquidation or reorganisation.Romania reduced each appeal from 30 to 10days. In addition, appeal can be limited only onlegal grounds, not on the case facts, which arealready established and accepted by the judge atthe start of the case.Estonia: allows the case to continue duringappeal, avoiding disruption while providing fordisputes to be resolved. Allowing the foreclosureor bankruptcy case to continue on appeal is associatedwith 20 percent less time in closing abusiness. And it almost doubles the chance ofkeeping it operating.Successful Initiatives taken by BusinessesThis section focuses on the initiatives taken fromthe private sector including informal businessesperspectives on their business rights and ensurethey can take full advantage of opportunities andmarkets.1. Appropriate legal frameworks that enshrine thefollowing as economic rights:• Access to finance, raw material, and productmarkets at fair prices;• Access to transport and communication infrastructure;251

• Access to improved skills and technology;• Access to business development services;• Access to business incentive and trade promotionpackages: tax deferrals, subsidies, tradefairs, etc.;Examples:Fair Trade examplesVegcare, KenyaGrameen Bank, BangladeshSocial Fund, Egypt2. Legal property rights:• Private land• Intellectual property• Examples:land rights for rural women in Mozambique, intellectualproperty rights for indigenous peoplein southern Africa3. Use rights to public resources and appropriatezoning regulations:• Rights to urban public land;• Rights to common and public resources: pastures,forests, and waterways;• Appropriate zoning regulations stipulatingwhere and under what conditions informaloperators or businesses can operate in centralbusiness districts, suburban areas, and/orindustrial zonesExamples:Warwick Junction in Durban/eThekwini;Dedicated Built Market for Traditional MedicineVendors in Durban/eThekwini, SouthAfrica;Buy-Back Centre for Waste Collectors in Durban/eThekwini,South Africa;street vendors zoning in Bangkok and Manila.4. Appropriate legal frameworks and standardsfor what informal operators and businesses areallowed to buy and sell:• Appropriate laws and regulations on what arelegal vs. illegal goods and services;• Appropriate product and process standards:e.g., public health and sanitation concernsabout street food;• Marketing licenses for products and servicesExamples:Appropriate standards for handling and processingof milk in Nicaragua, Kenya;market license for gum collectors in India.5. Appropriate legal tools to govern the transactionand contractual relationships of informaloperators or businesses:• Bargaining and negotiating mechanisms/power;• Legal and enforceable contracts;• Grievance mechanisms;• Conflict resolution mechanisms;• Possibility of issuing shares;• Right to issue shares;• Right to advertise and protect brands andtrademarks;Examples:Brand name and advertisement for packagedcashew nuts in Senegal;brand name and fair prices for Ghanaianchocolate in UK;use of IT to market fish products in Senegal,India.6. Legal rights and mechanisms to provide informaloperators and businesses with:• Temporary unemployment relief• Insurance of various kinds, including of land,house, equipment, and other means ofproduction;• Bankruptcy rules;• Default rules;• Limited liability;252

• Asset protection;• Capital protection;• Capital withdrawal and transfer rules.Examples:Limited liability devices (ILD);Asset shielding devices (ILD; )Capital locking-in devices (ILD).7. Legal right for informal operators and businessesto join or form organisations, legal recognitionof such organisations, and legal right ofrepresentation of such organisations in relevantpolicy- making and rule-setting institutions:• Membership in mainstream business associations;• Membership in guilds or other associations ofsimilar types of entrepreneurs;• Representation in relevant planning and rulesettingbodies.Examples:SEWA in India;StreetNet International;Ghana Trades Union Congress;Catalunya affiliate of national trade union confederationin Spain.An Integrated Economy ApproachInstead of considering the formal and informaleconomies as a dichotomy, practice is beginningto recognise them as a continuum. Slowly butsurely, the more enlightened policymakers arebeginning to understand that legal empowermentin the form of reduced regulatory burden makessound business sense. New models, some of whichhave been illustrated above, are emerging whichrecognise that economic policy has to promotean integrated approach to maximise social andeconomic opportunity and well-being of all socialand economic strata. The integrated and inclusiveeconomy approach recognises that if relationshipsbetween different levels of economic activity areto be anticipated, and made strategic and optimal,policy and institutional change for sustained businesslinkages and skills development has to takeplace.To design and support the development of appropriatepolicy and institutions for an integratedeconomy, innovations emerging at the interfacebetween the informal and formal have to beanalysed. Small producers and micro entrepreneursare daily developing strategies for dealingwith the demands of formal institutions whilethe latter have also developed ways of managingtheir inevitable encounter with those who arethe majority in the poorer countries of the world.These coping strategies hold the clues to whatdevelopment interventions can build upon withinparticular cultures and economies.Analysis of current practice offers several observationsthat could guide movement froma bifurcated to an integrated, cohesive approachto entrepreneurship and economic activity.First, in order to encourage greater engagementbetween established formal businesses and thesmaller enterprises, transaction costs and risks ofsuch engagement have to be reduced.Second, the public sector has to develop andimplement participatory processes so that supportis relevant to those on the fringes of formal activity.Third, change has to be negotiated throughiterative dialogue and partnerships that spanacross central and local governments, the privatesector, domestic capital markets, producer groupsand their social and economic organisations.Fourth, the function in micro and small scaleentrepreneurial activity of ‘immediate and directreciprocities’ 94 has to be recognised; in many lowincomecommunities social groups and economic253

Case Study:Identity, Voice, and Association in the Informal Economy— The Long Journey of Self-employed Women’s Association (Sewa), IndiaSEWA, established in 1972, is a trade unionof low-income working women who earn theirlivelihoods by running small businesses, doingsubcontracting work or selling their labour.With over 700,000 members in 2003, SEWA isthe first trade union of workers in the informaleconomy not only in India, but also around theworld. It is also the largest trade union in India.SEWA’s objectives are to increase self—relianceas well as the economic and social securityof its members. SEWA members fall into fourbroad occupational categories:• Hawkers and vendors, who sell a range of productsincluding vegetables, fruit and used clothingfrom baskets, push carts or small shops;• Home-based producers, who stitch garments,make patchwork quilts, roll hand-made cigarettes(bidis) or incense sticks, prepare snackfoods, recycle scrap metal, process agriculturalproducts, produce pottery or make craft items;• Manual labourers and service providers, whosell their labour (as cart-pullers, head-loadersor construction workers), or who sell services(such as waste-paper picking, laundry servicesor domestic services); and• Rural producers, including small farmers,milk producers, animal rearers, nursery raisers/tenders, salt farmers and gum collectors.Over the years, SEWA has built a sisterhood ofinstitutions, as follows:• SEWA Union (the primary membership-basedorganisation to which all SEWA members belongand which provides overall governance ofthe organisation);• SEWA Bank (which provides financial services,including both savings and credit);• Gujarat Mahila Cooperative Federation (whichis responsible for organising and supportingSEWA’s membership in several types of co-operatives);• Gujarat Mahila Housing SEWA Trust (whichprovides housing services);• SEWA Social Security (which provides health,childcare and insurance services);• Rural and Urban Branches of SEWA (whichoversee, respectively, its rural and urban activities,including the recruitment and organisingof members);• SEWA Marketing (which provides productdevelopment and marketing services);• SEWA Academy (which is responsible forresearch, training, and communication).The first three are democratic membershipbasedorganisations, governed by elected representatives.The others are support institutionsthat provide services of various kinds to SEWAmembers. Source: SEWA, 2003.groups are synonymous. How social relationsand values other than material affect the modusoperandi of millions of entrepreneurs has to bebrought into economic reform considerations.Finally, the private sector has to be defined asincorporating all entrepreneurial activity in anycountry and should be seen as inclusive of both‘entrepreneurship inspired by opportunity’ and254

‘entrepreneurship inspired by necessity’. 95 Thelatter was always known as the social welfareapproach; it now needs to be looked at througha business and wealth creation lens. Within aninclusive economy, entrepreneurship, whetherformal or informal, would be supported by:• Removal of regulations that unduly inhibitprivate sector development;• An integrated perspective on micro, small,medium and large enterprises;• Linkages between various sizes of businesses;• Increased efficiency and productivity of thelabour force;• Enhanced competition;• Expanded markets. 96In making profitable markets more inclusive ofthe poor, risk mediation is a fundamental concern.Formal institutions and large firms as wellas small and micro enterprises are all equally riskaverse, given the absence of adequate investorprotection or social safety nets in many countries.Acceptable risk is central in developing andsustaining trust. 97 So far, successful mediationbetween large and small businesses has usuallybeen provided by guarantees through contractualand financial arrangements facilitated by credibleintermediaries such as donors, governments andNGOs. These models can be scaled up to becomemainstream if there is political will towards propoorpolicy and institutions that can move currentpractice towards greater parity and fairness inaccess to opportunity and assets.sector, in the national economy. These corporateentities of micro-enterprises can become thenatural partners of larger corporate entities thatmight outsource many of their operations andcomponent inputs to these entities. The problemsof dealing with large numbers of such enterprises,scattered as they are across the country,and maintaining quality control have discouragedwhat might otherwise have been a mostcost-effective partnership between the formaland informal sector. Larger corporate entities ofmicro-enterprises would eliminate both the costand managerial problems associated with buildingthis linkage and could open new horizons ofopportunity that might lead the informal sectorto become formally integrated with the macroeconomy.98To Sum UpThere are rich, real life examples of ‘businessrights’ successes from all over the world that canbe borrowed and implemented, with necessary improvementsand modifications to suit local environmentsand priorities. What is needed on the partof both the authorities and business participantsis openness in critically evaluating real-life cases,and in adopting and adapting as necessary thosewith potential for successful implementation.Another example of integration is the prospect oflarge numbers of micro-enterprises, living precariouslives in the informal sector, coming togetherto form large corporate entities, and competing innational and global markets. This could providea new perspective on the role of the informal255

6. Pursuing the agenda forchangeOver the last two decades, much attention hasbeen paid to legal and regulatory institutions andto their influence on economic outcomes. It isrecognition of the importance of good governancein advancing economic development initiatives.As a result, much development assistance isbeing directed towards reforms of national legalcodes, public institutions, and bureaucraticprocesses. The anticipated result is a legalinfrastructure conducive to market-led economicgrowth. However, the reform movement has notfully (perhaps only marginally) addressed themultifarious issues of informal economic activity.Deregulation was expected to result in significantshifts of entrepreneurial activity from informalto formal. But, as pointed out earlier the scaleof informal economic activity is actually growing,not decreasing. The informal sector is hereto stay. At the same time, policy reform, thatstrengthens what works for the working poor andresponds to what does not, is long overdue.Laws, regulations, and institutions governingcommercial relations need to reflect the realitythat most economic units are very small with fewhired workers and that many of the working pooroperate on their own account. Also, biases inexisting laws, regulations, and institutions thatfavour large enterprises over small ones, and menover women, need to be addressed. Meanwhile,in the absence of new and more appropriate laws,regulations and institutions, most informal businesseswill remain unprotected, insecure, andvulnerable.Business-related reforms are now really comingunder closer scruitiny. 99 In fact, there is anincreasing demand for reforms to contain ‘valuebased policies, strategies and institutions’ thatwill bring long-term sustainable benefits to thepoor in general and to informal enterprises inparticular.What is needed at this juncture are policiesregarding formalisation that not only simplifyformalities or improve the quality of regulation,but also increase the value of informationprovided by public registers to their users, bothpublic and private. This is because business formalisationis an ordinary productive process thatincurs costs but also provides valuable publicand private services. The private services reducefirms’ transaction costs in many of their contracts,and the public services facilitate the workof the administration in its dealings with firms.In other words, ‘the main priority should not beto reduce the cost of business formalisation — acost paid only once — but rather to reduce transactioncosts in all business dealings. . . . Therestructuring of formalities is in itself insufficientfor reducing total transaction costs. It may alsobe a costly distraction. It is necessary, rather, toenhance the value of formalisation.’ 100Addressing informality, therefore, is a multi-facetedproposition requiring a thorough understandingof the factors that create and drive informality.Reform initiatives may also require that theformal sector be re-defined to accommodatemany of the principles and values which characterisethe vibrancy and resilience of the informalsector. Clearly, there is no single approach toreform but there are essential and common principlesthat must be observed. Three key ones are:context specificity, a participatory and genderedapproach, and recognition of legal empowermentof informal businesses as a governance issue.This section sums up our discussion on what thepromise of legal empowerment holds with respectto unlocking the productive capacities of the256

millions who operate poor, micro informal businesses.Changes have to be Context SpecificAlthough development interventions tend to favourreform through standardised, ‘best practice’ institutionalforms, 101 what is required is an empiricallygrounded perspective using context-specificresearch, organisational innovation and politicalentrepreneurship rather than the importation ofinstitutional templates (‘toolkits’) forged elsewhere.102 Because rules are at once constituentelements of cultural norms and values as muchas they are embodied in commercial codes andconstitutions, attempts at ‘legal empowerment’need to engage if not with that full spectrum thenat least with a more complete awareness of thespectrum’s existence and importance. 103Therefore context-specificity is a fundamentalrequirement in moving towards change. Thisspecificity must also extend to the reality ofdifferent categories of informal businesses inspecific locales and industries. Any policy orinstitutional reform has to recognise and supportboth the self-employed (differentiating betweenmicro-entrepreneurs and own-account operators)and wage workers in the informal economy. Thelack of recognition and understanding of thesebasic components of the informal economy oftenhinders the development of appropriate policy.Reform Processes Must beParticipatory and Gender ResponsivePolicy and institutional reform should be participatoryand inclusive and allow for policies tobe developed through consultation with informalbusinesses, and through consensus of relevantgovernment departments, the organisations ofinformal businesses and other appropriate socialactors. In order to have a voice, those who arein the informal economy must be organised andtheir efforts to organise into association andcooperatives at every level should be encouraged.In order to organise, the working poor have to beallowed the space and resources to associate fora common economic purpose and without politicalmanipulation.Of course, formulating appropriate policies andstrategies is not an easy task. However, with theinvolvement of the organisations that representinformal businesses it is likely to succeed. Theway forward has to be one of negotiated solutions,and these negotiations have to be aboutrights and responsibilities. While the inclusionof the voice of all stakeholders in making policyis essential to its success, the input of informalworkers and their organisations, based on recognitionof their right to organise, is crucial.The voice of women has to be clearly heard inthis process. In most regions of the world, alarger share of the female than of the male workforceis in the informal economy and, within theinformal economy, more women tend to be concentratedin lower-return segments than are men.As a result, even within the informal economy,there is a significant gender gap in earnings andin the benefits and protection afforded by work.Understanding relations between men and women,their different positions in the economy andtheir access to and control of resources, is crucialto understanding the informal economy, wherea gendered approach is a pro-poor approach.Supporting women’s work will, in effect, lead tosupport for poor households and poor children.Legal empowerment of informalbusiness should be prioritised as agovernance issueThe reform process should be based on an informedunderstanding of the economic contribu-257

Case Study:Technology and the Informal Sector: Fishing with Mobile PhonesA Fisherman on the coast of Kerala, in southernIndia, faces the dilemma: in the situationof good catch, should he or she sell the fish(sardines) at the local beach or or travel to amarket farther away? If he or she stays at thelocal beach , prices could be low due to oversupply, but travelling would be a costly decisionin terms of transportation cost and time toanother market. Moreover, each market remainsopen for only a couple of hours before dawn andfish are perishable; any that cannot be sold willhave to be dumped into the sea.According to a research by Robert Jensen, untilthe introduction of mobiles phones in 1997 fishepeople used to stick with their home marketsall the time. This was wasteful: on average, 5-8percent of the total catch was lost. He noted, forexample, on January 14th 1997, ‘Eleven fishermenat Badagara beach ended up throwing awaytheir catches, yet on that day there were 27 buyersat markets within 15km (about nine miles)who would have bought their fish.’After the introduction of mobile phones therewas remarkable change in fishermen’s behaviour,the price of fish, and the amount of waste.Fishermen started to buy phones and use themto call coastal markets while still at sea. Insteadof selling their fish at home beach auctions, thefishermen would call around to find the bestprice. In one area, the proportion of fishermenwho ventured beyond their home markets to selltheir catches jumped from zero to around 35percent. At that point, no fish were wasted andthe variation in prices fell dramatically. ‘The‘law of one price’ — the idea that in efficientmarket identical goods should cost the same— had come into effect, in the form of a singlerate for sardines along the coast... This moreefficient market benefited everyone. Fishermen’sprofits rose by 8 percent on average andconsumer prices fell by 4 percent on average.Higher profits meant the phones typically paidfor themselves within two months. And the benefitsare enduring, rather than one-off.’This shows the importance of the free flow ofinformation to ensure that markets work efficiently,which in turn improve welfare.tion of informal businesses and serve to mainstreamthe concerns of the informal businessesin those institutions that deal with economicplanning and development. In the past, themanagement or regulation of informal activitieshas often been relegated to social policy departmentsor, in urban areas, to those departments(such as the police or traffic) that deal with lawand order issues. Locating governance of theinformal economy in traffic, health, policy orsocial departments ignores its economic aspects.Institutions that govern the informal economyshould be those dealing with economic planningand development. That is why this report hasemphasised that reform has to be couched withinan integrated economy approach where informaland formal are seen as equally important economicplayers, each demanding equal attentionin national governance laws and institutions.Strategies and Institutions to SupportInformal Businesses258

In developing and promoting new approaches,some considerations and innovations outlinedbelow could be considered. 104Market-based institutions for the poorThe capacity of informal businesses to operate onmore equal terms in the market place dependsgreatly on their capacity for collective action.The weakness of the poor in the market placeoriginates in their isolation. Here, investmentsin institutions, whether sponsored by NGOs orrepresenting collective action by the poor in theform of marketing cooperatives, or corporate bodiesof the poor, remain crucial interventions. Theissue therefore remains, posed as a challenge: toinvest the poor and informal businesses with capacityto develop the financial and organisationalstrength to sell products and services, at a timeand in a market that offers them the best terms,or to simply watch as they continue to sell theirgoods out of distress or just the need to subsist.Taking up the challenge positively demandsinterventions in the macro-credit market to underwritesuch marketing ventures, the designingof institutions which aggregate the market powerof the poor, and the deployment of professionalswith management skills and especially trained toassist the poor in up-scaling their participation inthe market economy.Adding value and supply chain to the labour of thepoor and informal businessesMany NGOs around the world provide marketingservices to the poor, for particular commodities,in particular markets. The best service that canbe provided is to help the poor and informal businessesadd value to their labours by moving upmarketthrough either agro-processing or providinginputs to the corporate sector. The pioneeringrole of Amul Dairy in India and, more recently,BRAC, are instructive model examples. They enablesmall dairy farmers, or just poor householdsthat own a cow bought through a micro-creditloan, to become part of a milk processing chain,thus enabling the poor to share in the profits fromselling pasteurised milk or cheese in the metropolitanmarket. Such initiatives may be taken onestep further by financially empowering the vastbody of small farmers servicing the private agroprocessingsector, as well as handloom weavers,to become equity stakeholders in the upstreamenterprises that could add value to their produceor abour.Taking micro-credit out of theghetto 105Nowhere is there a greater need for developing amacro-perspective for poverty eradication than inthe area of monetary policy. The instruments ofmonetary policy appear to be exclusively targetedtowards ensuring macroeconomic stability, moderatinginflation and meeting the credit needs ofthe corporate sector. The financial needs of thepoor, once left to the informal sector, have nowbeen segregated in the micro-credit market. Thisapartheid within the monetary system remains amajor anomaly.Indeed, it can however be argued that by its verynature, micro-credit can never aspire to eradicatepoverty since it only addresses one componentof the various markets that condition the lives ofthe rural poor. It is arguable that by locking thepoor into the micro-credit system, based on thefiduciary responsibility of the household, theyhave been excluded from participating in themacro economy, isolated from collective action,and condemned to live on the fringes of the povertyline. It is, therefore, not surprising that thosecountries with the most substantive exposure tomicro-credit, remain mired in poverty. However, it259

is not the aim to diminish the enormous contributionof micro-credit in alleviating poverty and distress,as well as enhancing the self-worth of thepoor. There is, today, no reason why such organisations,of the maturity of Grameen Bank, shouldnot graduate into the macro finance system byaccessing the deposits of the public and evenmarketing its assets at the global level, throughsuch financial instruments as securitisation, thatare in widespread use in more advanced financialsystems.Anumber of commercial banks are alreadyusing NGOs and community-based organisationsto retail banking services to the poor. Otherexamples include Scotia Bank in the Caribbeanand ANZ Bank in the Pacific Islands, which haveventured into ‘Banking for the Poor’ and ‘MobileBanking for Villages’. In Egypt, the Social Fund,Credit Guarantee Company and Micro-financeNGOs are not only successful providers of creditto informal businesses but also organisers of permanentexhibitions for MSMEs’ products, offeringentrepreneurial training and outreach services topoor enterprises.Mutual funds for the poorApart from the issue of redesigning monetarypolicy to deliver credit to the poor, the monetarysystem also needs to design special financialinstruments to attract these micro-savings intothe corporate sector, particularly where it can bestructured to serve the poor. The mutual fund isbut one institutional mechanism to link the poorto the corporate sector. The underlying premise ofthe mutual fund is the notion of creating possibilitiesfor the poor to own corporate assets. Opportunitiesare therefore opening for linking thefarmers to the agro-processing corporate sector bygiving them an equity stake in such enterprises.At the same time, the agro-corporations shouldBox 4 Largest multi-nationalcompany has 2.3 million ruralpoor women as shareholdersThe largest single foreign corporate investment inBangladesh is manifested in the GrameenPhone experience.GrameenPhone is a commercial joint ventureto provide cellular phone services. The companycurrently has two million subscribers which coverstwo-thirds of all phone subscribers in Bangladesh.Telenor, the largest mobile phone company in Norwayholds a 51 percent ownership stake in Grameen-Phone and has so far invested over US$600 millionin the joint venture making it the largest singleforeign investor in the country. Grameen Telecom,a sister organisation of Grameen Bank, ownedby 2.3 million poor rural women in Bangladesh,owns 35 percent of Grameen Phone. As and whenGrameenPhone goes public it will be possible forthese rural women to become direct stakeholdersin the largest private enterprise in the country. Thegoal of Grameen Bank is to make these poor womeninto the majority owners of the company as Telenormeets their commitment to gradually divest theirequity stake in the company to local investors. Theprospect of poor rural women in Bangladesh owningone of the largest corporate enterprises in the countrycould have a transforming effect on how the poorperceive their role in the national economy.be motivated to invest in improving productivityand capacities of their rural partners. An interestingpossibility of enabling the poor to own corporateassets is provided in Bangladesh.Financial policy need not limit itself to ownershipof corporate assets but could also be restructuredto ensure that all assets, from urban land, to realestate development, and from banks to corporatetrading houses, could be redesigned to accommodatethe poor as equity partners. The two260

institutional instruments to make this possibleremain the mutual fund and the need for privatelimited companies to transform themselves intopublic limited companies. Here monetary and fiscalpolicy can provide incentives to encourage thecorporatisation of private wealth along with thereservation of space for equity ownership of thiswealth by the poor.Institutionalising the collectiveidentity of poor and informalbusinesses 106Suggestions about building a collective identityfor the poor and informal businesses throughspecially constructed institutions derives fromthe need for the poor to claim a place in societythat is more commensurate with their numbers.The poor remain disempowered because they areisolated; bring them together and they emergeas a major force in the economy, in society and,eventually, in the political arena. Institutionalarrangements that can add value to the reformagenda are:a) Corporations of the poor and informal businesses:Community-based or self-help organisations(CBOs) of the poor, cooperatives andactivity-based organisations, that bring groupsof the poor together, should aspire to forge aninstitutional identity. Corporatising the CBOs willprovide the legal foundations for collective action,to enable these bodies of the poor to accesscredit, enter into contractual relationships anddeal with international organisations. The preciselegal persona of these corporations may varyfrom limited liability companies, with the poor asequity owners, to cooperatives with the poor aspartner members. But the common feature of allsuch corporate entities of the poor is that theymust operate in the market place and generateincome rather than limiting themselves to surviveas savings and loan associations.b) Corporatising micro-enterprises: The prospectof large numbers of micro-enterprises, livingprecarious lives in the informal sector, comingtogether to former large corporate entities thatwould compete in national and global markets,provides a new perspective on the role of theinformal sector in the national economy. Thesecorporate entities of micro-enterprises can becomethe natural partners of larger corporate entitiesthat could outsource many operations andcomponent inputs to them... The larger corporateentities of micro-enterprises would eliminate boththe cost and managerial problems associated withbuilding this linkage and open up new horizonsof opportunity to the informal sector to formallyintegrate with the macro economy.Bangladesh provides technology upgrading,quality control, credits and marketing services tolarge numbers of handicraft enterprises acrossthe country. However it still deals with theseenterprises as clients who are helped by accessto credit, markets and skill development. BRAChas to take the next step of aggregating theseproducers into a larger corporate entity wherethey acquire an equity stake in the final profitsof the enterprise. Such a corporate entity hasbeen developed in India with the Papad cooperativewhere around 100,000 small householdenterprises producing the spicy snack condiment,the Papad, have been aggregated to become thelargest single supply source of quality papads togrocery stores across the country.c) Micro-insurance — Protecting Informal businesses:Micro-credit can help the poor rise abovepoverty. Micro-insurance can help by providingprotection against certain perils; micro-insurancecomplements other financial and socialservices. Because they often live and do business261

in risky environments — in urban shanty townswith unsanitary conditions, in rural areas proneto droughts or floods — the poor and informalbusinesses are more vulnerable than the rest ofthe population to perils such as illness, accidentaldeath and disability, theft or fire, agriculturallosses, natural or manmade disasters. They arealso the least able to cope with crisis when itoccurs. Micro-insurance with the use of technologyhas been successfully been introduced in anumber of countries:In Uganda and Malawi, some insurance providersissue smart-cards to poor policyholders toconfirm that they are who they say they are, andcan instantly provide information on their level ofcoverage and whether the premium has been paid.In the Philippines, insurers have minimised thetransaction costs of collecting many small premiumsby allowing people to pay via their mobilephones.In India, a barcode system is being tested as away of managing client information. The barcodestickers are especially useful for illiterate clientswho can attach them onto pre-addressed envelopesto identify themselves.Business Rights — providevalue-based change process.The rationale for changes in the informal businessessuch that some elements and advantagesof formalisation are incorporated is rooted in awider appreciation of how both individuals andbusinesses can be disadvantaged by operatingoutside the formal economy and the recognitionthat there are benefits to formalisation. Neverthelessmicro-entrepreneurs make an economiccalculation along the lines of a cost-benefitanalysis, which determines a minimum thresholdof participation in formal arrangements for whichthe costs remain lower than the benefits. Somefirms will therefore choose to participate in onlya subset of institutions at any point in time. Inaddition, benefits and costs of participating in aformal context vary for firms of different size andexpected lifetime. It would for instance seem thatyoung, inefficient and small firms are disproportionatelyinformal.The chart below illustrates the phases an enterprisemight hypothetically go through before itbecomes an official formal enterprise. The chartalso illustrates that the transition from an informalto a formal status is gradual and that it isimportant to initiate the relevant processes thatcould assist enterprises to reach a more formalexistence. Any interventions in support of movingenterprises towards a more formal existenceshould be prioritised and concentrated on wherethe maximum effects can be reached. The waythat the informal enterprises themselves rank theproblems that they are facing would indicate howto prioritise interventions.In order to make a smooth transition from informalto formal there needs to be a strong foundationof: a) rule of law and access to justice; b)good governance and protection of basic rights(human, legal, property and labour); c) strongphysical and social infrastructure; d) politicaland economic stability, and e) conducive and fairbusiness environment.Additionally, the causes of informality are complexand defy simple explanations. Consequently,the transformation can only be tackled successfullyby a linking set of policy initiatives thatdeliver both pull and push pressures. The DemandPull and Supply Push measures are brieflyhighlighted in Chart 1. Demand ‘Pull’ initiativesinclude: access to finance, capital and credit;tax relief and incentives, titling, public procure-262

Figure 5Legal Empowerment of Informal EnterprisesSUPPLY PUSH• Regulatory Reforms• Reducingadministrativebarriers• AffordableBusiness Fees• Simplified Taxation• AccessibleBusiness Licensingand Registration• ReducingCorruption• Adaptable LabourLawsGradual Transition through Business RightsInformalSubsistenceBusinessesUnofficialBusinessesPartlyOfficialBusinessesFormalSustainableBusinessesDEMAND PULL• Access toFinance andCredit• Tax relief andincentives• Titling• PublicProcurementOpportunities• SkillsDevelopment• EntrepreneurialtrainingRULE OF LAW& ACCESS TO JUSTICEBASIC RIGHTS(HUMAN, LEGAL,PROPERTY & LABOUR)PHYSICAL & SOCIALINFRASTRUCTUREPOLITICAL & ECONOMICSTABILITY & GOODGOVERNANCECONDUCIVE &FAIR BUSINESSENVIRONMENTPILLARS OF FOUNDATION FOR FORMALISATIONment opportunities, skills development, entrepreneurialtraining, etc. Supply ‘Push’ initiativesare regulatory reforms, reducing administrativebarriers, affordable business and licensing fees,accessible business and licensing and registrationprocedures; reducing corruption; adaptablelabour laws, etc. The chart further highlightsthat the number of informal enterprises movingtowards formal sustainable enterprises is smallcompared to the huge size of subsistence informalenterprises.Formalisation may therefore be seen as anincremental process that begins by introducingappropriate incentives and benefits of formality,then progressively enforces compliance with thecosts and regulations associated with operatingformally which would depend on the size, output,or location of the enterprises. Once conditions aremet, the working poor in the informal economywould be entitled to the benefits of formality and,at the same time, they would be enabled to complywith the duties of formalisationPillars of ChangeThe sustainability of any proposed reform toa country’s governing institutions depends onpublic recognition of the changes to be made.Recognition will thus depend on the capacity ofthe reform to be legitimised within the public’scultural and social milieu. Failure may preventthe successes of legal reforms that are otherwisecognizant of larger policy aims to promotemarket-driven economic growth. For Sub-SaharanAfrica, for example, failure to incorporate widely263

accepted customary forms could mean outrightrejection by the private sector. Therefore, indetermining what can be done to legally empowerinformal businesses to better access the opportunities,finances, services and facilities of the formalsector, one would have to take into accountthat which already works.The recommendations of the working group forChapter 4 of this report may be summarised indescriptions of five proposed pillars of reform:Pillar 1: Adopt an inclusive and integratedapproach to economic development so that thereis legal recognition and empowerment of informalbusinesses.Legally empowering small informal businessesrun by poor individuals or households should beseen as a central pillar of a just society and acentral strategy for reducing poverty and inequality.This means that policies and global economicprivilege, which is geared at present to the elitesand large enterprises, have to change to becomeinclusive of the billions at the bottom of the economicpyramid. These billions are the producersand consumers who make markets profitable forthe privileged. Their share has to be duly recognisedthrough much greater public and privatesector cognisance and support to small firmsand enterprises. Informality, with its flexibilityand space for millions to engage productivelyin economies, is here to stay. Official and legalresponse needs to recognise what works in thissector and strengthen and integrate these innovationsinto an inclusive integrated approach towealth creation.Pillar 2: Support legal empowerment througha package of commercial rights underlined inpolicies and instituted and enforced throughregulatory bodies.Commercial rights for informal entrepreneurs/operatorsinclude, but are not limited to, propertyrights, labour rights, right to social protection,right to be organised and represented in policymakingand rule-setting institutions and processes,and the right of access to justice in a transparentand equitable manner. The rights of the morevulnerable groups — the own-account operators,including single-person operators and those whowork in family businesses or on family farms— must also be addressed. These commercialrights should address all categories of informalenterprise, and include the following provisions:a) Basic commercial rights: right to work, includingthe right to vend; right to a work space(public land, private residences), includingrelated basic infrastructure (shelter, electricity,water, sanitation);b)Intermediary commercial rights: right togovernment incentives and support (includingprocurement, tax holidays, export licensing,export promotion); right to public infrastructure(transport and communication);c) Advanced commercial rights: relevant for larger,more advanced informal enterprises.Pillar 3: Reduce Decent Work ‘defi cits’ of thosewho work informally.This means support to informal businesses in theform of:• Participation in policy processes of a representativevoice of the working poor in the informaleconomy. Recognition and correction of thebias in existing commercial policies, regulations,laws and procedures favouring largerfirms and enterprises. Extension of governmentincentives and procurements to the smallestinformal enterprises;• Facilitation as appropriate of backward and264

forward linkages on fair terms between largerand smaller firms;• Promotion of market access and fair trade forsmaller firms and enterprises;• Social protection of informal operators throughproperty, health, life, disability insurance;• Adequate and relevant retraining, life-longlearning, and other support to labour mobility.Pillar 4: Broaden access of informal businessto financial services and support innovation infinancial products and processes. This requiresthat there be:• Awareness in both formal and informal creditsystems of the way the working poor use creditand the barriers and often inappropriate rulesin formal lending procedures;• Legal and administrative processes in placewhich make the processing of collateral includingsocial collateral cheaper, transparent andfaster;• Legally recognised and mutually negotiated riskmediation processes in place for both the lendersand borrowers from informal business;• Support to innovation in financial products andservices with a view to deepening their outreach.Pillar 5: Engage in evidence-based reform.There are now hundreds of good practice examplesthat illustrate how the constraints of informalbusinesses have been successfully addressedaround the world. These examples should bestudied and the lessons learnt should be groupedaccording to what constraint or need was beingaddressed and the policy lesson drawn from theexperience. The policy reform that ensures shouldbe participatory and targeted to the realities of thedifferent sub-sectors in the informal economy.ConclusionsThis report has outlined how the process ofachieving greater legal empowerment (throughbusiness rights and access to the advantagesof formalisation) can and should take differentforms. Incentives to encourage informal entrepreneursto actively engage in the change processmust show actual benefits to their livelihoods andtheir well-being. These incentives are essentiallywhat would result if the barriers to entry intoand/or interaction with formal and legal economicactivity were addressed. Incentives could be inthe form of• Simplified registration procedures and progressiveregistration fees;• A supportive investment climate and a businessenabling environment;• Fair commercial transactions between informalenterprises and formal firms;• Appropriate legal and regulatory frameworks,including: enforceable commercial contracts;private property rights; more equitable use ofpublic land; and tax-funded incentives, suchas government procurement, tax rebates, taxfundedsubsidies, and incentive packages.These incentives would have to be supported atthe same time by appropriate and customisedfinancial, business development, and marketingservices. Mechanisms and financing arrangementsto provide social protection to informalproducers have to be put into place and policyand institutional reform undertaken in a participatorymanner. The participation of informal entrepreneurs,both women and men, would be bestensured through proactive and iterative dialogue— on an ongoing basis — with representatives ofassociations of informal entrepreneurs.265

Recommendations and Key MessagesObjectives of Empowerment ProcessLegal empowerment of informal businessesshould seek to promote an appropriate mix to differenttypes of business rights, and the pursuit ofthe following sets of objectives:Broad Objectives• Reducing regulatory burden;• Reducing barriers to formal markets and institutions;• Increasing assets, including property rights;• Expanding market access;• Improving terms of doing business;• Extending legal and social protection;• Increasing organisation and representation.Specific Objectives — Depending on their sizeand potential for growth, informal businesses needsome combination of the following business rights:• Basic business rights: right to work, includingright to vend; right to a work space (includingpublic land and private residences), and relatedbasic infrastructure (shelter, electricity, water,sanitation).• Intermediary business rights: right to governmentincentives and support (includingprocurement, tax holidays, export licensing,export promotion); right to public infrastructure(transport and communication).• Advanced business rights: ILD set of legaltools, such as bankruptcy rules, relevant forlarger, more developed, informal enterprises.Means to Meet ObjectivesDifferent Instruments — Policies and laws, regulationsand procedures, business developmentinfrastructure, and organisation and representationof informal business.Policy and Regulatory Environment - Legal empowermentof informal business requires a policyand regulatory environment that:• Provides legal identity to the working poor asproducers or traders;• includes representative voice of the workingpoor in the informal economy;• Recognises and addresses the bias in existingcommercial policies, regulations, laws, andprocedures that favour larger firms/enterprises;• Seeks to extend government incentives andprocurements to the smallest informal enterprises;• Seeks to build backward and forward linkageson fair terms between larger and smaller firms;• Seeks to promote market access and fair tradefor smaller firms and enterprises;• Promotes social protection for informal operators(property, health, life, disability insurance)plus retraining, life-long learning, and othersupport to mobility.The Formalisation Debate:In response to the question of whether and howto formalise informal businesses, the Commissionshould highlight the point that formalisation hasdifferent dimensions:• Expanding formal employment opportunities.• Creating incentives for informal enterprises toformalise, including1) Simplified registration procedures and progressiveregistration fees;2) Supportive investment climate;3) Fair commercial transactions between informalenterprises and formal firms;4) Appropriate legal and regulatory frameworks,including enforceable commercialcontracts, private property rights, use266

of public space, tax-funded incentives(including government procurement, taxrebates, tax-funded subsidies, and incentivepackages).• Providing financial, business development, andmarketing services to informal enterprises;• Creating mechanisms and financing arrangementsto provide social protection to informalentrepreneurs;• Promoting participatory policy processes andinclusive rule-setting institutions that includerepresentatives of associations of informalentrepreneurs.267

Chapter 4 Endnotes1 A business has been defined as an organisational entity designedto sell goods and/or services in an effort to generate profit or a financialreturn. They can be also be a source of employment for others — inaddition to the owner and operator - and provide wealth and livelihoodsto the owners as well as the employees. Informal Businesses andInformal Enterprises are used interchangeably in this report.2 George A. Aryee: ‘Promoting Productivity and Social Protection inthe Urban Informal Sector - An Integrated Approach. Report on Pilotprojects in Bogota, Dar es Salam and Manila -Summary of activities,lessons and recommendations,’ ILO, 3rd (updated ) edition. Dec 2006ISBN 92-2-110343-9.3 Discussion Paper ‘The Informal Economy,’ Committee onEmployment and Social Policy, ILO, March 2007.4 Woolcock M., ‘Some Initial Thoughts on Empowering InformalBusinesses,’ contribution to CLEP, June 2007.5 Hyden G., African Politics in Comparative Perspective,Cambridge University Press, New York, 2006.6 Hart, K. (1973) Informal income opportunities and urbanemployment in Ghana. Journal of Modern African Studies, 11, 61-897 Devey, R., Skinner, C,, and Valodia, Imraan. ‘Informal EconomyEmployment Data in South Africa: A Critical Analysis,’ Forum 2003Papers, Development Policy Research Unit, School of Economics,University of Cape Town, http://www.wiego.org/publications/devey%20skinner%20valodia%20Informal%20Economy%20employment%20data%20in%20ZA.pdf8 UNU-WIDER. 2006.9 Stiglitz, J. Making Globalization Work. Penguin Group. UK. 2006.p11.10 Stiglitz, J. Op Cit p11. Even if the targets of the MillenniumDevelopment Goal (MDG) for water and sanitation are achieved, therewill still be more than 800 million people without water and 1.8 billionpeople without sanitation in 2015.Summary, Human DevelopmentReport 2006. Beyond Scarcity: Power, poverty and the global watercrisis. New York. 2006. p13.11 Sen, A. Development as Freedom. 1999. First Anchor Books, USA.12 A business has been defi ned as an organisational entitydesigned to sell goods and/or services in an effort to generate profi tor a fi nancial return. They can be also be a source of employment forothers — in addition to the owner and operator - and provide wealthand livelihoods to the owners as well as the employees.13 Palmade, V. and Anayiotos, A., Rising Informality, Viewpoint 298,World Bank, Washington D.C., August 200514 Xaba, J. Horn, P. and Motala, S. ‘The Informal Sector in Sub-Saharan Africa’. Working paper on the informal economy, EmploymentSector, International Labour Offi ce, Geneva. 2002. http://www.ilo.org/public/english/employment/infeco/download/ssafrica.pdf, p.315 Charmes, J. (cited at) Women in Informal Employment:Globalisation and Organising (WIEGO), 2 nd Annual Meeting, Cambridge,Massachusetts. 22-24 May 2000.16 ‘Parallel Session III: Integrated Employment and SocialProtection Policies to Upgrade the Informal Economy,’ 11th AfricanRegional Meeting, Addis Ababa, 26 April, 2007. http://www.ilo.org/public/english/region/afpro/addisababa/pdf/informaleconomy.pdf, p.117 Mofokeng, C. ‘The Informal Economy in Africa & Its Impacton Women’, Paper presented at the Symposium on Women’s Rightsand the Role of Women in Africa, Canada, October 3, 2005. http://canadianlabour.ca/updir/africaenwomen.pdf, p.218 ILO DG report ‘The Dilemma of the Informal Sector.’ 1991.19 Mofokeng, C. Op Cit. p.6.20 Gallin, D. ‘Organising in the Global Informal Economy.’Bogazici University Social Policy Forum: Changing Role of Unions inthe Contemporary World of Labour, Istanbul, November 26-27, 2004.http://www.global-abour.org/workers_in_the_informal_economy.htm21 ‘Market Life in West Africa: Markets and the Informal Economy.’http://www.khm.uio.no/utstillinger/madeinafrica/english/marked_6.html22 A market is defi ned as a social arrangement that allows buyersand sellers to discover information and carry out a voluntary exchangeof goods or services. It is considered as one of the two key institutionsthat organise trade, along with the right to own property (Wikipedia).23 Stiglitz, J. Op Cit. Also, nearly 741 million Indians in ruralareas are poorly served, despite a huge demand for fi nancial services,including an estimated annual credit demand exceeding $10 billion.24 Sen, A. Op Cit. p.4-5. Opportunities to satisfy hunger, achievesuffi cient nutrition, enjoy clean water and sanitation, receive basiceducation, health care, etc. are among the constitutive components ofdevelopment.25 Discovering Hidden Assets. Financing the Base of the Pyramid.Developing Alternatives. Vol.10, Issue 1. Winter 2005. p4.26 Stiglitz, J. Op Cit.27 Chang, H-J. Stronger than Fiction? Understanding InstitutionalChanges and Economic Development. Policy Brief. UNU-WIDER.Finland. 6 November 2007.28 The underlying assumption of many interventions targetingwomen is that engagement in economic activity will translate intoeconomic empowerment (Safi lios-Rothschild, 1990; Goetz and SenGupta, 1996). Such assumptions rest on the belief that women securethe benefi ts of their involvement in an economic activity. However,research has shown that outcomes vary according to both the type ofactivity and women’s household circumstances.29 Given a formalisation system, an entrepreneur always decideswhether or not to formalise depending on the value of their fi rms.Arruñada, B. Pitfalls to Avoid when Measuring Institutions: Is DoingBusiness Damaging Business? Pompeu Fabra University. Barcelona. 17June 2007. p15.30 For instance, according to Friedrich Schneider, citizens behaveaccording to a ‘tax morality’, which describes the readiness ofindividuals to leave their offi cial occupations and enter the informaleconomy. If citizens feel that their government is corrupt, they will feelless inclined to cooperate with state rules and regulations. As such,it is assumed that a declining tax morality increases the size of theinformal economy.31 Decent work and the informal economy. ILO, 90 th Session. 2002.pp.2-332 Recently completed studies of eight countries: Bangladesh,Brazil, Ghana, India, Indonesia, Tunisia, Uganda and Vietnam. Cord,Louise . Promoting Pro-Poor Growth: Lessons from country experiences.The World Bank. In Analysing and Achieving Pro-Poor Growth. Povertyin Focus. International Poverty Centre. UNDP. March 2007.268

33 Chen, M. Rethinking the Informal Economy: Linkages with theFormal Economy and the Formal Regulatory Environment. EGDI andUNU-WIDER Conference ‘Unlocking Human Potential: Linking theFormal and Informal Sectors.’ Helsinki, Finland. 17-18 September 200434 Dar es Salaam Informal Sector Survey. 1995. ILO35 Manushi S. Laws, Liberty & Livelihood. A bottom up Agenda ofEconomic Reforms. www.manushi-india.org36 Ishengoma, E. K., Kappel, R.. Formalising Informal Firms: Whatcan be done? In Analysing and Achieving Pro-Poor Growth. Poverty inFocus. International Poverty Centre. UNDP. March 200737 Eneste and Schneider, 1998 and WDI, 2002. Includes 53developed and developing countries from all continents exceptAustralia. The OECD country data is based on the average WB reportedGDP per capita at constant 1995 US$.38 Loyaza, N. The economics of the informal sector; A simple modeland some empirical evidence from Latin America. World Bank PolicyResearch Papers. 199739 Cord, L. Promoting Pro-Poor Growth: Lessons from countryexperiences. The World Bank. In Analysing and Achieving Pro-PoorGrowth. Poverty in Focus. International Poverty Centre. UNDP. March200740 This section was drawn by and largely from ILO, 2002, Op Cit.41 J. Charmes, cited at Women in Informal Employment: Globalizingand Organising (WIEGO) Second Annual Meeting, Cambridge,Massachusetts, 22-24 May 2000. In ILO, 2002, Op Cit, p.16.42 Op Cit, ILO,p.1643 Carr, M., Chen, M. A.: Globalisation and the informal economy;How global trade and investment impact on the working poor,background paper for ILO Report, 2002. May 2001.44 F. Verdera: Informality in Latin America: Recent trends, policiesand prospects. Paper prepared for ILO Technical Workshop on Old andNew facets of informality, Geneva. 2 March 2001.45 http://info.worldbank.org/etools/docs/library/76309/dc2002/proceedings/pdfppt/statistics.pdf46 Nurul Amin, A.T.M. The Informal sector in Asia from the decentwork perspective. ILO. 2002.47 The role of informal sector through the stages of developmentand cycles of economic growth: The Asia Evidence. Paper presentedat the ILO Technical Workshop on Old and New Facets of Informality.Geneva. 2 March 2001.48 WIEGO-Women in Informal Economy: Globalising and Organising,www.wiego.org49 Lundström, S. and Ronnås, P., Swedish InternationalDevelopment Cooperation Agency, Sida in Analysing and achieving Pro-Poor Growth. International Poverty Centre, March 2007. Brazil.50 Sangathan, M., Op Cit.51 Ishengoma, E. K., Kappel, R. Formalising Informal Firms: Whatcan be done? March 2007. Op Cit.52 Legal Identity for Inclusive Development. ADB. 2007. ThePhilippines. p.xiv-xv53 While it is estimated that the achievement of water andsanitation related MDG Goals require an additional annual funding ofUS$10-US$25billion, the scenario would appear distinctively differentand be more manageable if the efforts to achieve these targets aresupplemented by service delivery through PPPs particularly through theempowerment of the local communities to manage their need througheffective value chain strategies. The same rationale will apply for theprovision of an estimated US$700 billion of investment required tobring electricity to an additional US$1.4billion people.54 Rodrik, Dani. The Limits of Self Enforcing Contracts. ReactionEssay. August 9, 2007.55 The world’s fastest growing market now, it argues, is at the‘bottom of the pyramid.’ With nearly four billion people living onless than US$1500/year, the opportunities for the private sector aresizeable.56 Bannock, G. et al. (2002) Indigenous Private Sector Developmentand Regulation in Africa and Central Europe: A 10 Country Study.London: Bannock Consulting.57 World Bank, Doing Business Report 2003-200658 World Bank, Doing Business Report, 2007.59 USAID, Removing Barriers to Formalisation: The Case for Reformand Emerging Best Practice, 200560 De Soto, H. 1989. The Other Path (New York: Basic Books)61 Ibid.62 Ibid.63 Building Resources Across Communities (formerly known asBangladesh Rural Advancement Committee)64 ILD paper on Legal Tools to Empower Informal Businesses,submitted in 2006 to our working group on Chapter 4.65 De Soto, Hernando. 1989. The Other Path (New York: BasicBooks), and 2000. The Mystery of Capital (New York: Basic Books).66 ILO DGReport ‘The Dilemma of the Informal Sector’ 199167 Woolcock M., ‘ Some Initial Thoughts on Empowering InformalBusinesses,’ a note to CLEP Working Group 4, June 2006.68 UN Report on Social Development 2005.69 State of the World 2007: Our Urban Future, Worldwatch Institute.70 An estimated 1.6 million urban residents die each year due tolack of clean water and sanitation as a result. Cities Key to TacklingPoverty, Climate Change, Worldwatch Institute, January 10, 2007.71 Sheehan, M. State of the World 2007 Project Director.‘Policymakers need to address the ‘urbanization of poverty’ by steppingup investments in education, healthcare, and infrastructure.’ From1970 to 2000, urban aid worldwide was estimated at US$60 billion —just 4 percent of the US$1.5 trillion in total development assistance.72 A study sponsored by the World Bank in Luanda involved ananalysis of the existing informal water market and the communities’willingness to pay for services or participate in the programme in otherways. More than 50 percent of Luanda’s population, and most who live inthe musseques, do not have access to piped water. The peri-urban andmusseque population is forced to pay extremely high prices for (oftenuntreated) water pumped from the Bengo River and distributed by tankertrucks to informal sellers in the various bairros. While the private sectorhas stepped in to provide an essential service that the state has failedto deliver, the costs are very high, because of the extreme inefficiency ofdelivering water to the bairros by tanker truck rather than by pipe. Thestudy of the water market demonstrated that musseque residents wereaccustomed to paying up to 10,000 times more for water to the privatesellers than the well-to-do in the cement city were paying for treatedwater piped to their household taps by the provincial water company.Ironically the poor were far more accustomed to pay dearly for services269

than the rich. It further demonstrated that US$35 million per year waspaid by the urban poor for purchasing water, and that much of thisincome could eventually be recovered in water fees if a just set of tariffswas set at equitable prices for all consumers. Cain, A. Livelihoods and theInformal Economy in Post-War Angola. Published in Monograph No. 102,August 2004. Supporting Sustainable Livelihoods-A Critical Review ofAssistance in Post-conflict Situations. Edited by Clover, J. and Cornwell, R.73 Sachs, J. Capacity-net. E-DISCUSSION: Capacity to effectivelyand sustainably deliver local basic services to the poor. Consider acountry at US$300 per capita. It typically raises around 15 percent ofGNP in tax revenues, or US$45 per capita for all government services.If it is very well governed, it perhaps devotes 20 percent of the budgetto health, or US$9 per capita per year.74 ILO: A Global Agenda for Employment: Discussion Paper.75 Besley, T., Burgess, R. and Esteve-Volart, B. The Policy Originsof Poverty and Growth in India. In Analysing and Achieving Pro-PoorGrowth. March 2007. International Poverty Centre. UNDP76 Decent work and the informal economy. ILO. 2002. p3577 Over the last nearly three decades, micro-fi nance has servednearly 100 million people in nearly 100 countries.78 For example, commercial banks in Latin America were knownto enter the micro-fi nance markets after a decline in the reserverequirements imposed on them from 50percent to about 10-30percentwas introduced.79 ILO. 1999. Central bank of the West African States: Data Bank onmicro-fi nance institutions in West African Monetary Union.80 While targeted savings and consumption loans includingRotating Savings and Credit Societies and savings clubs can helpthe poor to cope with day-to-day events, but as risks increase inmagnitude and uncertainty, the losses increase and simple savingsand loan activities are unable to manage those losses. Brown, W. WhyMFIs are providing insurance to low income people? 2000. Dhaka81 Kawas, C. and Gitterman, M. 2000. Roundtable on MicroinsuranceServices in the Informal Economy: The Role of Micro-fi nanceInstitutions. The Ford Foundation. New York.82 Cohen, Monique and Jennefer Sebstad. 2003. ReducingVulnerability: The Demand for Microinsurance. Microsave-Africa. Nairobi.83 The remittance transfer market is limited; it is dominated by theWestern Union with Visa and Mastercard having a signifi cant share.84 For instance, currently US$100 remitted to Venezuela translatesinto only US$50 received by the receiver.85 World Bank Assistance to Agriculture in Sub-Saharan Africa:An IEG Review. Independent Evaluation Group. The World Bank.Washington DC. 200786 Stiglitz, J. Op Cit. Also, nearly 741 million Indians in ruralareas are poorly served, despite a huge demand for fi nancial services,including an estimated annual credit demand exceeding US$10 billion87 Not surprisingly, various reports have been advising the UNto strengthen its relationship with the private sector The MonterreyConsensus highlights the necessity to engage the private sectoras a prerequisite for poverty alleviation. The report of the UN’sCommission on the Private Sector and Development entitled ‘UnleashingEntrepreneurship — Making Business Work for the Poor’ emphasisesimproving the environment for private sector development and privateinvestment. The UN Millennium Project Report urges the private sectorto play a central role in reducing income poverty through inclusive andsustainable economic growth, while encouraging governments to providethe enabling environment for them to do so. In highlighting the needfor new partnerships to tackle global challenges and achieve globallyagreed priorities, Report of the Panel of Eminent Persons on UnitedNations-Civil Society relations, underscores the need to connect the localwith the Global and the critical role of non state actors including theprivate sector as partners in policy-making and decision-making.88 The world’s fastest growing market now, it argues, is at the‘bottom of the pyramid.’ With nearly four billion people living on lessthan US$1500/year, the opportunities for the private sector are sizeable.89 Chang, H.-J. Stronger than Fiction? Understanding InstitutionalChanges and Economic Development. Policy Brief. UNU-WIDER.Finland. 6 November 2007.90 The underlying assumption of many interventions targetingwomen is that engagement in economic activity will translate intoeconomic empowerment (Safi lios-Rothschild, 1990; Goetz and SenGupta, 1996). Such assumptions rest on the belief that women securethe benefi ts of their involvement in an economic activity. However,research has shown that outcomes vary according to both the type ofactivity and women’s household circumstances.91 Dickerson, C. OHADA countries in Western and Central Africa.92 ILD ‘Best Practices to Empower Business Organisation —Gabriel Daly,’ December 2006.93 Benchmarking the Administration of Business Start-ups, FinalReport; prepared by CSES for the Enterprise Directorate General of theEuropean Commission; 200294 Hyden G., African Politics in Comparative Perspective,Cambridge University Press, New York, 2006.95 Makerere University Business School, Global EntrepreneurshipMonitor: GEM Uganda 2004 Executive Report, the GEM website, 2007.96 Bannock G. and Kapila S., from notes for the draft SessionalPaper on MSEs in Kenya, 2004.97 Hyden G., African Politics.98 Ibid.99 Benito Arruñada ‘Pitfalls to Avoid when Measuring Institutions:Is Doing Business Damaging Business?’ Dept. of Economics andBusiness. Universitat Pompeu Fabra. Trias Fargas, 25. 08005-Barcelona (Spain) June 17, 2007.100 Ibid.101 Scott, J. (1998) Seeing Like a State: How Well-IntentionedSchemes to Improve the Human Condition Have Failed New Haven: YaleUniversity PressPritchett, L. and Woolcock, M. (2004) ‘Solutions when the Solution isthe Problem: Arraying the Disarray in Development’ World Development32(2): 191-212.102 Ibid.103 Woolcock, M. (2007) ‘ Notes to the Commission’s InformalBusinesses Working Group: World Bank.104 Sobhan, R. ‘A Macro Policy for Poverty Eradication throughStructural Change.’ UN University, Wider, January 2005.105 This section was contributed by Prof. Rehman Sobhan, op. cit.106 Ibid.107 USAID, 2006270

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WIEGO, ‘Accra Hawkers Association,’ News from Ghana Daily Graphic,May 2006,WIEGO Women in Informal Economy: Globalising and Organising, www.wiego.orgWomen’s World Banking, ‘Banking for the Majority: Profi table andResponsible Micro Finance,’ Federation of Latin AmericanBanks and Women’s World Banking. 1994.Women’s World Banking, Client Case Studies from the DominicanRepublic, Bank ADOPEM, Women’s World Banking, NewYork, USA, www.swwb.orgWoolcock M., ‘Some Initial Thoughts on Empowering InformalBusinesses,’ World Bank notes to CLEP, June 2007.World Bank ‘Doing Business 2007 — How to Reform’, September 2006.______. ‘Rural Investment Climate Survey: Indonesia,’ September2006.______., Doing Business Report 2003-2006Xaba, Jantjie, Horn, Pat, and Motala, Shirin. ‘The Informal Sectorin Sub-Saharan Africa.’ Working paper on the informaleconomy, Employment Sector, International Labour Offi ce,Geneva. 2002.273

ChapterFIVERoad Maps forImplementationof ReformsImplementation Strategies,Including Toolkits and Indices275

EXECUTIVE SUMMARYExisting power structures prevent poor people from taking charge of their lives and occupations andachieving upward mobility. To end poverty, those structures must be reorganised — a challenging task dueto the many dimensions of poverty and disempowerment. Interchangeable solutions do not work acrosscountries in exactly the same ways; practitioners must be inventive and experimental to produce more justrelationships among the state, the marketplace and the poor.Listening to the poor and learning by doingare critically important. Civil societies,non-governmental organisations, membership-basedgroups of employers and of workers,coalitions and networks have major roles to play ingenerating and articulating bottom-up demand forlegal empowerment. Support of central authoritiesis also vital for sustaining progress in most countries.Policy champions are needed to bring othergovernment actors on board to preclude policyspoilers from blocking implementation of legalempowerment.Implementation of Legal Empowerment of the Poor(Legal Empowerment of the Poor) in a countrybegins with contextual analysis, focusing on thesocial and cultural features that could affectimplementation. Consideration must also be givento the economic context (which can be both a helpand a hindrance), and to the openness and capacityof the state. Supplementing the inventory ofthese concerns should be a careful analysis of thereach and hold that informal institutions have onthe poor. A full contextual analysis forms the basisfor a feasibility review of various empowermentscenarios.The most important constraints set by the nationalsocio-political context are:• The domestic social structure, especially its gender,class and ethnic makeup, as well as culturalattitudes toward participation and equality;• The economic context — including the distributionof wealth and income, and the level and rateof economic growth;• The characteristics of the state — both the politicaland the administrative system;• The extent of economic and political informalityand tensions with the formal and officially recognisedsystems.Practitioners and policymakers can use the tool ofcontextual analysis within a country to determine:1) if conditions appear ripe for legal empowermentreforms; 2) which implementation options seemmost probable; 3) what sequencing and timelinesfor reform look doable; 4) how the reforms shouldbe designed; 5) what tradeoffs need to be considered;6) which risk-mitigating mechanisms areworth trying, and 7) what contextual variables needcareful monitoring during implementation.276

Following the contextual analysis — or perhapssimultaneously with it since implementation stepsare never discrete — local activists and externalchange agents should undertake a stakeholderanalysis of the constituencies concerned with LegalEmpowerment of the Poor. The objective is to differentiateamong the superficially homogeneousbeneficiaries, to better understand the divisions,alliances and particular needs that exist amongthe poor. Other stakeholders who might opposeor assist the target group or groups also need tobe scrutinised to see what motivates their behaviourand to reflect on how they could be broughtinto the process. The purpose of the stakeholderanalysis is to get a firmer grasp of the probabilityof moving forward with various legal empowermentalternatives, and to begin serious thinking aboutwhat it might take to build a minimum winningcoalition for legal empowerment in the country.Stakeholders act out of regard for their own advantage,as they define it. Poor people are the targetbeneficiaries of legal empowerment and need tohave as big a hand as possible in initiating anddesigning the relevant policies. Even though theylack physical, financial or organisational resources,and even social capital in many locales, the pooralways have a passive capacity to derail legalreforms aimed at them. Because poor stakeholdersare diverse, legal empowerment policies may havesurprisingly uneven impact if officials are inattentiveto the needs and preferences of the intendedbeneficiaries.Legal empowerment also creates policy ‘losers’,no matter what the broader merits are. It oftenredistributes a right or benefit from one group ofstakeholders to another, for example when thereare mutually exclusive claims to a fixed resourcesuch as fertile land or minerals. Policymakers mayendeavour to minimise redistributive conflicts byexpanding economic opportunities so that differentinterests can be negotiated to meet every side’sneeds, but plenty of potential for confrontationremains because important stakeholders believeothers’ gains come at their expense. The mutualpayoff to legal empowerment is in the future, butthe individual sacrifices must be borne now.Finally (though again the chronology wouldprobably be overlapping), the internal technicalfeatures of the alternative courses of action mustbe reviewed. Policy characteristics analysis wouldfocus on the complexities of the different policies,their ambiguity, and their potential to sow discord— all of which may hinder implementation. Effortswould be made to find a simple, incremental, andsustainable way forward, and to avoid as muchas possible taking steps that provoke needlessconfrontation.Obviously, what legally empowers the poor in onenation may be unsuitable in another country, wherethere would likely be a different social structure,economic environment and universe of stakeholdergroups. The procedures in determining a suitablereform strategy might look alike in both countries,but the substance of the outcome would be sharplydifferent. And in all cases, the process is messyand imprecise, yielding only what appear to be thebest fitting policies, given the imperfect informationavailable to policymakers at the time andunder the political realities.Development professionals must creatively seekto capitalise on the specific situation at hand,placing front and centre poor people’s perceptions.While legal or organisational reforms may appearself-evidently empowering to outside experts, theyshould be cautioned that a poor community mightsee them as dangerous from their own perspective.It may be best to move forward selectively and notdissipate energy on too many legal or regulatoryinitiatives at once. Empowerment policies seldom277

take effect quickly. Individual uncertainty aboutimplementation encourages poor people to withholdsupport for reforms, which can create self-fulfillingprophecies of slippage. One should thereforelook for interventions promising short-term rewardsfor beneficiaries. Design simplicity should be a keyconsideration to minimise conflict, uncertainty, andother implementation problems arising from theprocedural and technical traits of legal empowermentactivities.Roadmaps to ImplementationEffective implementation of policy reform takesa mix of experience, professional judgment, andwillingness to take chances. Creative policymakerslook to open up policy windows that create thespace needed to move forward in solving particularproblems even under difficult circumstances.Six common sets of tasks are associated withdeveloping specific national roadmaps for LegalEmpowerment of the Poor. They follow a generalized(but not lockstep) pattern, conceived as aninteractive cycle launched by a stream of issues,agendas and decisions that, over time, provide additionalinput and momentum to the process.• Issues, Agendas, and Decisions: Advocate forchange, develop policy issues, and make decisionsto launch policy reforms. Although politiciansand interest groups tend to take the lead,they will seldom succeed without pressure frombelow, and mobilisation from among the poorthemselves, including their demands.• Policy Formulation and Legitimisation: Addressthe technical content of reform measures. However,besides technical content, reform measuresneed to be accepted and be seen as necessaryand important. Through their representatives, thepoor should be part of the reform design process.• Constituency Building: Convince beneficiaries ofthe advantages of reforms, and demonstrate thatlong-term benefits are worth short-term costs.• Resource Mobilisation: Ensure the flow of adequateresources by addressing incentives, andexercising leadership in galvanizing constituencies.Financial, technical, and human resourcecommitments are needed.• Implementation Design and Organisational Development:Reformers need to create and nurturenetworks and partnerships for cooperation andcoordination, and provide for the developmentof new organisational skills and capacities in thepublic, private and non-governmental sectors.Old procedures, operating routines, and communicationpatterns are difficult to root out; changeis likely to be resisted within some quarters.• Action Planning and Progress Monitoring: Set upsystems and procedures for obtaining feedbackso that implementation is related to learning andadaptation, so as to produce results and impact.Legal Empowerment of the Poor may be perceivedas a spectrum that provides opportunities, protectionand security to beneficiaries. It establishes aminimum ‘floor’ of entitlements and safeguardsto which everyone is entitled, by the simple factof our common humanity. The task is to establishthis floor using human rights law. For every facetof empowerment, therefore, one test is to identifya range of potential policy options from which nationsand citizens can choose, depending on theirnational context and the different starting points ofvarious groups of the poor within them. Finally, aspectrum approach explicitly recognises the incrementalmanner in which poor people improve theirlives in practice.Implementation of empowering policies at thenational level should seek to integrate legalempowerment into existing processes, such asthe preparation of national development plans orpoverty reduction strategies, rather than seek to278

establish a ‘legal empowerment programme’ as astand-alone entity. Another important dimension ofnational level work will involve working closely withprofessional associations to create a new cadre oflegal, engineering or other para-professionals toassist poor men and women.The base organisation of the poor must be engagedin the design of interventions of any kind. Informationdissemination will be a central strategyfor legal empowerment at the local level. In somecountries with particularly weak or oppressivenational governments, community empowermentactivities may be the only feasible ones. Wheresocial mobilisation is strong, however, the legalempowerment agenda can be built, bottom-up, bysupporting existing initiatives of the urban or ruralpoor.Mapping Legal Empowerment beyondthe Nation StateImplementation undertaken at the global levelshould support country-level activities. The importantdifferences among countries and regions callfor a flexible, demand-driven approach that is appropriateto local realities. The likely focus wouldbe on two types of measures to encourage legalempowerment at the country level: advocacy andknowledge management. Advocacy activities wouldfocus on getting key messages out to importanttarget audiences through a variety of vehicles. Awebsite, or a ‘brand/logo’ that can be added toexisting websites, providing updates and progressreports on how the Legal Empowerment of thePoor agenda is being implemented. An inventoryof evidence on capacity development in domainssimilar to Legal Empowerment of the Poor wouldbe compiled, and dialogue would be supported todisseminate global good practices.Knowledge management activities should buildon the initial inventories of good practice, on-goinginitiatives and actors engaged in promotingempowerment. A key element is to identify existingindicators and monitoring efforts that would furtherthe Legal Empowerment of the Poor agenda. Similarly,and particularly in the case of the rights tojustice and asset holding, evaluations for learningwill prove to be valuable.In addition, a range of measures should be undertakento prepare for country-level dealings. Countriesand international support organisations canbe identified to support the process of change atthe country level. Pro-poor toolkits and methods tosupport capacity building can be inventoried andgaps identified. These would be made availablethrough a variety of avenues, including websitesand workshops, among others.At the regional and sub-regional levels, activitiesshould also likely focus on advocacy and knowledgemanagement. The region and sub-region arecritical for success of the legal empowerment agenda;at these levels global norms can be adaptedto different socio-economic contexts. Buildingpolitical will for change will occur through regionaland sub-regional organisations, UN Regional Commissions,sub-regional bodies, and in partnershipwith regional development banks. A series of new‘Regional Social Contracts’ could be an importantmechanism to forge political consensus on thelegal empowerment agenda.Toolkits and IndicesCarrying out Legal Empowerment of the Poor takesa variety of different tools or specific techniques,many of which have been developed by anti-povertyworkers, community organisers and reform advocatesaround the world. These techniques weredesigned to promote activities analogous to thepoor person’s empowerment agenda of the poor,and they include: advocacy/lobbying; collection anddissemination of best practices; community map-279

ping; competencies assessment; conflict preventionand resolution; domestic resource mobilisation;exchanges; focus groups; force field analysis; genderauditing; impact evaluation; influence mapping;institutional analysis; institutional twinning; internshipprogrammes; the logical framework approach;national symposia; opportunity ranking; mediaoutreach, public hearings and study circles; participatorybudgeting; participatory poverty assessments;translating laws into plain language; political mapping;political will and risk analysis; problem solvingstudies; problem tree analysis; social impact andopportunities assessment; stakeholder monitoringwith household surveys and key informant interviews;strategic planning framework; technical assistanceand training on leadership, group work, andrelated management issues; travel grants/internshipsfor officials; web-based support; and workshops.These tools are general, flexible and easy tomodify; development practitioners shouldreject the ones that don’t apply to their particularcountry context. Critical tasks often include thefollowing:• Mobilising stakeholders: Identify key stakeholdersand agree on a process as well as a set ofprinciples that will guide the legal empowermentagenda. This should help to build confidenceamong stakeholders. Key issues include coordinationmechanisms, adoption of a protocol oragreement, clarification of roles and responsibilities,and agreement on a broad process forreform.• Situation analysis or legal empowerment diagnostic:A detailed assessment should be made ofthe relevant issues to be addressed. The analysiswill identify policy, legal and institutional concerns,as well as gaps in resources, capacity andtools.• Action planning: Development of the goal, objectives,strategies, and specific interventions thatcontribute to the legal empowerment objective.Critical issues include sequencing and timing,resource constraints, establishing a monitoringand evaluation framework, and ensuring a balancebetween process and products required tomaintain momentum.• Pilot activities: These should be built around theidea of ‘quick wins’ in areas where these are feasible.In this way one can build the credibility ofthe legal empowerment agenda and demonstrateinitial success.• Scaling-up: Expanding the range of activities andtaking on more complicated challenges. Raisingawareness of past successes, additional sensitisation,and strengthening the consultation process.• Institutionalising change and the change process:Tackling some of the fundamental reformsby building on experiences in the pilot phase andscaling-up phase to reform the organisations andrules that shape the institutional context.Both the formulation and monitoring phases ofimplementation look to indicators of democratisation,good governance, human rights protection,and many other variables related to legal empowerment.There are numerous measures of differentaspects of governance in the public domain, butunfortunately, none is sufficiently developed to beof great value in measuring changes in the politicalor legal status of a country’s poor men and womenover time. Accordingly, legal empowerment programmesand projects must develop and use theirown metrics for evaluating the socio-economicenvironment and gauging accomplishments, basedon surveys and interviews.Action planning and progress monitoring are especiallyimportant for outside agencies. Among itstools are:• A management information system based on280

targeted indicators endorsed by national stakeholders;• Stakeholder monitoring to identify the responsesof those that benefited or those that lost fromthe policy reform measures;• Problem-solving studies to devise tailored andpractical solutions to implementation issues;• Process and impact evaluations to support learningover time.The design of each component should respectsome important principles: adaptation to userneeds and availability of resources; user participation;parsimony (the least amount of informationand cost required to accomplish the task), andsimplicity. Monitoring of the implementation policyreform process will loom large over time, and anumber of practical suggestions that have beengleaned from lessons learned from country experiencesare offered here:• Define a list of steps, processes, targets andmilestone events in the reform process. This willenable the breakdown of the policy processesinto a series of components to enable an easiergrasp of what needs to be monitored.• Make use of qualitative rather than quantitativeapproaches in monitoring the system, as theyoffer a more complete and nuanced set of datathat are numeric and narrative.• Engage implementing parties and beneficiariesin drawing up the monitoring systems and methodologiesand acquire feedback. This will simplifythe process of tracking previously identifiedindicators. Focus group discussions, workshopsand other similar methods can be used to ensureparticipation.• Customise the choice of monitoring methods tothe needs and constraints of the implementingagencies.• Delegate the monitoring process to an externalbody, such as civil society organisations, thinktanks and advocacy groups, to ensure greaterindependence, transparency and accountability.Strategy and TacticsChange agents must put aside preconceived oruniform approaches to empowering the poor andthink creatively about how to make policies available,affordable and acceptable. The following corevalues belong front and centre:• Poverty reduction is the ultimate objective, soevery reform must be judged by the extent towhich it imparts the freedom that allows poorpeople to gain more control over their futuresand to improve their well-being.• The peaceful struggle against impoverishmentmust be participatory and based on respect forhuman rights, with the poor playing active rolesalong the way.• Gains of legal empowerment should be broadbasedand take into account the diversity ofdisadvantaged groups, especially indigenouspeople who are often inadvertently overlooked bypolicymakers.• Gains also must include women, hence anotherstandard against which to measure Legal Empowermentof the Poor policy is whether it takesfull account of gender-specific effects.• Empowerment of the poor in the end meanssocial transformation — not only a more justdistribution of wealth and income, but a moreexpansive sharing of power that enables disadvantagedpeople to begin bringing about significantchange through their own actions.Anumber of strategic options and considerationsstand out. Although they are rich withparadox, it will be up to government officials, civilsocietymembers, and development practitioners to281

sort out the conflicting elements and determine themost promising strategic direction to take for theircommunity, their country or their region. We listthem as follows:• Legal Empowerment of the Poor is easiest toimplement where it is needed least.• A rich base of comparative international experienceexist, but there are no ready-made formulasfor legal empowerment.• Think systemically, act incrementally.• Think long, go short.• Start from afar, but change from within.• Support associations of the poor, but do notcompromise their independence.• Bundle service delivery.• Support Alternative Dispute Resolution.• Collaborate with professional organisations.Change agents may consider employing these suggestions.While remaining true to the core valuesof the legal empowerment agenda, they may makeit possible for many more poor people to improvetheir lives in the foreseeable future. Of course,these agents must be prepared to come up againstcountervailing factors, and there can be no guaranteeof successful implementation; but steady andmodest progress in fighting poverty with legal toolsand rights is well within the realm of possibility inmost countries.• Work from the bottom up and the top down.• Decentralise — except when it is better to centralise.• Balance demand for change with the capacity toaccommodate change.• Put together informal and formal institutions.• Look for cooperation, but anticipate confrontation.While walking the tightrope of these strategic suggestions,change agents can call upon a variety ofimplementation tactics they can use, including:• Be opportunistic.• Use plain and local language.• Work with para-professionals.• Bring existing technical solutions up to date.• Bring together technical expertise and grassrootsexperience.• Dedicate resources to support participatory processesand coordination.• Provide effective outreach.• Provide access to information.282

1. Introduction: Attributesof Legal EmpowermentA singularly promising means for empowering poorpeople, the Commission contends, is to establishlawful claims they can use to lift themselves outof poverty. The four interdependent domains ofempowerment highlighted by the Commission are acoherent, accessible legal order; more secure rightsto assets and possessions; stronger and clearerlabour rights; and fairer, more constructive rules forsmall business and micro-enterprise. Each domainis meant to provide defences against exploitationand loss of assets; they fit together in a way thatwould work to emancipate the poor to become bothmore productive and better able to keep the surplusesthey produce.The conceptual framework is depicted graphicallyin Figure 5.1. Due to insecure land tenure systems,and to the unequal distribution of other factors ofproduction, as well as of economic and politicalpower, the poor are shut out from economic opportunities.Voice, identity and assets are the key enablingconditions that offer space and leverage tothe poor to bring their legal rights to bear in changingtheir socio-economic status. Using voice andtaking on stronger identity require both bottom-upand top-down institutional reforms. Membershipbasedorganisations must be built and strengthened,and state policymaking institutions must bemade more inclusive and accountable to the poor.Strengthened by voice and identity in their rolesas citizens, asset holders, workers, and entrepreneurs,the poor can begin to use their rights inthe corresponding empowerment domains to keephold of and grow the resources at their disposal. Ifthings go by design, institutional restructuring andlegal reform will furnish society’s least advantagedmembers with the capability to raise their stature,meet their basic needs, and eventually move intothe economic mainstream. Figure 5.1 also showsthat the link between the enabling conditions andempowerment goes in two directions, and that thelegal setting both shapes and reflects power relations.Existing political, administrative and juridicalinstitutions have not been fashioned with therights of the poor in mind as a major consideration,Figure 5.1 Legal Empowerment of the PoorEnabling Conditions Empowerment Domains GoalsVoiceOrganizationRepresentationInstitutionalReform+}Identity& AssetsCitizensAsset HoldersWorkersEntrepeneurs+LegalReformExerciseof RightsJusticePropertyLabourBusinessProtectionEconomicOpportunitiesLegalEmpowermentImproved Living Standards283

so the Commission is advocating radical changesin the existing distribution of public (and private)power. As the poor gain income, assets and power,they will be in a stronger position to call for additionalinstitutional reform, and so on in a virtuouscycle of empowerment. Changing policies injust one or two legal domains represents a start toempowering the poor, but the possibilities of legalempowerment will eventually require establishingmore open, inclusive and accountable institutionssystem-wide.This is a bold vision. Making it a reality meansimplementing a host of specific publicpolicies around the world to tackle the everydayhumiliations of powerlessness and destitution.Many legal covenants have been proposed andratified by the world community that are reasonablestarting points for building inclusive domainsof power 1 — the challenge is to adapt the broadprinciples of institutional and legal reform to reallife circumstances so they mean something to themultitude living on the edges of society. Implementationseldom goes as planned, or as the Englishproverb has it: ‘There’s many a slip ‘twixt cup andlip.’ This report discusses why those slips systematicallyoccur and how development practitionerscan work with poor people to sustain momentumduring implementation despite the tendency forpro-poor policy to be diluted and delayed while beingcarried out.Reports from the working groups for Chapters 1through 4 have analysed the way rights-expandingpolicies in the four domains of empowerment canblunt impoverishing forces. Legal recognition is afundamental step so that even the poorest citizenscan invoke the law to assert their rights anddemand protections to which they are lawfully entitled.For that to occur, judicial institutions mustbe made responsive, transparent, and answerableto all, not just to the privileged few. Property rightsare central to the fight against poverty: they are ameans for poor people to transform limited assetsinto secure, productive resources, which theycan then use to enter the marketplace and claima fairer share of gains from exchange. Eventually,they could build their asset base to support a betterquality of life. Labour rights are another mechanismby which disadvantaged groups can obtaindecent and productive work. Such rights enablethe poor to claim their rightful share of the wealththey have helped to generate and to achieve theirhuman potential. Many poor people are caught inambiguous employment relationships where theirrights as workers are illdefined and their ability tomake occupations safe and non-abusive is limited.Business rights round out the anti-poverty approachtaken by the Commission, in view of thefact that a significant share of the poor are eitherself-employed or already in charge of micro-enterprises.These entrepreneurs are burdened byunnecessarily complicated procedures and regulations,and they lack legal instruments providingaccess to the credit markets that would allow themto expand their small business activities and totake more risks with new investments.It may be evident that the interdependent domainsof empowerment are vital to ending poverty, butwe must ask if, and to what extent, the underlyingrights are realisable. The question has promptedour working group to address ways of puttingrights-expanding policies in place so they actuallyreach the poor. In Section 2, we discuss the numerousobstacles that policymakers must face andovercome in efforts to implement rights-conferringprogrammemes. Understanding these obstacles isthe first step to overcoming them.284

2. Implementation:Challenges andOpportunitiesImplementation refers to the carrying out of publicpolicy. A public policy can be thought of as acourse of action (or purposeful inaction) chosen bypublic authorities to confront a given problem orset of problems. Implementation thus involves governmentor quasi-government organisations settingaside resources and organising specific activities toimprove society in line with announced plans. ForLegal Empowerment of the Poor (Legal Empowermentof the Poor) the relevant policies may includecitizen registration drives, land titling schemes,labour rights for workers, whether in enterprises orhome-based, juridical recognition of informal businesses,and many other concrete activities.Table 5.1 lists representative specific reformsidentified by the different working groups that havebeen involved in preparing this volume. They areonly illustrations, and may not necessarily be themost pressing required for a particular country inachieving legal and institutional change. (For thecomplete record of recommended possible reforms,we refer the reader to the groups’ separate papersexploring the four domains of empowerment.) Itshould be self-evident that the policies suggestedin Table 5.1 are not all equally needed or feasiblefor every country. Reformers need to look at theTable 5.1 Sample Legal Empowerment of the Poor ReformsJustice• Effective, affordable and accessible systems of alternate dispute resolution.• Improved identity registration systems, without user fees.• Legal simplifi cation and standardisation and legal literacy campaigns targeting the poor.• Stronger legal aid systems and expanded legal service cadres with paralegals and law students.• Structural reform enabling community-based groups to pool legal risks.Property• Legal recognition of joint registration of land rights and reform of discriminatory inheritance and divorce laws andpractices.• Legal guidelines for forced relocation, including fair compensation.• Recognition of a variety of land tenure, including customary rights, indigenous people’s rights, group rights, certificates,etc.• State land audits with fi ndings published to discourage illegal taking possession of public land.• Simplifi ed procedures to register and transfer land and propertyLabour• Fundamental rights at work, especially freedom of association, collective bargaining and non-discrimination.• Improved quality of labour regulation and its enforcement.• Inclusive approaches to social protection, delinked from the employment relationship. Labour rights (health and safety,hours of work, minimum income) extended to workers in the informal economy.• More opportunities for education, training and retraining.285

menu of possible Legal Empowerment of the Poorreforms to find the policies that are applicableto given situations and to particular problems ofpoverty and disempowerment.Implementation sometimes conjures up erroneousimpressions of a chain of command for publicpolicy, but this regimented image hides thedisorderly element of the true process. It is best toavoid getting locked into a vision of public policyas a hierarchy of separate stages (one of which isimplementation), and to think instead of interactingspheres of policy activity all of which contributeto implementation. We will navigate this looselyordered process more carefully with the policyroadmap in Section 3 of this chapter.Because it is an overarching set of aspirations,covering four mutually supporting domains ofempowerment, Legal Empowerment of the Poor itselfis not something that is usually ‘implemented’in the narrow sense of the term being used here.Implementation entails identifiable projects andprogrammemes in different sectors, and many ofthese specific courses of government action mightbe empowering in different ways without everbearing the official label Legal Empowerment ofthe Poor. Seldom is constructive pro-poor policypossible if the poor are the passive targets of statecentredreform; a balanced legal empowermentstrategy is community-driven and grounded inlocal needs, which, however, can be translated intonational-level reforms for wider impact on upwardmobility (Golub 2003).In some cases, the positive outcomes for thepoor depend upon government establishing newprocedures or institutions. (An example from theAndes countries is given in Box 5.1.) In othercases, the task is to revive an existing policy thatwas never fully or fairly enforced — for instance,a bill of rights that calls for treating everyone insociety equally. A third possibility for aiding theBox 5.1 Removing Barriers toPublic Works ContractsThe development of public investment policies thatpromote the use of labour-based technologies hasimproved access of small local contractors to publicprocurement processes for services and works inAndean countries. Activities range from contractingof micro-enterprises for routine road maintenance inrural areas, to involving them in waste collection andstreet cleaning in urban areas. An ILO study shows,however, that access of small local contractors topublic procurement is still very limited due to the existenceof a series of legal and institutional barriers.For example, countries may restrict contracts to enterprisesrecorded in the national contractor register orto recognised civil engineers or architects.A transparent information system about tenders needsto be implemented to facilitate the participation ofsmall contractors in public works. Two alternativeshave proven workable: A ‘small contractor card’ and aregister for local contractors, enabling small contractorsto carry out small and medium-sized works inthe local area after passing certain prerequisites andminimum qualification criteria. Other possibilitiesinclude: subcontracting consortiums and associativecontracts for contractor collaboration; specialcontracting arrangements in projects receiving donorfunding; preferential treatment of micro and smallenterprises in public procurement in Peru; and directcontracting (i.e., one bidder) for small contracts.See: José Yeng and Serge Cartier van Dissel,Improving access of small local contractors to publicprocurement — The experience of Andean Countries,ASIST Bulletin #18, ILO (September 2004).poor is to change or eliminate existing policies thathave outlived their usefulness or that have cometo serve new purposes now at variance with theiroriginal intent. Examples of the latter are colonialera statutes regarding vagrancy, trespassing andforced labour, many of which survive on the booksof many countries. Whatever their original function,these relics of colonialism have the effectof criminalizing poor people. Archaic laws of this286

nature need to be rewritten or abolished to encouragebroad-based legal empowerment.Policy InitiationWhere a public policy originates is therefore aleading factor to consider with implementation.There is also the question as to who proposes sucha policy and who formulates the approach. Thedegree of domestic enthusiasm and support is whatmatters most for implementation, though externaldonors and international agencies are a usefulsource of ideas for policy reform. Often, a crisissuch as a natural disaster, or warfare, may act as apowerful stimulus for introducing new policies; butit is neither a necessary nor a sufficient conditionfor implementation. In the wake of the Asian financialmeltdown in the second half of the 1990s, forinstance, Indonesia enacted a series of importantlabour law reforms that began with guaranteeingthe fundamental right of freedom of association.The first legislative change repealed provisions thatlimited representation to a single government-controllednational federation of trade unions, and putinto place a framework offering workers the chanceto form federations as they wished. These reformsmight well have been shelved under normal conditions.Building on earlier work analysing political willfor anti-corruption activities and on policy reform(Brinkerhoff 2000; Brinkerhoff and Crosby 2002),the following initiating scenarios for legal empowermentcan be identified:1. Grassroots groups, social movements, membership-basedgroups of workers or of small businessowners mobilise and demand change. Some decisionmakers in the government respond favourably.This option provides motivation for insiders whocan potentially champion change.2.Choice of Legal Empowerment of the Poor reformis based on country actors’ consideration andanalysis of options, anticipated outcomes forvarious groups, and cost/benefits. When countryactors choose policies and actions based ontheir own assessments of the likely benefits tobe obtained, the alternatives and options, andthe costs to be incurred, then one can crediblyspeak of independently derived preferences andwillingness to act.3.Government initiates Legal Empowerment ofthe Poor reform. Commitment is questionablewhen the initiative for reform comes largely fromexternal actors. Some degree of initiative fromcountry decision-makers must exist in order totalk meaningfully of political will.4.Government mobilises key stakeholders in supportof Legal Empowerment of the Poor. Thisset up concerns the extent to which governmentactors consult with, engage, and mobilise LegalEmpowerment of the Poor stakeholders. Do decision-makesreach out to members of civil societyand pro-poor groups to advocate for the changesenvisioned? Are legislators involved? Are thereongoing efforts to build constituencies in favourof new Legal Empowerment of the Poor reforms?5.Government publicly commits and allocatesresources to Legal Empowerment of the Poorreform. To the extent that country decision-makersreveal their Legal Empowerment of the Poorpolicy preferences publicly and assign resourcesto achieve announced policy and programmemegoals, such actions indicate commitment tochange. When countries commit to changesfunded by outside donor resources, the presenceof political will becomes unclear.6.Government supports continuity of effort. Anothersituation is the assignment of resourcesand effort over the long-term to achieve LegalEmpowerment of the Poor goals. One-shot or episodicefforts would signal weak or wavering own-287

ership. Legal Empowerment of the Poor reforms,by their very nature, are long-term undertakings.7. Key actors monitor Legal Empowerment of thePoor progress for learning and adaptation. Itshows a level of commitment when country actorsestablish a system for tracking Legal Empowermentof the Poor reform progress, and activelymanage implementation by adapting to emergingcircumstances over time. However, learning canalso apply to country decision-makers who havebeen able to observe Legal Empowerment of thePoor policies, practices, and programmemes fromother countries and who can selectively adoptthem for their own use.8.Donors club together into a joint programmemingstrategy, or multi-donor group (e.g., through theHarmonisation Alignment and Coordination approach).This option provides another possibilityfor outsiders to assess the possibility for change.While external support can be a strong catalystfor change, external micro-management can alsoeasily render the process too burdensome forreformers and policy champions within government.It is important that the donor role in LegalEmpowerment of the Poor be supportive and notself-defeating.Before adopting any of these options, thoughtshould be given as to whether to engage in severalLegal Empowerment of the Poor domains,or sectors, at once, or to proceed with one andthen transition to others. Also, one must be onguard to ensure that a policy chosen does notsimply increase state power and patronage in waysinconsistent with pro-poor objectives. Agrarianreform has often gone wrong, with the supposedbeneficiaries becoming victims. The best guaranteeagainst such perverse developments is to bring thepoor themselves into the policy initiation process.Civil societies, NGOs, membership-based organisationsof employers and of workers, coalitions andnetworks all have a major role to play in generatingand articulating bottom-up demand. The participatoryobjective often goes hand- in-hand withdecentralisation.But the advantage of community engagement anddecentralised structures is not a universal law. Insome cases, central authorities may be the bestallies for the poor, because they can potentiallysidestep local spheres of interest in support ofmarginalized and disadvantaged communities. Theycould serve as counterweight for the poor and minoritiesagainst what may be entrenched control oflocal government by anti-poor factions. A concreteexample is the key role played by the federal governmentof Brazil in combating forced labour in remoterural areas of the country (ILO 2001: 25).Policy ChampionsThe degree of initial government support for anypolicy derives from domestic leaders who share aperception of a problem and who have agreed onhow to solve it. One or a few of these people mayemerge as policy champions, or entrepreneurs,who make a policy their signature issue and driveit forward over time. Securing political will for anynew course of action needs champions to bringother government actors on board and precludepolicy spoilers from blocking introduction of thepolicy. Having strong advocates at high levels ofgovernment is vital to getting the legislative andexecutive arms to cooperate and follow through onpolicy reform.Policy champions within government may beemboldened by backing and pressure from civilsociety within the country. To start a controversialpolicy such as Legal Empowerment of the Poor,which threatens many vested interests (see below),domestic policy advocacy is especially important.That is another reason why organising by the poorand their representation of their rights are basic to288

Figure 5.2 Influences on Policy Implementation: Empowering the PoorPolicy championsPolicy environment(social structure,economic context,political/administrativesystem, informality)Policy initiative(intended expansionof justice, assetholding, labourand entrepreneurialrights)Policy stakeholders(beneficiaries, allies,practitioners, challengers)Policy characteristics(complexity, ambiguity,discord)Policy outcomeInstitutional/legalprotection/ opportunitiesfor excluded groupsthe Commission’s empowerment agenda.A policy champion can come forward at any levelof government. Many Legal Empowerment of thePoor policies do not start out not at the nationalcentre, but emerge from the periphery via local orregional governments. A mayor or town council, forexample, may want to take care of problems at anirregular housing settlement, an open air market ora waste disposal site. Acting pro-actively, the localgovernment may try to include the people wholive or work in these areas in finding the solutions.Perhaps more commonly, the local government maysimply go ahead with reforms devoid of popularparticipation, sometimes triggering an empoweringreaction as poor men and women move to legallyto protect themselves from the harm caused by thepolicy. In either scenario, the national governmentmay be on the sidelines of implementation.Protagonists dedicated to the task of implementationmay emerge out of other stakeholder groups(see below), as well, not just from the public sector.Any individual with leadership skills, initiative,and commitment can play the role of policy champion,though they may be most effective if theyalso have technical knowledge about the subject athand. Having several policy champions is generallybetter for implementation.Forces Affecting ImplementationOnce a policymaking process has been started, severalcommon factors have been found to facilitateor impede reaching the desired policy conclusion,notwithstanding the content. Some of the generalinfluences on implementation concern the peopleaffected by the policy, or the policy stakeholders.Another set of influential factors reflects attributesof the context in which the policy exists, or the policyenvironment. A third set is distinctive featuresor policy characteristics of the proposed course ofaction. We can think of these three categories ofsignificant forces as the ‘who’, the ‘where’, and the‘what’ of policy implementation. (The ‘how’ willbe dealt with in Sections 3 and 4, on implementationroadmaps and pro-poor toolkits.) Figure 5.2presents a schematic summary of these influenceson implementation in the specific context ofempowering the poor. The arrows in Figure 5.2 areshown as diminishing in size during the implementationventure, to convey the idea that these tend289

to be frictional forces that reduce the probabilityof fully attaining projected policy outcomes. Thelarge initiating arrows also assume there is strongpolitical will for the policy, which may or may notbe true. The frictional influences on implementingLegal Empowerment of the Poor will test the resourcefulnessof policymakers seeking to carry outthe Commission’s agenda. Legal Empowerment ofthe Poor requires continued vigilance to push backagainst inertia and the status quo.Policy StakeholdersA logical place to start when trying to understandinfluences on pro-poor policy implementation is toenumerate the stakeholder groups and apprehendtheir stand on the issue being considered. Stakeholdersare people with an interest in a policy, andwho have the capacity to move the policy forwardor stop it in its tracks. Some of these groups maybe set up as formal entities, while others may beunorganised collectives with shared interests butno official representation or recognition. Stakeholdersact out of regard for their own advantage, asthey define it. 2 To implement policy requires a criticalmass of supportive constituencies and minimisationor neutralisation of the unsupportive groups.The important thing to bear in mind in lookingat stakeholders is that they act in responseto economic and political incentives. At its core,legal empowerment is about changing incentivesto induce poor people to be more creative andproductive by allowing them greater autonomy andfreedom. Change agents are nevertheless cautionedto be on guard against perverse incentivesthat could lead some constituencies to act in waysdetrimental to poverty reduction.Accordingly, it is advisable to conduct a stakeholderanalysis and to plot stakeholder interests andintentions regarding the problem that a particularpolicy seeks to address. 3 There are many possibleformats to use with stakeholder analysis, butthe usual practice is to start by enumerating thepossible constituencies. Examples from the landsector might include the following:• Individuals: landowners, landlords, tenants,shareholders, squatters, refugees, as well asbeneficiaries of specific programmemes.• Public sector: politicians, line ministries, provincial/municipal/districtdepartments.• Private sector: land developers, estate agents,notaries, lawyers, surveyors, planners, bankers,media.• Civil society: business associations, NGOs,CBOs, CSOs, faith-based groups, public policyresearch institutes, universities.• Traditional authorities: chiefs, elders.• International development partners: multilateralinstitutions, bilateral agencies, private foundations,international NGOs.The next step, typically, is to estimate eachconstituency’s position on an issue, the intensityof its interest in the outcome (or policy salience),and the group’s relative power to affect the outcome.This may be tricky because any given set ofstakeholders need not have monolithic interests.Policy cleavages are important because they affectthe possibility of building alliances across groups.Also any one member of these groups may belongto several stakeholder categories, and this may alsopresent opportunities for communication, bargainingand coalition-building among the groups. Ingeneral, it is must be remembered that the configurationof stakeholder interests and policy positionsis not static.Sometimes the importance of the issue to thegroup and its potential influence on implementationmight be rated on a rough zero-to-ten scale(from no importance to vital). The priority to beaccorded the group could also be quantified. Table290

Table 5.2 Illustrative Stakeholder MatrixStakeholderInterest in thePolicy(Pro/Neutral/Con)Salience of thePolicy(0-10)Influence on thePolicy(0-10)Priority forPolicymakers(Hi/Medium/Low)Group 1Group 2Group 3, etc.5.2 shows a generic stakeholder matrix, similarto the kind of tool policymakers might develop toidentify potential alliances and implementationstrategies for an Legal Empowerment of the Poorpolicy initiative.Archon Fung and Erik Wright (2003) suggest twogeneric strategies to contend with stakeholders:top-down adversarial strategies and participatorycollaboration. Building alliances across stakeholdergroups is vital, which will turn on the networks andcoalitions to which they belong. Support for LegalEmpowerment of the Poor will arise from stakeholderswho view it as good politics and a meansto build political support and legitimacy. Donorscan assist, but the driving forces for change mustcome from within the country. National leadershipin debating the difficult issues is crucial.With regard to participatory collaboration, agreementmay be absent about who should be involvedin decisions. Some stakeholders will not have aprearranged structure. Also, there may be no approvedinter-stakeholder process for developingcommon policy positions. Such an institutionalarrangement will therefore need to be expresslybrought together for purposes of implementingLegal Empowerment of the Poor. The challengesof establishing commonly agreed upon definitionsof problem situations and identifying the relevantstakeholders must be overcome as a first step.Adversarial situations are even riskier for the poor.Most of the time, disfavoured, disenfranchisedstakeholders stand to lose in confrontations withbetter endowed groups. Resolution of the conflictinginterests ranges along a continuum from negotiationto mediation, to third-party adjudication or arbitration,to refusal to compromise at all. Adversarialstakeholders ordinarily enter into negotiation whenthey see that is the best alternative compared towhat they could obtain ‘away from the bargainingtable’ (Ramirez 1999). Where conflict already exists,a strategic starting point for development professionalsis to understand stakeholder preferencesfor how to deal with the clash of interests.In thinking about stakeholder preferences, thereare four stylised stakeholders (shown in the middlebox of Figure 5.2, above) to consider: the policy’sbeneficiaries, obviously, but also its allies (whosupport the policy even though they may notbenefit directly), practitioners responsible for thepolicy, and challengers of the policy. Some of thepossibilities are sketched out below; these areillustrative categories and, needless to say, thedescriptions may not accurately depict any actualgroup in any given country. As noted, real groupsmay straddle the generic categories or switch backand forth among them, for example from beingLegal Empowerment of the Poor challengers at onepoint in time to being Legal Empowerment of thePoor allies at another period.BeneficiariesPoor people are the target beneficiaries of LegalEmpowerment of the Poor policies. They are the ma-291

jority of the population in many countries. The term‘the poor’ is a convenience, of course, for this multitudeis far from a monolithic constituency despitesharing hunger, ill health, inadequate housing andother pathologies of poverty. They live in remote ruralvillages and in urban shantytowns. They work assubsistence farmers, agricultural labourers, domesticworkers, street vendors, and trash recyclers. Theyare members of underrepresented ethnic minorities— often internal or external migrants seeking improvedopportunities in a new area where they lackclear legal status. They have been displaced by warand civil unrest, and they are indigenous people whohave been left out and left behind by the dominantsociety. A lopsided number of the poor are women,who usually have home and family responsibilitieson top of any work they have found outside thehome. It is useful to have a segmented census ofthe poor as a starting point for Legal Empowermentof the Poor work in any country, to know who theyare, where they are located, and to what extent theirinterests are aligned.Beneficiaries of legal empowerment need to haveas big a hand as possible in initiating and designingthe relevant policies. Even though they lackphysical or financial resources, and organisationalresources and social capital in many locales, thepoor always have a passive capacity to derail legalreforms aimed at them. If the poor are afraid of oraverse to playing their designated role in implementation,the best intended policy would cometo nothing. It is critical that their views be airedand taken into account by policymakers to makesure the proposed course of action fits what poorstakeholders are prepared to do.Because poor stakeholders are diverse, legal empowermentplatforms may have surprisingly unevenimpact if officials are inattentive. An illustrationcomes from South Africa. Residents of extra-legalsettlements in South Africa can be given individualdeeds to their homes. Yet, for some inhabitants theresult is a decrease in security of tenure. Ownershipis registered in the name of only one memberof each household, to the disadvantage of womenand members of the extended family. The newproperty owners also become liable for paying localtaxes and service charges, forcing some to sell becausethey cannot afford to pay. A few people who,by statute, come to own dwellings, cannot not livein them because informal street committees decideother people should take possession of the properties(Cousins et al. 2005). Thus an apparently equitablepolicy to expand asset-holding rights endsup having an unequal impact on poverty, becauseeven within these very poor residential areas, materialgoods and power are not distributed equally.Policymakers might have minimised this outcomeby differentiating among beneficiaries and payinggreater attention to existing social practices thathave widespread legitimacy (see the later discussionof informal institutions).Poor women present a particular challenge forLegal Empowerment of the Poor because insome cases their advantage can be to the disadvantageof the male half of the poor population. In EastAfrica, for instance, women tend to enjoy ‘use rights’to land (see further discussion of the spectrum ofland rights, below) as wives and mothers, but lacktransfer rights due to customs that reserve these formen. Women therefore are without secure claim to anatural resource they use for daily supplies of fuel,water and food. Legal insecurity inhibits economicprogress because women cannot make decisionson expanding or developing land (UNEP 2004:99).Their fathers, husbands and sons are likely to balkat efforts to implement expanded women’s rightsin this important economic realm, because theywould compromise men’s rights to the same assets.Women’s community based organisations may be theanswer. These have proven somewhat effective inpreserving women’s land access in Mexico, though292

effective land control does not necessarily follow(Radel 2005).Poor indigenous people, who represent 15 percentof the world’s poor but only 5 percent ofits population (ILO 2007: 27), are another specialtest for Legal Empowerment of the Poor due tophysical or social isolation from the influence ofthe governance claimed by a nation-state. Someindigenous people are nomadic; some have beendispossessed de jure or de facto of their ancestrallands. They may speak a separate language. Indigenouspeople often live in remote sites with higheconomic potential for water, timber, or medicinalplants, but lack legal instruments to preventover-extraction of natural resources by outsiders.All these characteristics make it all the moreimportant for government to reach these wouldbebeneficiaries. (See Box 5.2 for an example ofa participatory approach that helped indigenouspeople in Philippines assert claims to their ancestralrealm.)Box 5.2 Ancestral Domain, Sustainable Development, and ProtectionPlan of the Bago and Bugkalot Tribes.The Philippines Indigenous Peoples Rights Act (IPRA) of1997 consolidated bills related to ancestral domains andlands, and international agreements on the recognition ofland/domain rights of the indigenous peoples. Metagora(a project funded by OECD) in the Philippines developedevidence-based assessment methods and tools combiningquantitative and qualitative approaches. Thestudy measures four aspects of the rights of indigenouspeoples to their ancestral domains and lands: the indigenouspeoples’ perceptions and awareness of their rights,the enjoyment or violations of these rights, the governmentmeasures and customary laws for the realisationof these rights, and the availability of mechanisms forredressing violations or fulfilling rights.Metagora’s method of work is based on a bottom-up approachconsisting of:• Working with the shareholders in pilot countries, toidentitfy issues in human rights, democracy; andgovernance for which evidence-based assessment ishighly relevant;• Applying statistical methods and tools to that particularcontext;• Assessing these methods for their capacity to providepolicy relevant results;• Providing stakeholders with a shared knowledge on thepolicy issues at stake; drawing universal lessons fromthe local experiences;• Formulating recommendations for further applicationof the tested methods elsewhere.Three tribes covering public ancestral domains in threeregions of the Philippines were covered by the survey.Major respondents were representative samples of thetribal population stratified according to selected criteriathat are in consonance with the customs and traditionsof the target population. Non-indigenous people respondents,especially the governance stakeholders, alsocomprised the secondary respondents of the survey.This is a case of objective survey data having policy forceon account of the involvement of an international projectin partnership with the Commission on Human Rights ofthe Philippines, its Regional Offices, the National Commissionon Indigenous People, and National StatisticalCoordination Board (NSCB).The data and evidence gathered had the positive consequenceof making the national and regional governmentauthorities take the implementation of the provisions ofthe Philippines Indigenous Peoples Rights Act seriously,so that the rights of indigenous peoples are settled, aproactive public policy approach is taken, and fundsprovided under the law are allocated properly to benefitthe indigenous people.Source: Metagora Training Materials. Ref:http://www.metagora.org.293

At the national level, a society’s failure to provideopportunities to all in an ethnically diverse population(poor and not-poor alike) is found in somestudies to be a drag on economic performance,making it harder for a country to grow its way outof poverty (ILO 2007: 9-10). Policymakers need toconsider how ethnic and religious cleavages within acountry, along with traditional caste or gender-basedexclusions and oligarchic traditions of domination,affect the distribution of wealth and income, andthe projected likelihood of empowering reforms.These power relations may have a significant impacton the chances of implementing Legal Empowermentof the Poor. We return to the questions of theeconomic and social context later in Section 2.AlliesThe main allied stakeholders of Legal Empowermentof the Poor policies are pro-poor communityassociations and activists of civil society. Someof these stakeholders will be local social actionor advocacy groups, such as the Indonesian LegalAid Foundation whose mission is to defend poorpeople in court and expand their rights. Allies mayalso include professional associations sympatheticto the plight of the excluded and have-nots. Forexample, Ecuador’s Association of Law SchoolDeans supports legal assistance for the indigent inthat country. National bar associations are engagedin similar activities in many nations.Certain politicians may come out as allies. It is notuncommon, for example, to find even somewhatdisreputable politicians offering to use public landto woo voters’ support in slum areas. Such personsmay not be reliable allies, however. More dependablewill be the genuine policy champions, who haveemerged from among the national or local politicalleadership to make a progressive name for themselvesas friends of legal empowerment.Some commercial enterprises, and particularlylarger companies and multinational corporations,may fall into the camp of policy allies on certainoccasions. Over 3,000 corporations in morethan 100 countries have joined the UN’s GlobalCompact, which commits them to support highstandards in the areas of the environment, humanrights and labour rights (UN 2007). These firmsoften say they would like to forge partnerships withpoor communities in the developing world to createbusiness models that are sustainable, equitableand embedded in the local culture (Hart 2005).Some signatories are turning to the poor as businesspartners, suppliers, or distributors.Nairobi, for example, has a productive alliancebetween informal entrepreneurs and larger businesses.Two business associations joined with thestreet vendors’ organisation in a dialogue with localauthorities to improve the status of street vending.Street vendors in Kenya’s capital city are subject toharassment and demand for bribes from city inspectors.The uncertainty forces the vendors to limit theirstock and hinders their productivity and income. Thetwo conventional associations had wanted to driveout street vending because of litter and crowding,but came around because, among other things, ofa growing realisation that the outdoor presence ofvendors limits crime and thus is good for everyone’sbusiness. Interestingly, the vendors’ group wants itsmembers to pay licensing fees, on the argument thatpaying gives the members legal cover and providesleverage for government services (Kamunyori 2007).It should go without saying that these observationsdo not mean every self-described ally of the pooris a true friend of the legal empowerment agenda.The real world is far more subtle and complex thanthat. Some grassroots groups may feel threatenedby Legal Empowerment of the Poor if they do nothave the lead in directing the movement. Stakeholderanalysis cannot be done by mechanisticallyapplying generic labels to pre-determined groups of294

actors and assuming they will behave according totheir category.PractitionersA third important set of generic stakeholders arepractitioners — mainly the government officials,court officers, and others who draft, interpretand administer the land laws, labour statutesand commercial regulations in a country. Despitesometimes having low positions in the bureaucratichierarchy of government, these officials can and dowield considerable effective discretionary authorityover implementation.One common problem is that permits, businesslicenses, tax assessments and the likeare sources of power and potential illegal incomethrough bribes, kickbacks and other ‘rent-seeking’behaviour. 4 Even the abstruse text describing manyof these regulations provides low-level governmentemployees with power, for citizens cannot decode legaljargon easily on their own. The interests and attitudesof government officials at all levels must thereforebe factored into the implementation process. InBeijing, for example, law enforcement officers andlocal authorities look the other way when rural-urbanmigrant entrepreneurs do not comply fully withlicense requirements and instead lease licenses illegallyfrom local residents. This illicit license-leasingpractice is sustained because bureaucrats profit fromit (He 2005). Streamlining the business registrationprocess in line with Legal Empowerment of the Poorgoals would threaten illegal but routine bureaucraticincome in China’s capital city.These comments do not imply that bureaucrats arealways spoilers of reform. A new programmeme mayalso mean that staff members gain promotions,have interesting new responsibilities, or have trainingopportunities or other perquisites. Within everygovernment executive agency or judicial institutionthere may be potential policy champions, who cometo identify with a particular solution to a socialproblem and make strenuous effort to get it implemented.As noted, entrepreneurial effort by policychampions in elected and administrative office is aconsistent theme in successful policy implementationaround the world.ChallengersA final constituency to consider is rival stakeholdersthat challenge disenfranchised people exercisingnew rights or reviving latent ones. These competingor oppositional stakeholders may include foreignbusinesses and large domestic companies, but alsocover many small landlords, mine owners, shopkeepers,and moneylenders, plus some lawyers,engineers, and similar specialised experts who tendto prefer the status quo. We should be careful aboutbrushing any class of people with too broad a stroke,but numerous local elites and professionals arelikely to feel threatened by confident and forcefulpoor people and may try to pre-empt improvementsin poor people’s status and income. Lawyers, forexample, may lose the upper hand with clients iflaws are translated into everyday language or if inexpensiveconflict resolution forums are made widelyavailable.A common and tricky problem of implementation iswhen contending stakeholders do not try to block reformsoutright, but subtly manipulate emerging policies(and especially donor-driven programmemes)to their advantage — a phenomenon known as ‘elitecapture’ (Decker 2005). This distortion is chronicwith Legal Empowerment of the Poor activities.In many Asian countries, for example prospectivetitling programmemes often have the perverse effectof inducing speculators to buy up land ahead oftime from squatters at slightly better than informalprices. The squatters come out ahead in the shortterm, but pay the opportunity cost of not waitinglong enough to get the main benefit of the titling295

programme — which accrues to the people withdeeper pockets. Low income and vulnerability leadto a safety-first calculation, so squatters reasonablyprefer to have their cash immediately. Contrary tothe stated intention of the titling programmeme,however, elites capture most of the gains from it.The sequential and conditional release of funds isone strategy for countering the persistent problem ofelite capture (Platteau 2004).Policy Environment and ContextualAnalysisCrucial as stakeholders are to implementation,even more basic is the country context. In mostcountries, a minority of the better-off holds disproportionateinfluence over the local and nationalpolicy apparatus due to its more sophisticatedknowledge about markets, to its greater businessand political contacts, and to its better access tofinance. These power structures influence the decisionson who prevails in the bargaining, competitionand cooperation among stakeholders, and alsoconstrain many other facets of Legal Empowermentof the Poor. It is impossible to decide what sorts ofreforms to attempt and to determine what it will totake to carry them without first coming to an honestassessment of the country policy environment.A clear-eyed contextual analysis should thereforeguide all decisions on if, when and how to go forwardwith Legal Empowerment of the Poor policiesand provide guidance during implementation. AsFigure 5.2 suggests, the most important constraintsset by the national socio-political context are:• The domestic social structure, especially itsgender, class and ethnic makeup, plus culturalattitudes toward participation and equality.• The economic context — including the distributionof wealth and income, and the level and rateof economic growth.• The characteristics of the state — both the politicaland the administrative system.• The extent of economic and political informalityand tensions with the formal and officially recognisedsystems.These are the critical factors for contextual analysisand the parameters within which practitionersmust operate as they try to steer implementation oflegal empowerment reforms.Social StructureSeveral important points regarding social structurewere already implied in the discussion of stakeholders,which emphasised the task of buildingwinning coalitions for change among clashingconstituencies. Thus, a country with fewer poorpeople relative to its population will likely find iteasier to integrate them into the legal and economicsystem compared to a country with morepoor people (though the poor also may be easierto ignore when their numbers are lower). Similarly,a homogeneous country will also find empoweringpeople at the bottom takes less effort compared toa country where the population is deeply divided bylanguage, religion or national origin. The absolutegap between rich and poor also matters, with asmaller gap facilitating implementation of LegalEmpowerment of the Poor policies. A society wherewomen have considerable legal recognition willhave less ground to make up with empowering poorwomen than another society. Whether the socialand economic cleavages are cumulative or crosscutting(that is, to what extent does membershipin a particular religious community or ethnic groupcorrelate with discrimination, low income, exclusionfrom power, and other negative attributes).These are given social facts at any point in time,though they can change in a country due to economicgrowth, human migration, mass education,and exposure to media, among other factors. Poli-296

cymakers must tailor their empowerment strategiesto the structure of particular societies.Cultural factors are crucial to the social structure,as well. Assorted traditions and customarypractices colour the systems of propertyrights, contract enforcement and dispute resolutionthat the poor typically use. Indigenous people areparticularly likely to have elaborate but officiallynon-existent systems in place for organising economiclife. There may be a large gap here betweenthe shared norms and values of the beneficiaries oflegal empowerment versus their stakeholder allies(not to mention their rivals or opponents). Thatcultural distance makes it harder to come up withworkable and effective empowerment instrumentsand activities (see additional discussion on informalinstitutions, below).Another important social structure consideration isthat many societies and subcultures reflect hierarchicaland patriarchal power structures that mayimpinge on implementation of legal empowerment,which is predicated on broad participation of thebeneficiaries in decisions and the levelling effectsof economic rights. Great tact may be needed tofind socially acceptable yet effective means ofinvolving, say, women or members of historicallyexcluded minorities in choosing and implementingpolicies that expand the ambit of empowerment.Development practitioners need to pay close attentionto these cultural factors when they considerhow to carry out Legal Empowerment of the Poor.Economic contextA country’s social structure cannot be isolated inpractice from who holds the country’s wealth andexercises economic power. The distribution patternmay reflect historical injustice whereby a privilegedfew used their political influence and access tothe justice system to legitimise unfair claims toproperty. The more unequal the initial pattern ofownership of land, capital, and other productiveassets, the more cautious will reformers have to beabout regularising the system of economic rights.There is no advantage to the poor from locking inplace deep pre-existing inequities in proprietorship— though to correct those inequities compensationmust usually be paid to the pre-existing assetholders, which may be both financially costly andpolitically risky due to the resistance it is likely tospark. It is important to the Commission’s agendathat Legal Empowerment of the Poor reforms aredesigned in a manner that braces the claims ofthe poor to assets without amplifying the existingskewed allocation of property.Land is probably the most difficult economicresource to manage, both because its supply islimited and because so many poor people dependdirectly on land for their survival. Indigenouspeoples, and pastoralist and subsistence farmersmust assure their use of forests, pastures andarable fields, but, as mentioned earlier, that bringsthem into head-on conflict with richer claimantsto the same limited resources. Land reforms haveproven a conundrum in many countries due to theexpense and complexity of managing overlappingclaims to the identical resource.In addition to how a nation’s ‘economic pie’ isdivided up, the overall size of the ‘pie’ also influencesthe extent of absolute poverty and hence theurgency of poor people’s empowerment and thescale of the effort needed to confront that socialproblem. Economic growth makes it easier to redistributeassets to the poor, yet, ironically, growth isalso an unsettling force for the poor.Acase in point is redevelopment of the vastsquatter settlement of Dharavi, in Mumbai,India. As the land has soared in value, the city andstate have advanced plans to replace the informaltownship with upscale development. Because297

Dharavi’s residents lack ownership rights their abilityto defend their homes and shops is limited. Fortunately,direct action and advocacy from civil societyhas gotten the government to agree to provide smallapartments to the residents who will be displaced.That is not the end of the story, however. Theseredevelopment plans can be drawn up without anyconsultation, and it is unclear who within Dharavi’spopulation will get the new living units and worksites. Mumbai has sky-high real estate prices andthe state and the private developers still stand toearn huge amounts over and above the cost of thismitigation effort (Patel 2007). On the other hand,mitigation may not have been forthcoming at allwere it not for the dynamic economic conditions inMumbai.With the clear exception of many programmemesinvolving the transfer of land andproperty, the financial cost of empowerment programmemesmay be modest. Since some elementsof Legal Empowerment of the Poor are revenueneutral, it is possible to pick the resource neutralelements first, or else the ones that require limitedexpenditure of resources. Special attention shouldbe paid to low-cost ways to enforce property rights,guarantee contracts, and provide fair resolutionof business and commercial disputes. Still, eventhese activities will slow to a crawl if the countrydoes not find enough funds to pay for them.Empowering the poor is a long-time endeavor soongoing budget support is problematic. Take manyof the emerging market economies in Asia. Theystill frequently underpay their judges and allowtheir courts to languish with inadequate facilities.Many of these legal systems are swampedwith a backlog of cases and are widely accused ofcorruption. Hence, fast economic growth does notnecessarily put an end to resource scarcities forimplementation if change is not a high priority.Political SystemPolitical system variables (i.e., factors affectingthe demand side of government) are crucial forimplementation and need to be taken apart andlooked at carefully. To combat legal disempowerment,there is no substitute for collective action bypoor men and women to push for rights and protections,as in the Mumbai case cited above. Whendoing contextual analysis, therefore, practitionersmust consider whether farmers, residents, workers,consumers and other constituencies have legalprotection to organise and petition the governmentor bargain with private entities to redress theirgrievances. In countries where these basic rightsare neglected or suppressed, Legal Empowermentof the Poor will be harder to carry out. The right toorganise does not exist in a vacuum separated fromactual organisations, and thus the level of developmentof civil society is another important influenceon the diagnosis for policy implementation.It is easier to carry out Legal Empowerment of thePoor in countries with strong community organisations,occupational membership groups or pro-poorpolitical parties, than where such social capital isabsent.As we have stressed, implementation of Legal Empowermentof the Poor usually involves communityparticipation, sometimes through formal venues setup for the purpose or else through the establishedmechanisms of local government. Simply makingparticipatory procedures available, however,is not sufficient because the better-off and moreconnected members of communities tend to takeadvantage of them. Barbara Pozzoni and NaliniKumar (2005) describe two related forms of socialexclusion: formal, which refers to the poor anddisadvantaged not showing up at meetings, andsubstantive, which refers to their not speaking upin these venues. In India, for example, local selfgovernmentappears to be working reasonably well,298

ut some community members report being toointimidated to contradict local leaders and governmentadministrators (Viswanathan and Srivastava2007: 72). Social mobilisation of the poor canhelp make participatory procedures in governmentwork closer to the way they are meant to.Legal empowerment is sometimes also facilitatedby democratic competition and free discussionof policy issues at the national level, whichinduces leaders seeking majority support to viewith policy proposals favourable to disadvantagedcitizens. But these are not panaceas. Proceduraldemocratic rule is now quite common in the world,yet empirical studies show countries experiencingdemocratic reform do not have systematicallybetter poverty outcomes (Ross 2006). For example,democratic countries are just as capable asdictatorships at carrying out government austerityprogrammemes that fall most heavily on the poor(Lindenberg and Devarajan 1993).The procedural democracies are not at all consistentin the extent to which they protect minorities,root out political corruption and preventstate-sponsored violence against citizens. Oftenthe leadership positions in these countries aredominated by the same social stratum that was incharge before the advent of procedural democracyand competitive politics. In some societies thisdominant group’s role is legitimated by religionor tradition, and deferential attitudes on the partof the poor may add another stumbling block toempowerment. One explanation for the economicdisparities that persist under democracy is theholdover of identity politics that divide the poor(Varshnay 2005). There may also be deep rootedpatron-client networks that push down the poor(more on this topic later).Take the example of Philippines. Its governmentis chosen in contested elections. Thousands ofcommunity based organisations exist in Manila andelsewhere, so there is a strong civil society. Philippineshas a national housing finance programmemeto regularise the city’s vast informal settlements,implementation of which is left to partnershipsbetween community groups, local governments,and the private sector. Local governments are alsorequired to set aside land for relocation of informalsettlers and to compile lists of informal settlers whoare eligible for relocation. Yet even in this relativelybenign political environment, the community groupstend to have limited influence and evictions andconversion of land to commercial uses continuesapace (Shatkin 2000).Honduras and Nicaragua have analogous problemsin rural areas. Land and forestry laws favour thepoor on paper, but practice is different. In Nicaragua,constitutional and legislative provisionsexist for the demarcation and titling of indigenousterritories. Yet the government continues to grantindustrial logging concessions on community landswithout fulfilling these requirements. In Honduras,small-scale forest producers have use rights butseldom can meet transaction costs of securingpermits and other approvals, owing to regulatorycomplexity and bureaucratic corruption. This forcesthem to rely on timber traders to secure permitsand other approvals, which, in turn, fuels collusionbetween traders and public officials, and elite captureof community forest management rights (Wellset al. 2004). Again, the quality of democraticinstitutions in this pair of countries appears to varyaccording to the class and income of the citizensusing them.These anecdotes obviously do not mean dictatorshipsare consistently better at confronting povertythan are countries classified as democratic. Thereare examples throughout history of authoritarianregimes that carried out successful land reforms andother pro-poor policies; yet there have undoubtedly299

een a far greater number of authoritarian regimesthat did little or nothing to improve the health andwell-being of ordinary citizens. We need to look beyondpolitical labels when designing implementationstrategies for Legal Empowerment of the Poor.It is important to think of political systems asshades of grey when it comes to empowering thepoor. At the far end of the pallet are systems ofarbitrary personal rule, which are typically quiteclosed regarding grassroots participation in policymaking,but which may be open to pro-poor policiesif the regime is a populist one that depends onmass support. Dictatorships blend into more openand competitive systems where the poor may haveprogressively greater scope to sway public policy,but where the rich may still exercise hegemony onkey political economy issues. Happily, there arefewer political systems today where poor peoplecannot organise at all to have some countervailinginfluence on government decisions; but in anumber of countries, freedom of association isstill being denied (ILO 2004: 1-2). And even inthe most receptive political systems the influenceof the poor is difficult to transform into extensivepower. Development practitioners should be carefulnot let preconceptions about regimes blind them tothese possibilities.Administrative stateThe supply side of political systems also needs tobe considered to understand implementation probabilities.How capable is the public administration?Does the state have the capacity to provide physicalsafety, to secure personal belongings, to settledisputes fairly, and to provide other public goodsto society? Does it possess the personnel, skills,systems, and infrastructure to carry out these corefunctions? Even political will cannot drive reformin the face of binding constraints on the capacityof institutions charged with delivering the mandateof empowerment. High-capacity states are onesthat implement policies efficiently, predictably, andin the manner intended. High-capacity states mayor may not be democratic, but they can carry outthe Legal Empowerment of the Poor agenda if thatis what the leadership wants. In very low-capacitystates, on the other hand, supportive leadership isstill beneficial except the follow-through capabilityis missing. Residents must therefore improvise andfigure out how to protect assets and resolve disputesthrough pragmatic means, such as aligningwith a political patron (see discussion of informalgovernance below).Administrative weakness is usually rooted in lackof human and financial resources, but a viciouscycle reinforces the problem. A World Bank reportargues: Burdensome or extraneous business andlabour market official regulations drive people intothe shadow economy, while a collective perceptionof ineffectiveness of the state’s actions gives riseto a social norm of non-compliance with taxes andregulations, which further undermines the state’scapacity to enforce the law and to provide publicservices (Perry et al. 2007). However, the methodologyunderlying such studies has come under serioustechnical criticism (Berg and Cazes, 2007).Bureaucratic corruption can also be a major weakeningfactor, especially for the poor who lack thewherewithal to pay bribes to make things happenwithin the bureaucracy. For people with means, onthe other hand, the civil service may seem capableenough because, unlike the poor, they can pay forindividualised special treatment. Thus bureaucraticcorruption will tend to reinforce the existingconfiguration of wealth and power. In cases wherepublic sector wages are low and virtually everythingthe civil service does is for sale, it may be almostimpossible for the poor to get public administrationto work in their favour. Legal Empowerment of thePoor reformers would have to address corruption300

efore taking on implementation, or choose to workin sectors where government employees are moreprofessional and trustworthy. 5Attitudes of public servants are also significant.Receptivity of state institutions to the agenda oflegal empowerment is as much about changing thebureaucratic mindset as it is about new processesor additional resources. Too often public functionariesfor a variety of reasons lack a service orientationand see their job as an entitlement. This mustbegin to change to implement Legal Empowermentof the Poor.Again we are talking about shades of capacity, notstark monochromatic differences. Among developingand transitional countries, those with highernational incomes tend to be recognised as havingthe stronger administrative capability, though thereare certainly exceptions to this pattern. The leastdeveloped countries, especially small island nationsand land-locked countries tend to have lowercapacity as a rule. Legal Empowerment of the Pooris obviously easiest to carry out on a national scalein countries with better capacity.State capacity is at its nadir in countries wherecentral authority is so ineffective that it has lost oris losing practical control over much of its territory.Implementing Legal Empowerment of the Poor inthese political systems must be done entirely fromthe bottom up or the outside in, because the nationalgovernment is too dysfunctional to work from thetop down. Consider the extreme case of Somalia,with four overlapping judicial structures: a formalone in regional administrations and central governmentscreated at international peace processes, atraditional, clan-based system, a growing numberof Muslim shari’a courts in urban areas, and ad hocmechanisms established by militias (Le Sage 2005:7). A nationwide implementation strategy for legalempowerment is currently problematic in Somalia,though there may be local or regional space forBox 5.3 Empowering Workersthrough CommunityContracting‘As in many other places in Somalia, the civil war thathas been raging on for years has had its toll on Garowe,a city in the Puntland region of that country. … A projectto improve the livelihoods of the people of Garowe throughsustainable waste collection management … applied theCommunity Contracting Model, a participatory processwhereby the community group negotiates with local governmentor a development programmeme and enters intocontractual agreements to undertake garbage collectionand disposal. This had multiple advantages: members ofthe community were directly involved in negotiating contractswhich in turn provided them with jobs that helpedthem improve their livelihoods.’‘This contracting system uses a participatory andbottom-up approach…. Local actors were responsiblefor … organising community contributions, transporthire, procurement of tools and materials, authorizationof payments, decisions on workers’ wages, selection andsupervision of workers and ensuring workers’ safety. Theywere also responsible for solving all disputes related toproject implementation.’‘There is a great potential for replication of sustainablewaste management activities in towns and municipalitieswithin the country as well as in urban centres ofother African countries.’ UN-Habitat, ILO and UNA (anItalian consortium of NGOs) have supported the Somaliinitiative.Indeed, 11 municipalities in Kenya, Tanzania and Ugandaare pursuing similar approaches to municipal service delivery.Community-based organisations, small enterprises,NGOs, informal economy operators and local traininginstitutions work with the administration to create propoorurban services using public-private partnerships.This was made possible by changing local governmentby-laws. The change opened up new opportunities for poormen and women; the ILO is working with local partnerstowards ensuring that the jobs are safe and productive.Source: ILO, Success Africa: Partnership for Decent Work — ImprovingPeople’s Lives, 2nd vol. (Addis Ababa, Apr. 2007), pp. 2- 4 and31-33.301

eform, as Box 5.3 indicates.Post-conflict states present a special situationfor legal empowerment even if the central statehas nominally reasserted its claim to authority. Itis particularly vexing to figure out how to returnproperty after its rightful owners have fled or beenkilled by one side or the other in a civil war. Oftenthe disputes over homes and other assets are sointense they must be addressed at once to sustainpeace. 6 The international community has recognisedinstitutional reform of the legal infrastructureis essential for reconstruction and reconciliation.Yet, a realistic timeframe for recreating a justicesystem following serious armed conflict with formalcourts, trained judges and a retrained police forceis close to 20 years (Samuels 2006: 19). That is along period for implementation with many chancesfor administrative operation to deviate from initialpolicy intent.Merilee Grindle (2007) proposes an elementarytypology of political systems, adapted here in Table5.3, right, which is a useful place to begin to considerwhat sort of Legal Empowerment of the Poorpolicies are feasible within different countries. Thethree left-hand side column headings reflect thepolitical and administrative dimensions of regimes,with the far right-hand column very roughly indicatingthe sorts of Legal Empowerment of the Poor initiativesthat might be appropriate; the rows are fivecommon regime patterns or syndromes. These areheuristic, but they suggest the possibilities for legalempowerment are greatest in states that are morecompetitive and better institutionalised. As Grindlepoints out, there is simply more to build upon inthese countries than in weaker states. A startingpoint for Legal Empowerment of the Poor practitioners,then, is to debate honestly where a particularcountry can be located among the common patternsof political administrative systems, and use theinformation to think creatively but realistically aboutwhat empowering reforms will work in that context.The typology in Table 5.3, right, is educative, notexhaustive; the capsule policy prescriptions in thelast column on the right are not meant to cover allthe possibilities, which are too numerous to capturein a simple table. The reality on the ground is thatpolicy champions may need to pursue a variety oftactics in every country, custom fit to the differentstakeholders, to support their overall strategy.That means mobilising the grassroots, the communityorganisations, the professional groups, andother interests to counterbalance opponents ofLegal Empowerment of the Poor trying to derail theagenda. The prospect of working with state actorsvaries according to the administrative capacity ofthe government.InformalityAcross-cutting dimension of the policy environmentis the extent of informality — in theeconomy, in the polity, and in the juridical system.People, organisations, and firms can operate underconditions of informality for some purposes andunder conditions of formality for others. LegalEmpowerment of the Poor reformers must besensitive to the vulnerability of informal empowermentmechanisms to cooptation and domination byelites and formal organisations. Let us look at thephenomenon and consider the impact on implementationof Legal Empowerment of the Poor.In the economic sense, informality refers to smallscale,self-financed and unskilled labour-intensiveproductive activities, which the poor use to survive.These pursuits are under-the-table and off-thebooks,and thus are legally defenceless againstmore powerful market interests and are subject tounfair exploitation. This parallel or shadow economyis a vast domain, representing the equivalentof about 40 percent of official economic activityin developing and transition countries, according302

Table 5.3. Political Administrative SyndromesPoliticalCompetitionInstitutionalstability of the stateOrganisationalcapacity of the statePotential Legal Empowermentof the Poor policyinitiatives*National level reforms inhuman and economic rights;assert claims to existing legaland basic welfare services;work through established civilsocietyRule through stable andlegitimate organisationsand procedures; opencompetition for powerthrough programmematicpartiesRules of the game widelyrecognized as legitimateand not subject tosignifi cant change; conflictsresolved through appeal tothe rulesHigh. Organisationschallenged to improveperformance on a sustainedbasis.Rule through stable andlegitimate organisationsand procedures; no opencompetition for power.Political parties serve theregime or are hindered andcontrolled by itClear rules of the game andgenerally orderly processesof decision-making andpublic management are inplace; generally centralizedand authoritarian practices.Modest. Many organisationscarry out routine activitieson a sustained basis.Mobilisation of poor citizensfor greater influence over therange of legal protections andopportunities from the centreAn unstable mixture ofpersonal and impersonalrule, with varying degreesof legitimacy. Partiesare based partly onpersonalitiesRule through personalitiesand personal connections.If political partiesexist, they are based onpersonalities.Basic rules of the gameare established in lawand practice, althoughthey function poorly andintermittently.Low. There may be someorganisations that are ableto carry out responsibilitieson a sustained basis.Similar to above, but withpossibly more decentralisedfocus and more emphasis oninstitution building; corruptbureaucracy may be a biggerobstacleBypass strategies to get aroundcorrupt officials; incrementalsteps only; watch out for elitecaptureStability highly dependenton personal control ofpower. Rules of the gameemphasise power of elitesand personal connections toelites; there is confl ict overwho controls the stateLow. Organisations respondto the personal and shiftingpriorities of powerful elites.There is no effective centralgovernmentExtremely low. There are noeffective rules of the gamethat are agreed uponExtremely low. It is difficultto identify organisationsthat have any capacity toproduce results.Community-basedempowerment programmemes* Illustrative examples only; the activities in these cells are not mutually exclusive.to a study financed by the World Bank (Schneider2002). Half or more of the employment (includingsubsistence farming) in developing countriesis outside the formal sector. Earnings are low anduncertain, but these parallel market activities haveproven remarkably vital and have grown worldwidein new guises and unexpected places. Capturingthe positive attributes of the informal economywhile minimising the low productivity and hazardousworking conditions that go along with it, isone of the challenges of the legal empowermentagenda.Economic informality does have some advantagesfor the poor; for example, women may find home-303

ased work easier to fit in around their householdresponsibilities. Formal sector businesses maychoose to outsource work to informal workers togain flexibility. That said, these jobs are mostlyvery badly paid, often dangerous, and they relyheavily on children (ILO 2003). Most people whotoil in the parallel economy do so out of necessity,not freely exercised choice. Judith Tendler (2002)writes of an implicit ‘devil’s deal’ in Brazil and othercountries, whereby informal economy workers andentrepreneurs consent to support certain politicians.In return, the politicians agree not to enforce tax,environmental, or labour regulations; and to keepthe police and inspectors from harassing the poor.This arrangement is difficult for either side to getout of and it limits the options for legal empowerment.Tendler suggests the way to break the ‘devil’sdeal’ is by demonstrating the paths by which smallfirms grow into form ones, including treating workersbetter and helping to upgrade their skills.The boundary between the informal and the formaleconomies is fluid and poor people can push it in adirection that favours them. Cairo, to take an example,has an informal refuse collection system whichactually has a well-defined set of internal rights,responsibilities, and sanctions that evolved overseveral decades in response to a changing externalenvironment. The city tried to bring refuse collectionunder municipal control by issuing licenses to largecorporate contractors. Refuse collection is a majorenterprise for poor people so the city was threateningtheir livelihood. After negotiation and mutualadjustment, a new arrangement emerged in whichsmall-scale service providers selectively adoptedinstitutional forms recognised by the municipalauthorities, while hanging on to the personalisedand adaptable practices that marked their informalsystem (Assaad 1996). The second element ofinformality that concerns Legal Empowerment of thePoor policy implementation is found in the politicalsystem. Similar to what goes on in the economy,informality here is based on implicit and unwrittenunderstandings. In effect, it is a coping method forthe poor. The terms used to describe this grey governmentzone are ‘patrimonialism’ and ‘clientelism.’Its dimensions are hard to measure, but the informalpatron-client political system is widespread inmany countries and may crowd out the official statesystem of rule, along with that system’s broad policiesthat guarantee rights and distribute privilegesaccording to objective criteria.Patron-client politics emerge from webs ofpersonal bonds that develop between patronsand their individual clients or followers. Thesebonds are founded on mutual material advantage:the patron furnishes excludable resources (money,jobs) in return for support and cooperation (votes,attendance at rallies). Typically, marginalizedmembers of society are drawn into patron-clientarrangements as a more reliable means thanthe state to take care of their everyday concerns(Brinkerhoff and Goldsmith 2004). Clientelismis widely seen as a barrier to more transparentgovernance and professional public administration.It lives on, however, because it provides somethingof value to people. No society is so ‘advanced’ thatit relies exclusively on de jure institutions to run itscommon affairs. For all their drawbacks, informalpatron-client exchanges are expedient means to getthings done.Clientelism evolves and adapts to the formalgovernance system, similar to what happens in theeconomic sphere. In fact, individuals who holdthe formal levers of power are often also head uppatronage networks. Political openness, widespreadpolitical participation and the emergence of broadprogrammeme that help people regardless of theirpersonal affiliations are ways ‘clientelism’ can bepushed back to benefit the poor (Brinkerhoff andGoldsmith 2005). But this is a struggle. Patrons do304

not give up their position willingly, and they oftenhave multiple additional claims to power, not justtheir control over material resources but also legitimacyderived from a high position in the local systemof social stratification and privilege. There maybe a religiously or historically derived convention ofdeference to authority that makes poor people lesslikely to stand up for their prescribed rights againstthe wishes of traditional patrons.The participatory budget process in Porto Alegre,Brazil illustrates how hardy ‘‘clientelism’’ canbe. The city has garnered a great deal of attentionfor making public spending more programmematicand universal, and less dependent on individualconnections and friends in high places. When theWorkers Party came to power in Porto Alegre in1989, it was determined to end the ‘clientelism’ ofthe old administration and it set up an inclusive processthat involved citizens from all social groups inestablishing budget priorities, allocating investmentsand monitoring results. Many city council representativesheld office based on clientelistic networkstied to neighbourhood associations. Though oftendisagreeing with participatory budgeting, they votedfor it with the hope of using the programmeme’spopularity to gain votes in the next election. It wasdifficult for these legislators to oppose projects thatdirectly benefited their own constituents (Wampler2007). Despite this progress, after the WorkersParty lost control of the city government in 2004,due in part to a drop in support from its low-incomepolitical base, there were signs of resurgent ‘clientelism’,with the city councillors and municipal staffonce again doing deals to arrange individualiseddelivery of public works and services.Informality turns up a third time in the legalsystem itself, where we again see overlappingstatutory and non-state systems of law (includingmafia-like self-regulating systems) in everycountry. As with economic informality and political‘clientelism’, the informal legal structures existpartly because they are more accessible and ‘userfriendly’ to people of limited means. Sometimes,private or mixed arrangements for rule enforcementand settlement are efficient because they enjoythe confidence of the participants and encourageflexibility and compromise within communitynorms. Other times, however, the non-state systemis neither efficient nor fair.The minibus-taxi industry in South Africa shows howthe informal economic and governance domainscan coincide in the real world, in this instance withmajor social cost. Minibuses are the major means oftransportation for South Africa’s poor, plus a majorsource of employment for poor people. A loophole inthe transit law allowed this largely unregulated sectorto emerge toward the end of the apartheid era,and commuter transportation became dominatedby independent small, business operators, drivingowned or rented vehicles. The minibus-taxi businessprovided low-cost movement around the country ata time when the majority was trying to get out fromunder the oppressive minority regime ruling SouthAfrica, and it has continued to grow to currentlyaccount for about two-thirds of commuter travel.In the absence of government regulation, however,the individual minibus owners and drivers turned toemerging private industry associations to allocatetaxi routes and cab stands, and to settle disputesthat arose among competitors. Over time, these associationsgrew very powerful in their own right andbegan to use strong-arm tactics to defend or expandturf claimed by rival taxi groups. By the mid-1990sa virtual taxi war was costing hundred of drivers andpassengers their lives each year. Lack of vehiclemaintenance, overloading and poor safety standardsled to thousands of additional fatalities per year inroad accidents. According to reports, the police havebeen corrupted to look the other way on traffic violationsand in some cases have become leaders in the305

Box 5.4 Organising out ofPoverty: Taxis in RwandaThe International Cooperatives Alliance, the InternationalTrade Union Confederation (formerly theICFTU) and the International Labour Organisationhave teamed up to develop an approach known asSYNDICOOP. ‘SYNDICOOP promotes trade unions andcooperatives — membership-based organisations forworkers in the informal economy. And because theyare membership organisations, they can be accountable.’An example is Assetamorwa (Association del’Esperance des Taxis Moto au Rwanda) inRwanda. ‘Each driver is an individual trader, negotiatingfares with passengers. But by combining together,they support each other and can negotiate with theauthorities of Kigali, the Rwandan capital.’ Assetamorwahas organised a system of pooling moneythat its members can tap in turn (known as tontine)and a health insurance fund for members. The groupalso trains young drivers, runs a garage and sparepartsdepot, and works to combat the spread ofHIV/AIDS. All of this activity depends on the necessaryframework legislation on freedom of association andcooperatives being in place at the national level.Source: Stirling Smith and Cilla Ross, Organising out of poverty:Stories from the grassroots: How the SYNDICOOP approach hasworked in East Africa (Co-operative College, Oldham, 2006).violence and intimidation among taxi associations(Barrett 2003).Fortunately, freedom of association is guaranteedby law in South Africa, and the governmenthas a non-judicial mechanism to resolvedisputes through mediation and conciliation. Thus,institutional and legal conditions exist for overcomingthe industry’s problems. The government hastried to reassert its regulatory authority and formalizethe industry. After consultation with stakeholders,a financial incentive programmeme has beendeveloped to encourage operators to upgrade theminibus fleet, join designated membership associations,keep better records and begin payingtaxes on their enterprises (van der Merwe 2007).The effectiveness of these efforts to supplant theinformal institutions and practices remains to beproven, however.This example is extreme, and Box 5.4 reports amuch more encouraging case of a taxi drivers’organisation from Africa; nevertheless, it makes thepoint that development practitioners face dilemmasin dealing with informality (and, by extension,with decentralised and local institutions generally).There are obvious advantages to exercising rightsthrough personalized and traditional authority becauseit is less expensive, more familiar and locallyavailable. Yet, just because de facto or relationship-basedauthority is embedded in poor communitiesdoes not mean they must be constructivein fighting poverty and injustice, as the violentfeuding of the South African taxi case vividly illustrates.A patron-client network, or clique, mayprovide a safe haven for society’s most vulnerable,but it limits their options also, long-establishedrules for allocating resources may work when thepopulation is small, but they might buckle underpopulation pressure. Additionally, a private legalmechanism may be accessible, but it could easilyplay favourites depending on a plaintiff’s personalconnections.A bottom-line concern is that development professionalsmust creatively seek to capitalise on theavailable mix of de facto or ‘traditional’ modes ofauthority. There is no reason to assume that theinformal institutions, rules and arrangements areeither superior or inferior to their de jure or ‘modern’counterparts. Context is critical. India is a possiblemodel for how to integrate representative andlegal institutions, having extended official recognitionto a system of village councils and people’s306

Box 5.5 Authority Systems: Land RightsRegarding the critical asset of land, there exists aninternationally well recognized spectrum of rights, asshown in the figure below. Starting with the floor offreedom from eviction, security of tenure progressivelyimproves as one follows the arrow. Land rights begin withthe perception that one will not be evicted, based oftenon political statements to that effect. The right becomesstronger through customary law, temporary occupancycertifi cates, through anti-eviction legislation and adversepossession (otherwise known as squatters’ rights) andgroup tenure. Long-term leases and individual freeholdtenure represent the most secure forms of tenure. Thenoteworthy feature of the continuum of land rights isthat it accommodates and reflects the diverse realityof land rights and social land tenures that exist in theworld today (for example, family and group rights). It alsodemonstrates the potential for an incremental path togreater security consistent with the way the poor accumulatetheir resources over time. This approach may be asolid foundation for achieving consensus on the issue ofland and property rights. It is also a good starting pointfor developing an innovative spectrum of protection andopportunities in this area, where parallel opportunitiesprotection/securityspectrums can also be linked (e.g.labour, justice, entrepreneurship).Continuum of RightsLegal orformal rightsCustomaryPerceived tenure approaches:• Political statements• Services without legal tenureAnti evictionsOccupancyLeasesGroup tenureAdverse possessionRegisteredfreeholdIllegal orinformal rightscourts. Drawing on traditional norms, the councilsare reported to be seeking out new roles and tobe adapting to the democratic factor in India’sformal political institutions (Pur and Moore 2007).Several West African countries use decentralisedlocal councils to administer land laws. Thesetend to be based on customary power structures,though as yet they appear upwardly accountable tothe central state, rather than downwardly to localpopulations (Ribot 1999). Box 5.5 discusses howthe integration of formality and informality mayhelp the poor with land rights generally.In all instances poor people’s perceptions shouldbe kept front and centre. Legal or organisationalreforms that look self-evidently empowering toexperts from outside the poor community may lookdangerous from the perspective of someone on theinside. This could detract from the local supportneeded for implementation.’As we finish this aspect of Section 2, it should bemore than evident how important contextual analysisis to implementation of Legal Empowerment ofthe Poor reforms. Policy makers have to come togrips with the national environment of public policy— that is, with the domestic social structure, economiccontext, nature of the political and administrativesystems, and the scale of economic andlegal informality. While a country’s environment forreform has to be unpacked and probed on its ownterms, we have offered useful questions that couldbe asked. Practitioners and policymakers can makegood use of the tool of contextual analysis to determineif conditions appear ripe for Legal Empowermentof the Poor reforms, which implementationscenarios seem most probable, what sequencingand timelines for reform look doable and how they307

should be designed, what tradeoffs need to beconsidered, which risk mitigating mechanisms areworth trying, and what contextual variables needcareful monitoring during implementation. Adheringto this general set of guidelines will increasethe chances of successfully carrying out empowermentpolicies.Policy characteristicsThree internal policy characteristics (the lowermiddle box in Figure 5.2, above) stand out ininfluencing implementation: complexity, ambiguityand the potential for discord and conflict. Thesecharacteristics are important in all policy arenas butare especially relevant for the four domains of legalempowerment.ComplexityOther things being equal, the more complex a policyis, the harder it is to implement due to the intensityof the administrative effort required. On the scale ofcomplexity, Legal Empowerment of the Poor tendsto fall at the far end. As seen by the Commission,the paradigm for empowerment is holistic and thushighly ambitious. Ideally, the poor should obtainlegal protection for their physical and financialassets (property rights) and human capital (labourrights), and also have the ability to engage in markettransactions (business rights). Cutting across allthree areas is a need to obtain access to justiceand political decision making (legal identity andcitizenship rights). Those are a lot of balls to juggleduring implementation. It may be best to go forwardselectively and not dissipate energy on too many initiativesat once. On the other hand, progress in onlyone area without the others may create imbalancesthat perpetuate poverty.A second source of complexity is the fact that legaland regulatory systems are very robust; meaningthat reconfiguration of one or a few aspects of thelaw or institutions may not alter the overall risk andlack of opportunity poor people face. Social conventionsand structures develop over long periodswith many redundancies and mutually reinforcingelements. Progress in one domain of empowermentmay be neutralised by lack of progress in another.Unanticipated effects may also be triggered duringimplementation that undermine or bypass theintended beneficiaries. In Peru, for instance, the introductionof greater flexibility in the labour marketwas heralded as progress in the early to mid 1990s;one of its effects, however, was to drastically reducethe percentage of the population who enjoyed alegal status as employees, which had given themaccess to social protection. Poverty rates increasedin the short-term. Had the reform package beenless sweeping, or accompanied by a social floor ormitigating measures, this negative impact mighthave been avoided.Third is the time dimension to complexity. Empowermentpolicies seldom take effect quickly. Regardinglaw reform to promote the right to freedom ofassociation and collective bargaining, for instance,the ILO (2004: 110-111) has observed that fourto five years is the minimum time that should beallowed before substantive results can be seen. Ingeneral, delays make political back-tracking likely asministerial appointments change and bring in newministers who have little interest or commitmentto their predecessor’s programmemes. Hesitationin implementation reinforces any inclination of thepoor not to go along as expected with a policy in thefirst place. Individual uncertainty about implementationencourages the majority to hold back supportingthe reform, which creates a self-fulfilling prophecyof implementation slippage. Thus it is importantto look for interventions that promise short-termrewards for beneficiaries. Micro-finance, for example,can have an immediate (though perhaps notsustainable) effect on poor people’s consumption.308

Afinal source of complexity is that legal empowermentis both a top-down activity (initiativeand coordination often come from the nationalcapital, regional centre, or city hall) and a bottomupactivity (the poor and their allies play a centralrole as advocates and watchdogs). There are manychances for misunderstanding and miscommunicationwith a policy where leadership comes fromseveral directions. Even if NGOs and local communitiesare the prime movers of Legal Empowermentof the Poor, they may not be able to accomplishmuch on their own without government assistance.An example of how complexity can distort implementationof Legal Empowerment of the Poor isthe ongoing struggle over labour rights in LatinAmerica. During the 1990s, several governmentsin the region tried to promote greater flexibilityin the labour market through changes in nationallabour legislation. This undermined labour unionmembers’ freedom of association and rights tocollective bargaining; it also impinged on workersas individuals because they lost job security. Tradeunions fought back against these changes and, insome cases, succeeded in curbing erosion of theirgroup rights, a positive accomplishment from theperspective of Legal Empowerment of the Poor. Butthey often ceded on deregulation of employmentlaw relating to individual rights, which is perhapsan even greater loss for an Legal Empowermentof the Poor agenda. An unintended by product ofthese policy disputes was also to strengthen thelarger and more established unions but to furtherweaken the organising and bargaining rights ofemerging rival unions (Cook 2005). These last areoften strong allies of poor people.AmbiguityAmbiguous policies are also more challenging tocarry out than clear policies are. There are severalreasons for this, but a principal one is that ambiguitygives bureaucratic stakeholders greater discretionin interpreting or even ignoring the policy.Ambiguity also clouds the efforts of beneficiariesand sponsor groups to hold the bureaucrats toaccount. As a result, the policy in practice tendsto drift further and further away from its design.Many policies related to Legal Empowerment of thePoor rank relatively high for ambiguity. In severalAfrican countries, for example, local people’s accessto land is protected through use rights, whichare legally recognised as long as the land is put toproductive use. What uses are ‘productive’ is notclear in the formal law, however, which tends tofavour large-scale commercial or industrial usersnot pastoralist or subsistence farmers seeking accessto land (Cotula 2007: 36). The less clear-cuta policy is, generally the greater is the probabilityof elite capture during implementation.The informal legal arrangements discussed earlierare a source of ambiguity simply because they existside by side with the formal system of civil andcriminal justice. Which one takes precedence? Theinadvertent result could be a labyrinth of law, inwhich the poor and disadvantaged may lose theirway. Setting aside any possible net advantages ofinformality for the poor in a given legal context, theabsence of documentation tends to render informaljustice a less effective platform for implementingempowerment strategies. Consider the phenomenonknown as ‘forum shopping’ whereby economicactors navigate among multiple legal orders to seekthe most favourable forum to pursue their claims.Thus a policy to give legal recognition to poorpeople’s customary system of justice or disputeresolution may in some cases work against thepoor, as long as the statutory or rule-based legalcode continues to exist. A business corporation orrich person will simply avoid the less expensivetraditional forum and force poor people to litigatein forums where they are at a disadvantage. The309

flip side of forum shopping is that NGOs and humanrights stakeholder groups working on behalf ofthe poor also have multiple venues to seek redressof their grievances, so, again, the implication isnot that institutional pluralism is inherently bad forLegal Empowerment of the Poor. Still, it is a complicatingfactor that makes empowerment policiestrickier to plan and execute.There may be temptation to clarify anambiguous informal legal structure simplyby replacing it with a more orderly statutory code,but as it might conceivably backfire on the poor,any approach must be carefully reasoned. Sudanis an acute case of what can happen when changeis suddenly rushed though. Urban elites in Sudanaggressively moved to take land at less than itstrue value by shifting land out of community-basedtenure systems and into a standardised Islamictenure system. The civil war that raged for years inthe south of the country was set in motion for manyreasons, but one was the resistance by rural peopleto the imposition of an unfamiliar tenure systemthat destroyed their traditional land rights (Bruceet al. 1998: 195). The conflict in Sudan’s Darfurregion also grows in part out of conflicts aroundcompeting systems of land tenure, representedby group-based camel nomadism, on the onehand, and more individually oriented sedentarycultivation, on the other (Abdul-Jalil 2005).Ambiguity additionally clouds lines of accountabilityand responsibility among implementing agenciesand allows them to ‘pass the buck’ during implementation.In post-tsunami Sri Lanka, the housingauthority allocated land to the displaced which waslater found to have been under claim by the municipalityas a waste dump, and had been classifiedby the water board as uninhabitable. Straighteningout mix-ups like this takes time and energy thatcould have been used more productively.DiscordThe distributional strife unearthed by policy ambiguityin countries such as Sudan merges into thethird stylised internal influence on implementation,which is a policy’s inbuilt potential to generatedissension. An ‘iron law of public policy’ saysthat most acts of government, no matter what thebroader merits, create winners and losers. If thegains and losses are seen as significant, they willbecome the object of intense political attention.This is particularly likely where the policy redistributesa right or benefit from one group to another,as happens when there are mutually exclusiveclaims to a fixed resource such as fertile land orminerals. Legal Empowerment of the Poor attemptsto minimise redistributive conflicts by expandingeconomic opportunities so that different interestscan be negotiated to meet every side’s needs, butthere is still plenty of potential for confrontationbecause important stakeholders believe others’gains come at their expense. The mutual payoff tolegal empowerment is in the future, but the individualsacrifices must be borne now.A concrete example of this ‘iron law’ is the titlingand registration programmeme implemented in Perustarting in the 1980s. According to a World Bankreport, the main winners were: settlers, who accruedthe economic and social benefits of formal ownership;the President of Peru, who earned the politicalcredit for the programmeme; local mayors, whoshared the political credit, and congressmen, whobacked the legal framework for formalization. Theprincipal losers were reportedly the public officialsin charge of regularisation processes who previouslybenefited from bribes; lawyers and notaries, who lostthe monopoly they enjoyed in the traditional registrationsystem, and former community leaders, whowere replaced by new leaders elected by the communitiesduring the reforms (Palacio 2006: 41).In conflict equations, defenders of the status quo310

almost always have the upper hand because theyhave won earlier power struggles over the samepublic policies. With Legal Empowerment of thePoor a special difficulty is that the self-perceived‘losers’ are apt to include members of the local eliteand bureaucrats mentioned earlier, who feel theirmonopoly on neighbourhood or community power isjeopardised should anyone else gain economic andfinancial independence. While these stakeholdershave many means to delay or dilute implementationof policies they reject — especially by co-opting thepoor through the dependency relationships of patronageand ‘clientelism’ and by corrupting the localbureaucracy — the example of Peru proves it is possibleto overcome the odds with the right leadershipand a winning coalition of support.Legal Empowerment of the Poor conflicts canbe mapped and considered before they come toa head, providing time to think about politicalstrategies to manage the tension. A policy’s costand benefit can both be widely distributed (spreadover most citizens) or narrowly focused (limited toan identifiable group). Decisions by a central bankto greatly expand the money supply, for instance,have widely distributed costs because everyonehas to pay the consequent inflated prices for goodsand services. Regulations targeting a specificindustry, such as licensing or safety inspectionsfor minicab taxis (mentioned earlier), are morefocused and narrowly concentrated and may beperceived as a loss or gain for those most affected.In other words, whether people see themselves aspolicy winners or losers is more important than thereality of who wins or loses. By and large, we cangroup the varieties of political situations into fourcategories; they are shown in Figure 5.3. 7 Each hasdifferent implications for generating conflict.Figure 5.3 Conflict Implications of Public PolicyPerceived policy costdispersed concentratedPerceived policy benefitnarrowWinner takes all(high conflict due tozero-sumcompetition)Patron-clientpolitics/corruption(stable, low conflictbecause costs arehidden andbeneficiaries havelittle inducement tochange)wideCollective Inaction(little incentive forbeneficiaries tomobilize; strongincentives forvictims to react) –Need policyentrepreneursConsensus politics(low conflict due toapparent positive –sum gains)Legal Empowerment of the Poor policies such asland titling or legal assistance fall in the top twocells in this matrix. Where both cost and benefitare narrowly concentrated (the top left cell),each side has an incentive to dig in to defend itsinterests by preventing or establishing the transferof resources. Because the policy affects relativelyfew people, gaining allies may be difficult for bothsides unless they can make ‘side payments’ orengage in ‘logrolling’. 8 Where the benefit is widelydispersed, as might be true of many policies designedto help the poor by expanding their rights,getting those beneficiaries motivated to push forthe policy is difficult because the individual gainsare small or may seem abstract. In short, eachcategory of policies tends to have a distinct shapethat Legal Empowerment of the Poor practitionersought to be alert to, as they try to predict and influencestakeholder actions. The categories, however,are not air-tight and can metamorphose into oneanother over time, as perceptions of issues change.Thus education and marketing are importantaspects of Legal Empowerment of the Poor implementationto try to get stakeholders to take a widerperspective on their self-interest.311

Lessons may be drawn from knowledge about theinbuilt characteristics of public policy. For example,as Legal Empowerment of the Poor tendsto be complex and ambiguous, and as implementationefforts might therefore be hindered, thepolicies to promote empowerment must be madeas clear-cut and straightforward as possible. Designsimplicity is one way to avoid or minimise conflict,uncertainty and other implementation problemsarising from procedural and technical traits of legalempowerment activities.Diagnosing the Influence on PolicyImplementationWe have emphasised the stresses and strains onLegal Empowerment of the Poor implementationto awaken policymakers to the need to think pragmaticallyand opportunistically about policy reform.Policymaking is not an assembly line, and a formulaicapproach to the ‘who’, ‘what’ and ‘where’ factorscould lead to overly pessimistic generalisations andmissed opportunities. Effective implementationrequires a mix of experience, professional judgment,and a willingness to take chances. Creativeactors look for policy windows that open up andcreate space for moving forward to solve a particularproblem, even when the circumstances appear to bedifficult.With these caveats in mind, Table 5.4 outlineshow to catalogue the influential factors in differentnations and assess tendencies to impel orimpede implementation (as indicated by the threeright-hand columns). The questions are illustrativeand need to be altered to suit different needs andsituations.An approach to implementation forCountry ‘X’Broadly, Legal Empowerment of the Poor implementationin country ‘X’ might start with an environmentalscan and contextual analysis. The focuswould be on 1) social and cultural features thataffect implementation; 2) the economic context,which also can be both a help and a hindrance,and 3) on the openness and capacity of the state.Supplementing the inventory of these concernswould be a careful analysis of the reach and holdthat informal institutions have on the poor. Thefull contextual analysis would then form the basisfor a feasibility review of various empowermentscenarios.Next (or perhaps simultaneously because these arenever discrete implementation steps), local activistsand external change agents in country ‘X’ would undertakea stakeholder analysis of the constituenciesconcerned with Legal Empowerment of the Poor.The objective: to differentiate among the superficiallyhomogeneous beneficiaries, to better understandthe divisions, alliances and particular needsthat exist among the poor. Other stakeholders, whomight oppose or assist the target group or groups,would also be scrutinised to see what motivatestheir behaviour and reflect on how they could bebrought into the process. The purpose of the stakeholderanalysis would be to get a firmer grasp ofthe probability of moving forward with various LegalEmpowerment of the Poor scenarios, and to beginserious thinking about what it might take to build aminimum winning coalition for legal empowermentin country ‘X’.Finally, with possible overlapping chronology, theinternal technical features of the alternative policyscenarios would be reviewed. The policy characteristicsanalysis would focus on the complexitiesof the various policies, potential ambiguities thatmight possibly sow discord — all of which wouldserve to hinder implementation. Efforts would bemade to find a simple, incremental and sustainablecourse of action, and to avoid as much as possibletaking steps that provoke confrontation needlessly312

Table 5.4 Skeleton Diagnostic Tool:Analysing Influences on Policy ImplementationQuestions (list is not comprehensive)Effect on ImplementationNegative Positive NeutralPolicy EnvironmentHow extensive are poverty and lack of ownership of or access to productive assets?What is the position of women in society?What is the degree of social and ethnic heterogeneity? Are there marginalizedminorities?What is the relative balance of power among social/ethnic groups?What dependency relations exist between elites and the poor?How open and competitive is the political system? Nationally? Locally?Is freedom of association guaranteed?To what extent do public agencies operate as effective bureaucracies? Is bureaucraticcorruption common?What is the capacity of institutions of the state to deal with the agenda of legalempowerment? Are accountabilities clearly spelled out?How scarce or abundant are government resources?Anything special about the country context? (Transition economy, least developedcountry, post-confl ict, etc.)Policy StakeholdersWho are the target benefi ciaries? How many are there? Are they members of an ethnicgroup or groups? Mostly women?Are the beneficiaries organised?What civil society organisations exist? Where do they stand on the pro-poor policyissue?Who is in opposition to the policy? What are their resources?What allies and potential allies are there for empowering the poor?Policy CharacteristicsHow complex are the changes that are supposed to happen? Are these small departuresfrom current practices or major changes?Is the policy geographically concentrated?Does it require a high degree of technical or professional knowledge?What is the level of confl ict about the value and nature of the changes?What does the pro-poor policy do? Is this clear or vague?What is the desired impact of policy reform, what is it expected to accomplish orfacilitate?313

Table 5.4 Skeleton Diagnostic Tool:Analysing Influences on Policy Implementation cont.Questions (list is not comprehensive)Effect on ImplementationNegative Positive NeutralPolicy Characteristics cont.Where did the impetus for the policy come from?Who decided to pursue the policy, how, and why?What is the nature of the policy benefi ts, and to whom do they accrue (disaggregated bysex, age and ethnicity)?What is the nature of the costs of the policy reform, and who bears them(disaggregated by sex, age and ethnicity)?What is the degree and complexity of the changes brought about by the new policy?How administratively intense or technically complex is the new policy?— recognising that some confrontation is unavoidableand that it might even prove productive inmoving the empowerment agenda forward. Obviously,what for works for Legal Empowerment ofthe Poor in country ‘X’ may be irrelevant in country‘Y’ with a very different social structure, economicenvironment and universe of stakeholder groups.The procedures in determining a suitable LegalEmpowerment of the Poor strategy might look alikein these two locations, but the substance of theoutcome would be sharply different. And in allcases, the process is messy and imprecise, yieldingonly what would appear to be the best fitting policiesgiven the imperfect information available topolicymakers at the time and the current politicalrealities.impediments to Legal Empowerment of the Poorimplementation. That is the subject of Section 3.Without looking beyond the generic influence onimplementation to any specific cases, we can seethat the legal empowerment movement has takenon a stiff but not infeasible implementation challenge.We have placed much stress on the needfor imaginative and adaptable policymaking, butto help imagination along it is imperative to havea number of rough roadmaps that will help totake policymakers around some of the pitfalls and314

3.Roadmaps toImplementationReforms to legally empower the poor are multi-faceted.Besides technical analysis and prescription,successful implementation of reforms calls forconsensus building, participation of key stakeholders,compromise, contingency planning, adaptation,and flexibility. These are the ‘how’ or methodissues of implementation. Reforms never proceedin a straight line; change is multi-directional andcalls for actions — by donors, government, NGOs,the private sector, and communities — sometimesiteratively, sometimes simultaneously, and sometimessequentially. To guide and track the necessaryactions to achieve reform ends, a roadmap isuseful to identify and to incorporate the technical,institutional, and political and dimensions of thereform process.In developing an implementation roadmap forreforms for Legal Empowerment of the Poor, ourworking group adapted a practical template developedby Brinkerhoff and Crosby (2002), whichdraws on policy reform research from multiplesectors. This template builds on empirical analysisthat identifies a common set of tasks associatedwith successful reform design and implementation.These tasks follow a generalised (but notlockstep) pattern, which can be conceived of as aninteractive cycle comprising the following phases:policy formulation and legitimisation, constituencybuilding, resource mobilisation, implementationdesign and organisational development, and actionplanning and progress monitoring. A stream of issues,agendas and decisions launch the cycle and,over time, provide additional input and momentumto the process.Figure 5.4, adapted from Brinkerhoff and Crosby(2002), illustrates this iterative process of policyimplementation, showing junctures or ‘crossroads’Figure 5.4Roadmap to the Implementation CycleAction Planning& ProgressMonitoringImplementationDesign &OrganizationalDeelopmentIssuesAgendasDecisionsPolicy FormulationandLegitimizationConstituencyBuildingResourceMobilizationprimary linkagesecondarywhere choices must be made while moving thepolicy onward. Below is a brief description of tasksassociated with each decision point on the roadmap.Issues, Agendas, and Decisions: Advocating forchange, developing policy issues, lists of items tobe considered, and making decisions that launchLegal Empowerment of the Poor reforms are theprecursors to crafting the operational content of aspecific policy. For these activities, it is politiciansand interest groups that tend to take the lead butthey will seldom succeed without pressure frombelow and mobilisation and demands from thepoor themselves. Out of this process, in the ideal,a policy champion will emerge (this could be aninfluential individual, a change team, or a coalition315

of interests). Without the commitment to reformand the political will to empower the poor, it isdifficult, if not impossible, to move to implementation.Commitment and political will depend uponincentives; thus Legal Empowerment of the Poorreforms must identify and create reasons for governmentand other entrenched interests to back (orat least not vigorously oppose) the pro-poor policy.Policy Formulation and Legitimisation: Address thetechnical content of reform measures. However, besidestechnical content, reform measures need tobe accepted and seen as necessary and important.The poor should, through their representatives, bepart and parcel of the reform design process.Constituency Building: Convince beneficiaries ofthe advantages of reforms, and demonstrate thatlong-term benefits are worth short-term costs.Resource Mobilisation: Ensure flow of adequateresources by addressing incentives, and exercisingleadership in galvanizing constituencies. Therecommendations of the Commission call uponcountries to undertake reforms that will requirefinancial, technical, and human resource commitments.Implementation Design and Organisational Development:Reformers need to create and nurturenetworks and partnerships for cooperation and coordination,and provide for the development of neworganisational skills and capacities in the public,private and non-governmental sectors. Old procedures,operating routines, and communicationpatterns die hard; change is likely to be resistedwithin some quarters.Action Planning and Progress Monitoring: Set upsystems and procedures for obtaining feedbackso that implementation is related to learning andadaptation, so as to produce results and impact.Table 5.5 suggests the questions to consider indrawing up a roadmap for implementing LegalEmpowerment of the Poor in a specific country— recognising that it is never possible to a havea complete understanding of the social structure,political framework and legal system beforehand,and that even if such foreknowledge were possible,it would soon be outdated because the factorsthemselves are constantly changing.Mapping the Empowerment DomainsLegal Empowerment of the Poor may be perceivedas a spectrum that provides opportunities, protectionand security. It establishes a minimum ‘floor’of entitlements and safeguards to which everyoneis entitled, by the simple fact of our commonhumanity. Under each of the Commission’s fourcore themes (access to justice, security of assets,labour protection, and entrepreneurial rights), thetask is to establish this floor using human rightslaw. For every empowerment domain, therefore,one challenge is to identify a range of potentialpolicy options from which nations and citizens canchoose, depending on their national context andthe different starting points of various groups ofthe poor within them. Finally, and perhaps mostsignificantly, a spectrum approach explicitly recognisesthe incremental manner in which poor peopleimprove their lives in practice. At each stage of thisimprovement, fundamental rights and an appropriatecombination of protection measures/securityand opportunities must be available to them.It would be futile to propose implementation recommendationsfor universal application; but it ispossible to put forward stylised recommendationsin the four domains of empowerment. Table 5.6shows how access to justice issues can be mappedwith protection/opportunity available in variouslegal instruments and with the goals of empowerment.316

Table 5.5 Country Specific Implementation Roadmap: RepresentativeSummary ChecklistReform implementation‘crossroad’Issues, agendas anddecisionsPolicy formulation— legitimisationConstituency buildingResource mobilisationImplementationdesign andorganisationaldevelopmentAction planning andprogress monitoringQuestions to bear in mindContextual analysis and checklist: Are the conditions right for a legal empowerment reform to succeed?Consultative process: Are the poor organised and represented by community groups, NGOs or memberbasedorganisations of workers?Have specifi c pro-poor policies been formulated?What Legal Empowerment of the Poor policies are proposed/underway?What are the characteristics of the Legal Empowerment of the Poor policies?What does the policy do?What is the desired impact of policy reform, what is it expected to accomplish or facilitate?Where did the impetus for the policy come from?Who decided to pursue the policy, how, and why?What are the policy benefits and costs, and who is affected?What is the degree and complexity of the changes brought about by the new policy?What is the duration of the policy change process?What institutions are involved in implementing the policy?How administratively intense or technically complex is the new policy?Have Legal Empowerment of the Poor reform champions been identified, and who are they?Have Legal Empowerment of the Poor reform policies been discussed in public forums and the press?Do key stakeholders see the Legal Empowerment of the Poor reforms as desirable?Do Legal Empowerment of the Poor reform champions have sufficient support and resources?Has a stakeholder analysis been conducted?Are constituencies at various societal levels organised and supportive of the Legal Empowerment of thePoor agenda?Has the Legal Empowerment of the Poor agenda been marketed to demonstrate its desirability and benefits?Are politicians and technocrats on board?Are representatives of the poor identified and engaged?Has opposition been addressed and overcome?Have resources been identified/obtained to pursue reform policies?Have partnerships been formed among government, civil society organisations, community associations,and pro-poor advocates?Are donors on board with resources and technical support?Have capacity/resource gaps been identified? Steps taken to fill them?Has implementation responsibility been assigned, and to which organisations or groups?Have implementation measures been elaborated and sequenced?Have pilot sites been identified?Do implementing organisations/groups have the appropriate capacities, missions, mandates, andresources to carry out implementation activities? If no, what modifications are required?Are new organisations/partnerships/networks required?Has the design of appropriate incentives been considered and addressed?Have specifi c plans, performance expectations, timetables and outcomes been developed?Do these plans include provision for early success and dissemination of success stories?Have resistance, opposition, and conflict been planned for?Are milestones in place to track progress and flag the need for adaptation?Are mechanisms established to capture lessons learned?

Table 5.6 Empowerment Domain 1: Access to JusticeFramework of Opportunities and ProtectionsLegal Instruments Problem for Poor People Opportunities/Protections• Universal Declaration on HumanRights (UDHR), ICCPR, CESCR• Rights related to access toinformation; legal services;protection• Professional rules of conduct• Extracts from other inter-nationalhuman rights treaties (includingfundamental ILO Conventions andthe Convention on indigenous andtribal peoples) conventions, UNGAresolutions, etc.• Lack of legal identity: indigenous,stateless, displaced• Ignorance of legal rights• Lack of access to legal services• Unjust & unaccountable legalinstitutions• Denial of fundamental rights• Registration drives; right tolegal identity• Increase knowledge of rights• Improve access to legalservices• Institutional reform/legalreform• Capacity-building ofrepresentative organisationsIn the second empowerment domain of assetholdingrights, the major issues for the poorinclude insecurity of tenure, forced evictions,the appropriation of the rural commons by thestate, confusing institutional, legal and regulatoryframeworks, lack of access to infrastructure, basicservices and credit, and difficulty of establishingrights. Table 5.7 shows how these might bemapped.The first task would be to identify the minimumstandard to which all human beings are entitled bytheir very humanity — in other words, the minimumfloor of protection. In the case of property rights, itwould be the ‘freedom from eviction’. No one shouldfeel threatened with being removed from their placeof residence without due process and compensation,including the possibility of resettlement. The mainsources of this protection include the Universal Declarationof Human Rights (UDHR), the InternationalCovenant on Civil and Political Relations (ICCPR)and the International Economic and Social Covenant(ICESR); for indigenous peoples, the Indigenousand Tribal Peoples Convention, 1989 (ILO ConventionNo. 169). In addition, there is an internationallyrecognised ‘Right to Adequate Housing’, whichincludes security of tenure as one of its six components.New opportunities and protections for the poor couldinclude systemic reforms to legal, regulatory andinstitutional frameworks to simplify procedures andsystems, the recognition and training of para-professionals(valuators, surveyors, etc.), extending housingmicro-finance ‘down-market’ to reach the poor, community-basedsavings linked to urban poor funds,low cost and decentralised surveying and registries ofland, recognition and registration of customary andcommon property rights in the name of rural poorand indigenous people, and freehold titles where appropriateand affordable.The spectrum of land rights (see Box 5.5) hassome important policy implications that couldinform a practical approach to the follow-up workof the Commission, namely implementing a legalempowerment agenda in the area of land rights. Agovernment could initially make a public statementor decree that residents of unauthorised settlementswill not be evicted without due process. This318

Table 5.7 Empowerment Domain 2: Property RightsFramework of Opportunities and ProtectionsLegal Instruments Problem for Poor People Opportunities/Protections• Universal Declaration onHuman Rights (UDHR), ICCPR,CESCR• Habitat Agenda• Right to adequate housing,including security of tenure,General Comment 4 & 7• Pinheiro Principles onRestitution of Housing, Landand Property Rights• Extract from other internationalhuman rights treaties,conventions, declarations, etc(in particular Indigenous andTribal Peoples Convention,1969 (ILO Convention No. 169)• Insecurity of tenure• Forced evictions• Common-property appropriatedby the state• Non-respect for rights ofindigenous and tribal peoples• Legal and institutional barriers(path to property, overlappingmandates, professionalreluctance)• Lack of access to infrastructureand basic services• Lack of access to credit• Spectrum approach to security oftenure• Guidelines to promote due process inthe event of forced evictions• Pro-poor land and agrarian reforms• Joint titling and reform ofdiscriminatory inheritance laws andpractices regarding land• Skills development of paraprofessionals(e.g., ‘barefootsurveyors’)• Extending housing micro-finance‘down-market’• Community-based savings linked tourban poor fundswould enable residents to invest in improvementsto their home and community that would havebeneficial side effects on other aspects of their life,particularly health. As resources permit, securitycould be increased, facilitating further investments.This incremental process would help ensurethat the tenure increases take place at the pace ofthe urban poor and do not unintentionally result in‘downward raiding’ by the middle-class — possiblyresulting in market-based evictions of the poor.On the labour rights front, the major concern ishow to ensure decent work for all. The poor facenon-respect for fundamental principles and rightsat work, a lack of legal recognition of workers andtheir organisations in the informal economy (andto some extent in the formal economy), institutionaland regulatory issues, unsafe working conditions,the specific problems of vulnerable groups such aschildren, and the lack of social security and protection.As in the case of land, workers find themselvesin a range of situations, from those in which theyare denied all opportunities (being subjected toforced labour) to those in which they enjoy opportunitiesfor full and productive employment, accompaniedby basic security. Unlike land the spectrumfor legal empowerment in relation to rights at workshould focus on the extent of opportunity/protectionenjoyed by a particular worker or group of workers.This is to avoid formal legal classifications (‘casualwork’, ‘independent contractor’, etc.) which varyacross legal systems. Fundamental principles andrights at work are particularly vital in the market forunskilled labour that is the main source of incomefor the poor.In relation to labour issues, protection/security andopportunities could be mapped along an ‘upwardsarrow’ spectrum towards decent work for all (fulland freely chosen productive employment, carriedout in conditions of dignity, equity and security).Fundamental principles governing work (e.g.,freedom of association, freedom from forced labour,child labour and discrimination) involve both319

Box 5.6 Gold Rush in Mongolia: from Herders to ‘Ninjas’Harsh winters in Mongolia have been forcing traditionalherder families to eke out a living as informal miners.Workers laid off from formal mining sites were the firstto mine informally. From the green plastic containersthey wear on their backs in turtle style, they are knownas ‘ninjas’. An estimated 100,000 men, women andchildren engage in informal mining (the entire populationis only 2.7 million), producing the same level as formalmining companies. Exposure to mercury used to extractgold from the ore puts the miners, especially the children,at serious risk.The Mongolian Employers Federation (MONEF) has beenseeking a new law to govern informal mining. At the sametime, it has been raising awareness among the miningcompanies and providing chances for children of miningfamilies to receive education and training. Tripartitenegotiations (involving government, and employers’ andworkers’ representatives) agreed on changes to labour legislationthat would extend its reach to those in the informaleconomy and improve protection against the worst formsof child labour. So far, however, these initiatives have notbeen enacted into law.Such measures would help to fill a legislative gap thatemerged at the time of privatisation of mining in the1990s. Legislation on mining minerals and the peoplewho mine them provides an opportunity for coherencebetween policies on natural resource use, investment,property ownership, job creation for adults and labourprotection.Source: Damdinjav Narmandakh, ‘Extending labour protection to theinformal economy in Mongolia,’ in David Tajgman, ed., ExtendingLabour Law to All Workers: Promoting Decent Work in the InformalEconomy in Cambodia, Thailand and Mongolia (ILO, Bangkok, 2006),pp 105-153; ‘Gold rush in Mongolia: When shepherds become‘ninjas’.’ ILO: About the ILO, 2 Sept. 2005.opportunities and protections. For example, thelegal protection prohibiting children from engagingin the worst forms of child labour (that can stunttheir growth and condemn them to a life of povertyas unskilled workers) needs to be accompanied byopportunities to attend school and acquire marketableskills.Similarly, the exercise of freedom of associationgoes hand in hand with legal protections thatpermit easy registration of trade unions, smallemployers, cooperatives and small traders’ associations,whether they are in the formal or informaleconomies. The security/protection dimension hasobvious relevance in relation to protecting workers’health and ensuring a social floor that keeps themfrom falling back into poverty when a family healthemergency strikes. For example, the Zambian Congressof Trade Unions and the Alliance for ZambiaInformal Economy Associations launched a partnershipin 2002. (Another illustration from Mongoliais presented in Box 5.6.) Moreover, the ability toachieve decent work for all will be conditioned bythe job-creating or job-destroying effects of internationaland national macroeconomic policies, sothis dimension would need to be captured as wellTable 5.8 shows how labour rights can be mappedwith the protection and security available in variouslegal and other instruments and with the opportunitiesand protections implicit in the Legal Empowermentof the Poor agenda.Establishing entrepreneurial rights also impliesa broad policy reform agenda (Table 5.9). Withinthe mandate of the Commission, the major issuesfor poor business people include lack of recognitionand vulnerability, lack of credit and capital,absence of social security, lack of protection oflabour and of assets, and institutional barriers tothe formal economy such as complicated procedures(entry/exit, expansion of business contracts,conflict resolution). There would be a possiblespectrum from the street hawker or fisher without320

Table 5.8 Empowerment Domain 3: Labour RightsFramework of Opportunities and ProtectionsLegal and Other Instruments Problem for Poor People Opportunities/Protections• Universal Declaration onHuman Rights (UDHR), CESPR,CCPR• ILO Conventions• Extracts from otherinternational human rightstreaties, declarations, etc.• Rights to decent work/livelihoods• National labour laws• Collective bargainingagreements• Some corporate codes ofconduct• Earnings inadequate to supportfamily• Lack of recognition• Denial of freedom ofassociation• Institutional barriers/issues• Unsafe working conditions• Child labour• Forced/bonded labour• Discrimination• Barriers to combining work andfamily• Lack of social security/protection• Low productivity and long hours• Productive employment with higherincomes• Skill acquisition/upgrading• Balanced regulation of subcontracting• Improved enforcement mechanismsand other institutions• Legal framework for stronger collectiverepresentation• Minimum package of labour rights forinformal economy workers• Innovations in social protection• Measures for gender and indigenousequity• Rapid, efficient and low-cost disputeresolution mechanismsassets, to the petty trader, the mobile hairdresser,the shopkeeper or tea-shop owner to the smallbusiness person with less than five employees,and the larger formal sector business. All thesedifferent entrepreneurs require different levels ofprotection and access to different kinds of opportunities.Examples of these rules and institutions areguarantees of fundamental rights, member-basedorganisations, cooperatives, access to financialservices, social security innovations, insurance,credit, equity and capital.These questions become even more important becausethe Commission’s intent is not to push legalTable 5.9 Empowerment Domain 4: Business RightsFramework of Opportunities and ProtectionsLegal Instruments Problem for Poor People Opportunities/Protections• Universal Declaration onHuman Rights (UDHR)• Rights to livelihoods• Right to development• Extract from other internationalhuman rights treaties,conventions, declarations, etc.• Lack of recognition-vulnerability• Institutional barriers to formaleconomy: Complicated procedures(entry/exit, expansion of businesscontracts, conflict resolution)• Health and environmental risks• Lack of credit and capital• Lack of social security/protection• Registration• Member-based organisations(associations, cooperatives)• Access to credit, equity andcapitalisation• Rapid, efficient and low-costdispute resolution mechanisms• Social security deficits (insurance)321

eforms, per se, but legal empowerment of thepoor. Policy changes must provide poor people withan institutional environment that offers protection,and in addition, provides incentives so that theycan develop their full capabilities as individuals.This becomes a difficult agenda to implement becausein too many developing countries, rights thatare well articulated in legislation are simply notrespected; in other developing countries, there iswell-functioning statutory legal regime, but it oftenmainly serves the interests of the middle and upperincome brackets. In some cases, the same law canbe used against the poor.We should also make mention of the legalregimes based on customary and sometimesreligious rules and social compacts. These are welldescribed and increasingly rely on some form ofdocumentation nested in local institutions, but notrecognised by statutory law. It is the poor, as previouslydiscussed, who typically use these regimes.Formal institutions and regulations are too complex,with technical standards set too high. Thelack of legal identity cuts off access to basic opportunities,such as education. At the same time,lack of identity exposes the poor to harassment andviolence. Ignorance and illiteracy prevent accessingopportunities and ensuring enforcement oflegal obligations. Special opportunity-measures areoften required for women and the more vulnerablegroups, including children and indigenous peoples.to local realities. This section presents a frameworkfor discussing the potential activities that couldbe undertaken at the global, regional national andlocal levels to support the implementation of theLegal Empowerment of the Poor agenda.Table 5.10 presents an indicative summary ofpotential strategies and activities to be consideredin the implementation of the Legal Empowermentof the Poor agenda at the global, regional nationaland local levels.Activities at global levelActivities at global level would likely focus on twotypes of activities to support Legal Empowermentof the Poor at the country level: advocacy andknowledge management. The former would focuson getting key messages out to important targetaudiences through a variety of vehicles. For theWorld Bank’s World Development Report, a periodof six months is usually allocated to promoting thekey messages after the launch date. A website, or a‘brand/logo’ that can be added to existing websites,would become the future repository of the followupto the Commission, providing updates and progressreports on how the Legal Empowerment of thePoor agenda is being implemented. An inventoryof evidence on capacity development in domainssimilar to Legal Empowerment of the Poor wouldbe compiled, and dialogue would be supported todisseminate global good practices.Mapping the Legal Empowerment ofthe Poor Agenda at Different Political/Administrative LevelsThere is also a need for ‘global public goods’ or activitiesundertaken at the global level that will havean important role to play in supporting countrylevelactivities. Moreover, as the Commission itselfhas stated, important differences exist betweencountries and even between regions that also callfor a flexible, demand-driven approach appropriate322Knowledge management activities would build oninitial inventories of good practice, on-going initiativesand actors engaged in promoting empowermentcollected through the process of preparing theCommission’s report. A key element would be toidentify existing indicators and monitoring efforts tofurther the Legal Empowerment of the Poor agenda.Similarly, and particularly in the case of the rightsto justice and asset holding, evaluations for learningwill be vital.

Table 5.10 LEP Implementation Strategies and Indicative ActivitiesPolitical/Admin.LevelWorldAdvocacy• High Level Meetingwithin the frameworkof the UN• Identify globalprinciples of LegalEmpowerment ofthe Poor and promoteas vehicle forpoverty reduction• Media strategy andcampaign promotingLegal Empowermentof the Pooragenda• Mobilise donors• Target setting inrelation to 2015• Periodic reports onstate of Legal Empowermentof thePoor• WebsiteKnowledgeManagement• Inventory of existinginitiatives andactors• Inventory existingevaluations andanalyse lessons• Develop analyticalframeworks forevaluation (includingfrom gender/indigenousperspectives)• Developing indicatorsand Legal Empowermentof thePoor monitoring• Strengthen statisticalbases for contextualanalysis• Establish supportnetworks of professionals,academics,etc.Pilot Initiatives• Develop countryselection criteria• Conduct globalsurvey• Engage in dialoguewith potential countriesand supportorganisations• Develop Legal Empowermentof thePoor interventionlogic and strategy(logical frameworkapproach)• Develop assessmenttools• Gender audit• Use Poverty ReductionStrategies andDecent Work CountryProgrammemesCapacity Development• Advocacy to changeorganisationaland managementpractices to favourLegal Empowermentof the Poor• Inventory of existingcapacity-buildingprogrammemes• Inventory of toolkits,tools and methodsto support implementation• Undertake capacityneeds/gap assessmentRegion andsub-region• Regional and subregionaladvocacystrategies with relevantpolitical andfinancial bodies• Regional SocialContracts• Ministerial meetings• Awareness raising• Sharing of RegionalBest Practice• Regional progressmonitoring• Regional reports• Cooperation betweenimplementingcountries,development banks,and political andeconomic regionalinstitutions• Peer-exchangeswithin and betweenregions• Knowledge platformon capacity developmentand evaluativeevidenceIn addition, a range of activities would be undertakento prepare for country-level work. Countriesand international support organisations wouldbe identified to support the process of changeat country level. Resources would be mobilised.Pro-poor toolkits and methods to support capacity-buildingwould also be inventoried and gapsidentified. These would be made available througha variety of avenues — websites, workshops, etc.Activities at the Regional andSub-regional LevelsAt the regional and sub-regional levels, activitieswould also likely focus on advocacy and knowledgemanagement. The region and sub-region arecritical for the success of the legal empowermentagenda; it is at these levels that global norms canbe adapted to different socio-economic contexts.Building political will for change will occur through323

Table 5.10 LEP Implementation Strategies and Indicative Activities cont.Political/Admin.LevelNationAdvocacy• National Legal Empowermentof thePoor Campaigns• Integrate LegalEmpowermentof the Poor intopoverty reductionstrategies/ nationaldevelopment plans/decent work countryprogrammemesKnowledgeManagement• Establishingbaselines andmonitoring progressregarding LegalEmpowerment ofthe Poor• Situation Analyses• Thematic studies• Who’s doing whatwhere in Legal Empowermentof thePoorPilot Initiatives• Pilot countries stepforward/ are identified• Pilot initiativesCapacity Development• Inventory of existingsupport structuresand needs• Collaboration withprofessional orgsand academia totrain grassrootsprofessionals• Set up and activateforums for stateinterface with thepoorLocality• Rights awareness• Information campaigns• Opportunitiesawareness• Identifying grassrootsexperience• Identifying partners• Pilot initiatives inup to four thematicareas• Support to grassroots/communitybasedorganisations• Support to grassrootsprofessionalsand para-professionals• Facilitate communityengagementtechniques andforumsregional and sub-regional organisations (e.g.African Union, ASEAN, etc.), U.N. Regional Commissions(e.g. ECA, ESCAP, ECLAC), sub-regionalbodies such as SADAC, Mercosur and in partnershipwith regional development banks (AfricanDevelopment Bank, Asian Development Bank, Inter-AmericanDevelopment Bank). A series of new‘Regional Social Contracts’ could be an importantmechanism to forge political consensus on thelegal empowerment agenda.of the Poor. For example, francophone countries inWest Africa are already taking steps to streamlinetheir commercial codes under the framework ofthe Organisation for the Harmonisation of AfricanBusiness Law. In terms of implementation, peerexchangemechanisms can facilitate the sharing ofcountry level experience in policy reform.Activities at National LevelImplementation of empowering policies ideallyExisting ministerial forums could be good opportunitiestakes place at the national level, where the chanceto promote Legal Empowerment of the Poor and is greatest to have wide impact on poverty; how-existing peer-exchange mechanisms will be possibleever, the aim should probably not be to establishplatforms for aggregating regional demand for a ‘legal empowerment programmeme’ as a standever,national reforms. Forums already engaged in law reformalone entity; rather, it should be to integrate Legalamong countries would have a natural interest Empowerment of the Poor into existing processes,in the issues being raised by Legal Empowerment such as the preparation of national development324

plans, poverty reduction strategies (PRSs), UNDevelopment Assistance Frameworks (UNDAFs),etc. Another important dimension of national levelwork will involve working closely with professionalassociations (lawyers, surveyors, planners, localauthorities, micro-finance institutions, Chambers ofCommerce, labour unions, farmers’ organisations,etc.) to create a new generation of professionals inthe spirit of the ‘barefoot engineers’ that have beenpioneered in South Asia. 9Activities at the Local LevelWithout support from the base organisations of thepoor, there is little chance of realising the LegalEmpowerment of the Poor agenda. Involving thesegroups in the design of interventions of any kind(advocacy, knowledge management, pilot initiatives,and capacity development) is crucial. Informationdissemination will be a central strategy atthe local level. In some countries with particularlyweak or oppressive national governments, communityempowerment activities may be the onlyfeasible ones. Where social mobilisation is strong,however, the legal empowerment agenda can bebuilt, bottom-up, by supporting existing initiativesof the urban poor, such as the pioneering urbanpoor funds in Cambodia, India and elsewhere.4. Country LevelApproaches, Toolkits andIndicesThe pathways to Legal Empowerment of the Poorare multi-tiered with many possible intersections,roundabouts, dead-ends, detours, and shortcuts.Given the options, carrying out Legal Empowermentof the Poor takes a variety of different country-levelapproaches, tools or specific techniquesfor manipulating the ‘how’ of policy. For countriespromoting the legal empowerment agenda, identifyingthe appropriate process, picking the righttools and establishing the appropriate benchmarksfor success are critical.Countries Piloting LegalEmpowerment ReformThere has been a tremendous positive responsearound the world to the idea of pro-poor legalempowerment. As the Commission moves from theglobal to the country level, a process must be developedto enable, where appropriate, the matchingof the demand for reform with the appropriatesupply of information, expertise and experience.Different countries will wish to take different pathsto legal empowerment. Some of the critical issuesthat countries and their development partners willhave to address are:Historical and social context: The objectives oflegal empowerment aim at achieving systemicchange in the relations between the poor, the stateand the market. The historic context will greatlyaffect the possibility to achieve change of thismagnitude and the timing should be carefully considered.Is the country ready to undertake the legalempowerment challenge? Comparing data regardingeconomic growth, inequality and social exclusion,and poverty will be important in assessing the325

need and the potential for success.Political will: As the reform agenda affects theinstitutions and structures of government, highlevel political support must be ensured. Evidenceof government commitment will include addition oflegal empowerment to national development plans,poverty reduction strategies and, perhaps mostimportantly, national budget allocations.Grass-roots and civil society capacity: To sustainthe momentum for reform will require the activeand sustained support of civil society, perhapsmore than any other entity with the exception ofgovernment. Assessing its capacity to drive andsustain change is critical.Governance: The quality of governance — theprocesses, rules and organisations supportingdevelopment — will have an important bearingon the likelihood of success in implementing LegalEmpowerment of the Poor. The relations betweengovernment, civil society and the professional andprivate sectors will make or break the chances forsuccess. Political risk mapping and stakeholderanalysis will be useful tools for managing politicalrisk.External support: Legal empowerment processesmust be nationally owned, but outsiders can playan important role in supporting the quality of thereform process and in helping to deliver specificoutputs that will build the momentum for change.Assessing donor interest and the capacity of externalsupport organisations will be important.Choosing the appropriate country levelprocessA variety of options exist for countries, and theorganisations that support them, to drive the legalempowerment agenda. The option chosen willdepend on the specific country context and will beaffected by such factors as the strength of civil society,private sector and donor interest, date of thenext elections, preparation of national developmentstrategy, and other time sensitive issues affectingthe policy window. Options include:• National civil society or academia collect informationand get specific issues, such as LegalEmpowerment of the Poor, into the policy debateand on the table.• Governments develop projects in a department/ministry as part of their on going developmentplans and programmemes, independent of donorsupport.• Governments and donors agree on specific legalempowerment projects. These can include theestablishment of project implementation unitswhose intent is to facilitate on-the-job trainingof government officials or, more direct methods,such as establishing an implementation cell ina senior office, possibly even the Office of thePresident. In so doing, care should be takennot to sideline other institutions that may needstrengthening, such as law reform commissions.• Building on national reform processes in any ofthe four legal empowerment domains, rangingacross broad national processes such as nationaldevelopment plans or poverty reduction strategies.• Establishing multi-stakeholder processes thatinclude government, civil society and externalpartners. One such example is the country-leveladaptation of the Harmonisation, Alignment andCoordination (HAC) process emerging from the2005 Paris Declaration on Aid Effectiveness (seeBox 5.7 describing the Kenya HAC process inthe land sector). Donors can choose from a widevariety of funding mechanisms to support thisprocess, ranging from direct budget support tothe establishment of basket funds.• Using the coordination and funding mechanisms326

Box 5.7 Land Sector Harmonisation, Alignment andCoordination for Poverty Reduction in KenyaIn line with the new agenda on aid effectiveness, theDevelopment Partners Group on Land (DPGL) aims todeliver and manage aid to the land sector in Kenya asto meet the principles of harmonisation, alignment andcoordination (HAC). In its activities and cooperationwith other stakeholders, the DPGL strives to achieveconsensus and support around the policy direction ofthe government instead of pursuing diverging agendas.The emphasis of the group is on three areas: 1) strengtheninggovernment capacity to develop and implementland-related policies and programmemes; 2) aligningdonor support with government priorities as set out inits poverty reduction strategy (PRS), and 3) avoidingduplication and overlapping in aid initiatives. The landsector donor group was officially formed in July 2003 andit has up until 2006 channelled support to the NationalLand Policy Formulation Process through a Basket Fundarrangement. Since its establishment, the donor grouphas supported the government with investments worth ofUS$10 million in the land sector.The support of the DPGL is now expanding beyondpolicy development to cover the main activities run bythe Ministry of Land through the Land Reform SupportProgrammeme (LRSP). The LRSP incorporates elementsrelating to the finalisation of the land policy process,policy implementation, institutional transformation, thedevelopment of a pro-poor Land Information ManagementSystems (LIMS), the implementation of the recommendationsof the Ndungu Commission on illegal allocationof public land and the development of Forced EvictionGuidelines in Kenya.These and other activities have collectively supportedthe Government’s economic recovery strategy (i.e.,PRSP) as well as the government’s efforts to realisethe Millennium Development Goals, particularly relatingto the Eradication of Extreme Poverty and Hunger(MDG 1), Promotion of Gender Equality and Empowermentof Women (MDG 3), and Ensuring EnvironmentalSustainability (MDG 7). Development Partners financiallysupporting the Basket Fund initiative have been DFID(UK), SIDA (Sweden), DCI (Irish Aid) and USAID. Otherdevelopment partners involved in the land sector inKenya include JICA, the Embassies of Finland and Italyy,the World Bank, as well as UN related agencies such asthe FAO, UNDP, and UNEP.Source: Adapted from UN-HABITAT (2007) Global Report on HumanSettlements 2007: Enhancing Urban Safety and Security,London, Earthscan, p. 154established in post-disaster or post-conflict contextsto support the reform process.After deciding on the general tack to take with regardto Legal Empowerment of the Poor, countrieswill likely need to agree on a more detailed processfor managing the reform process. This process willoften include a series of steps as outlined below.These are not necessarily sequential and severalsteps may have to be repeated over time as thesituation changes.• Mobilising stakeholders: Identifying key stakeholdersand agreeing on a process and a setof principles to guide the legal empowermentagenda will be a critical step to build confidenceamong stakeholders. Key issues will include coordinationmechanisms, adoption of a protocol oragreement, and clarification of roles and responsibilities,and agreement on a broad process forreform;• Situation analysis or legal empowerment diagnostic:A detailed assessment should be madeof the relevant issues to be addressed, includingthe relevant aspects of each of the four legal empowermentdomains. The analysis will identifypolicy, legal and institutional issues, as well asgaps in resources, capacity and tools.327

• Action planning: Development of the goal,objectives, strategies, and specific interventionsthat will contribute to the legal empowermentobjective. Critical issues will include sequencingand timing, resource constraints, establishing amonitoring and evaluation framework and ensuringa balance between process and products tomaintain momentum.• Pilot activities: These should be built aroundthe idea of ‘quick wins’ — outputs — in areaswhere these are feasible. In this way one canbuild the credibility of the legal empowermentagenda and demonstrate some initial success.Pilot activities could include a mix of practicalreforms in each of the domains, policy analysis(e.g., ‘path to property’ analysis), advocacy andawareness, information collection and strengtheningcoordination mechanisms.• Scaling-up: Expanding the range of activities andtaking on more complicated challenges. Raisingawareness of past successes, additional sensitisation,strengthening the consultation processwill all support this stage. Evaluations may beuseful tools here.• Institutionalising change and the change process:Tackling some of the fundamental reformsby building on the experiences in the pilot phaseand scaling-up phase to reform the organisationsand rules that shape the institutional context.Tools to support legal empowermentreformsAfter deciding on the general approach to be takenwith Legal Empowerment of the Poor, reformersneed to consider numerous applied techniques,developed by anti-poverty workers, communityorganisers and reform advocates around the worldfor carrying out activities analogous to the Commission’sempowerment agenda. Table 5.11 summarisessome of the pertinent pro-poor policy tools,sorting them out according to the implementationphases where they are most, but not exclusively,applicable. These implementation techniques aregeneral, flexible and easy to modify; developmentpractitioners will need to screen out those toolsthat do not apply to their situation, and selectthose that are workable in the particular countrycontext and suitable for the particular task at hand.Explanation of the toolsThree tools (stakeholder analysis, contextualanalysis, and policy characteristics analysis)have already been covered at some length in Section2. All the tools are annotated in alphabeticalorder in Annex 1 (and the tools for action planningand monitoring are explained further in Section 5).Readers are also referred to the numerous toolkitsdeveloped by international organisations and NGOsfor organising communities and implementingnumerous aspects of social and economic developmentpolicy (see the footnote below and Annex 2for a comprehensive inventory of toolkits). 10 Manyof these tools can be used individually or in combinationin the implementation of Legal Empowermentof the Poor reforms. On this basis, a set ofLegal Empowerment of the Poor indicators can bedeveloped, tailored to country circumstances.Ready-made Indicators of LegalEmpowermentBoth the formulation and monitoring phases ofLegal Empowerment of the Poor implementationdepend on indicators of democratisation, good governance,human rights protection, and many othervariables related to legal empowerment. There hasbeen a quantitative revolution in recent years ofinternationally comparable data on political andregulatory institutions. There are now at least 150measures of different aspects of governance in thepublic domain. These data series are of variable328

quality and utility in establishing rough baselinesfor governance among the nations of the world;they are not sufficiently developed to be of greatvalue in measuring changes in the political or legalstatus of a country’s poor men and women overtime. They are also highly aggregate and thus oflimited utility in ascertaining empowerment in aparticular sub-national community or region.While not perfect, perhaps the best example ofinternational indexes relevant to Legal Empowermentof the Poor is the World Bank’s GovernanceResearch Indicator series. These are based onseveral hundred individual variables measuringperceptions of governance. They are organised intosix categories: rule of law, lack of political violence,quality of the regulatory framework, efficiency ofthe bureaucracy, control of corruption and accountabilityof the political leaders. 11 The World Bank’sdata have their uses but must be applied verycautiously in development work (Arndt and Oman2006). The Eurostat/UNDP (2004) users’ guide togovernance indicators describes at length the applicationsand limitations of several of the leadingoff-the-rack governance data series.Pending reliable pre-existing empirical informationon national or local-level legal empowerment,Legal Empowerment of the Poor programmemesand projects will have to develop and use their ownmetrics for evaluating the socio-economic environmentand gauging accomplishments, based onsurveys and interviews, as discussed above. RuthAlsop and Nina Heinsohn (2006) report to theWorld Bank on one such analytic framework thatcan be used to measure and monitor empowermentprocesses and outcomes. Kucera et al. (2007) putforward indicators that have been tested for measuringvarious aspects of decent work. (See Annex3 for a list of readymade indicators.)5. Monitoring andEvaluationBecause action planning and progress monitoring(the final row in Table 5.11) has not beendiscussed much in these pages, and becausethis function is especially important for outsideagencies, some of its tools are worth looking at abit more closely. Brinkerhoff and Crosby (2002)identify four components to establish an efficientparticipatory and country-driven policy monitoringsystem:1. A management information system based ontargeted indicators endorsed by national stakeholders.2. Stakeholder monitoring to identify the responsesof those that benefited or those that lost fromthe policy reform measures.3. Problem-solving studies to devise tailored andpractical solutions to implementation issues.4. Process and impact evaluations to supportlearning over time.Best practices recommend that the design of eachcomponent should be based on the principlesof adaptation to user needs and availability ofresources, user participation, parsimony (the leastamount of information and cost required to accomplishthe task), and simplicity. To address boththe content and process sides in monitoring policyimplementation, it is important to understand fullywhat needs to be monitored.Lessons learned from country experiences have ledto the following practical suggestions for monitoringpolicy reform implementation, according toBrinkerhoff and Crosby (2002):1. Define a list of steps, processes, targets andmilestone events in the reform process. Thiswill enable the breakdown of the policy processesinto a series of components to enable329

Table 5.11 Pro-poor policy implementation tools*Implementation phaseDeveloping policy issues,agendas, and decisionsPolicy formulation andlegitimisationConstituency buildingResource mobilisationImplementation design andorganisational developmentAction planning andprogress monitoringPossible toolsCompetencies AssessmentContextual analysisLegal and institutional frameworkOpportunity RankingPolicy characteristics analysisPolitical will and risk analysisProblem CensusProblem treeSocial Baseline StudySocial Impact and Opportunities AssessmentCommunity MappingFocus groupsForce field analysisInfluence mappingInstitutional AnalysisParticipatory Poverty AssessmentsPolicy briefingsPolitical mappingStakeholder analysisStrategic Planning Framework/SWOT/PESTConflict prevention and resolutionNational symposiumOutreach (Media Campaigns, School Programmemes, Public SpeakingEngagements, Publications, Public Hearings, Study Circles)WorkshopsAdvocacy/lobbyingDomestic resource mobilisationFundraisingParticipatory budgetingBest practices (collection, dissemination)ExchangesInstitutional twinningInternship programmemesPara-professionalsPlain language (translation and dissemination of laws)Technical assistanceTraining (on leadership, group work and related management issues)Travel grants/internships for officialsWeb-based supportGender auditImpact evaluationLogical framework approachMISProblem solving studiesStakeholder monitoring (household surveys, key informant interviews)* Guide to the techniques that might be appropriate during the implementation cycle; a technique may be useful in more than one phase of implementation.Highlighted tools are described in Section 2 of this chapter.

Table 5.12 A Framework for a Demand-Led Assessment of ImplementationAccess toJusticeE.g., To whatextent does thelaw recognizethe right of apoor person tobe registeredat birth?E.g., In theinstant case,how affordablewas theregistrationprocess to thepoor persons?Asset holdingRightsE.g., To whatextent doesthe law protectpoor tenantsfrom eviction?Labour RightsEntrepreneurialRightsE.g., To whatextent does thelaw mandate thereduction of costof registering abusiness belongingto a poor person?E.g., in the instantcase to what extenthas the relevantgovernment agencydecentralisedits businessregistration processto give access tothe poor?CapacityDevelopmentE.g., To whatextent does thelaw mandategovernmentinstitution tosimplify proceduresfor the poor?E.g., To whatextent does thegovernmentprovide training toits staff on legalempowerment ofthe poor?E.g., To whatextent does thegovernmentprovide accessibleguidance to thepoor on servicesavailable to themfrom governmentagencies?LawE.g., To whatextent doesthe lawextend labourstandards tothe informaleconomy?E.g., to whatextent doesthe relevantgovernmentagency monitorcompliancewith labourlaws in theformal andinformaleconomyGovernmentimplementationeffortsE.g., In theinstant caseto whatextent has thegovernmentdocumentedtenure rights ofthe poor?EffectivenessE.g., In theinstant case,to what extentwas the poorperson ableto affect theregistration?E.g., In theinstant case,to what extentwas the poorperson ableto retainpossession ofthe property?E.g., to whatextent was thepoor personworking inthe formal orthe informaleconomyable to enjoythe benefitsof labourprotectionlaws?E.g., To what extentwas the poor personin the instant caseable to affect theregistration of his/her business?E.g., To what extentwas the poor personin the instant caseaware of their legalrights?an easier grasp of what needs to be monitored.2. Make the use of qualitative rather than quantitativeapproaches in monitoring the system, asthey offer a more complete and nuanced set ofdata that are numeric and narrative.3. Engage implementing parties and beneficiariesin the draw up of the monitoring systems andmethodologies and acquire feedback. Thiswill simplify the process of tracking previouslyidentified indicators. Focus group discussions,workshops and other similar methods can beused to ensure participation.331

4. Customize the choice of monitoring methods tothe needs and constraints of the implementingagencies.5. Delegate the monitoring process to an externalbody selected from civil society organisations,think tanks and advocacy groups, to ensuregreater independence, transparency and accountability.A possible framework for a demand-led assessmentof government implementation of the Legal Empowermentof the Poor recommendations is shownin Table 5.12, which is based on the framework ofthe World Resources Institute’s Access InitiativeAssessment method. Each cell of the matrix hasbeen populated with an indicator to serve as anexample. Those undertaking the assessment canrank each metric based on research guidelines anddata collected. These assessments, when repeatedover time, will show whether and how well LegalEmpowerment of the Poor recommendations arebeing implemented. 12Monitoring of reforms will involve seeking answersto critical questions. Among the questions thatmay need to be posed are the following: Are thepolicy reforms really being implemented? And if so,do they really matter? If they do make a difference,how important is it? What are the gender impacts?Taking into consideration the multiple dimensionsof policy reforms, the pace of implementation willlikely be gradual. There may not even be conspicuousimpact in the short-term. Therefore, inthe monitoring of progress, it will be important toestablish process indicators, and to pursue monitoringactivities either on a continuous or repetitivebasis. Furthermore, the entire set of measuringactivities — data collection, analysis, and interpretation— will need to be based on the country’snational priorities.6. Strategy and TacticsWe have reviewed the social, political and technicalfactors that stand in the way of poor people’slegal empowerment, and set forth broad ideasabout how to counter those forces. Change agentsmust put aside preconceived or uniform approachesto Legal Empowerment of the Poor to thinkcreatively about how to make Legal Empowermentof the Poor available, affordable and acceptablein their own specific context. They must be on thelook out for unintended consequences, perverseincentives, and hidden agendas. Their initiativesmust be informed by pilot projects that can beamended if they fail, and scaled-up and replicatedif they work.In designing empowerment policies and decidingupon how to implement them, change agents mustalways keep the following core values front andcentre:• Poverty reduction is the ultimate objective ofLegal Empowerment of the Poor, so every reformmust be judged by the extent to which it impartsfreedom and allows poor people to gain morecontrol over their futures and to improve theirwell-being.• The peaceful struggle against impoverishmentmust be participatory, based on respect for humanrights, and with poor people playing activeroles along the way.• The gains of Legal Empowerment of the Poorshould be broad-based and take into account thediversity of disadvantaged groups, in particular,the indigenous people who are often inadvertentlyoverlooked by policymakers.• The gains also must include women; therefore,another standard against which to measure LegalEmpowerment of the Poor policy is whether ittakes full account of gender-specific effects.332

Empowerment of the poor in the end means socialtransformation — not only a more just distributionof wealth and income, but a more expansivesharing of power so disadvantaged people canbegin bringing about significant change throughtheir own actions.Strategic FindingsAmong the strategic options and considerationsimplied in Chapters 1 through 4 of thisvolume, a number of them stand out, and they arementioned below. Several are rich with paradox,and government officials, civil society members,and development practitioners need to sort out theconflicting elements to determine the most promisingstrategic direction to take for their community,country or region.1.Legal Empowerment of the Poor is easiest toimplement where it is needed least. An effectiveadministrative state, a set of transparentand accountable political institutions, and agrowing economy are predictors of success forlegal empowerment policies. Yet, countries thatmeet these criteria probably have their povertyand social exclusion under relative control; thebulk of the global poverty problem is in preciselythose nations that lack these positive attributes,so implementation of Legal Empowerment of thePoor must usually be completed under inauspiciousconditions.2.There is a rich base of comparative internationalexperience, but no ready-made formulas forlegal empowerment. Solutions that suit one contextmay be dead wrong in another. Greatcare should be taken to develop interventionsthat are appropriate for the specific historical,socio-economic and political context of a givencountry.3.Think systemically, act incrementally. A nation’slegal and administrative setup functions likean ecosystem with a heavy measure of interdependence.That implies empowerment takessystemic changes. Yet, big bang approaches arerare and they often run out of steam when theyare tried. In particular, any attempt to supplantand replace existing informal mechanisms seemsdoomed to failure. Instead, informal mechanismsmust be gradually integrated with the formal.4.Think long, go short. Justice, labour and landissues are complicated and do not lend themselvesreadily to a traditional two-year project approach.Yet, reformers can never lose sight of thefact that politicians are in office for finite terms.The implementation process, therefore, needs toinvolve actors who are less affected by elections,and deliver successes on a regular basis. Evenif these successes are small, they must providetangible improvements to maintain the momentumfor reform.5.Start from afar, but change from within. Legalempowerment is on the international community’sagenda, as the very existence of this Commissionproves. Yet, pro-poor policy change hasto be endogenous. Any perception that foreigndonors drive reform may prove counter-productive.Reforms that do not find champions andbuild constituencies within are likely to fail (asthey should).6. Support associations of the poor, but do not compromisetheir independence. Capacity-developingsupport is important to associations of the poor,be they small farmers’ cooperatives, communitybasedorganisations, domestic worker trade unionsor urban user-groups. The incongruity is thatassisting these groups may cause them to becomemore accountable to the external funding agencythan to their membership.7.Work from the bottom up and the top down.Donor expectations regarding the interest ofthe poor in legal empowerment are often out333

of touch with the desires of the poor to get thestate to provide services and benefits throughrecourse to client connections if necessary. Atthe same time, external change agents cannotignore the preconceptions and policy positions ofthe international agencies that are funding theirwork with Legal Empowerment of the Poor. Theyneed to think about how to balance these twoperspectives.8.Decentralise…except when it is better to centralise.A common theme in several WorkingGroup reports is the need to decentralise responsibility,resources and accountability for legalservice delivery to the lowest level at which theycan be effectively managed. But decentralisationalso gives power to local elites opposed to theLegal Empowerment of the Poor agenda, so thisoption bears watching.9.Balance demand for change with the capacity toaccommodate change. The energy of the poor topinpoint solutions to their problems, to organise,and to engage in advocacy must be met withan equally receptive state. It is important togive attention to official capacity to respond tothe thrust for change coming upwards from thegrassroots.10. Put together informal and formal institutions.Informal institutions and authority can be ofgreat utility in pursuing Legal Empowerment ofthe Poor, but so can official institutions. Policymakersneed to combine the best features ofboth to facilitate implementation.11. Look for cooperation, but anticipate confrontation.There are Legal Empowerment of thePoor policies where all sides can benefit, forinstance land readjustment which takes irregularlysub-divided land and reallocates itfor public and private use according to planningrequirements. However, practitioners alsoneed to face up to the fact that compromiseand mutual adjustment are not always going tohappen with Legal Empowerment of the Poor.The narrow technical and legal aspects may bethe least controversial, but even those ultimatelyaffect the distribution of power withinsociety. Governments trying to implement anempowerment agenda have to figure out wayseither to reimburse or to defuse those possiblydisadvantaged by the reforms. Managingpolitical risk throughout the implementationprocess, therefore, is critical.Tactical IdeasWhile walking the tightrope of these strategicissues, change agents will also need to considerimplementation tactics. A list of common modesof action is presented below. These actions havebeen selected from materials put forward by all theworking groups involved in the preparation of thisvolume, and are presented in no particular order.1.Be opportunistic. Take tactical advantageof opportunities as they arise and do not beconstrained by a programmemed calendar ofdeliverables.2.Use plain and local language. One of the keyelements for national ownership is language:dialogue, debate and information sharing mustbe conducted in local languages; legal documentsshould be demystified by rendering themin layperson’s terms.3.Work with para-professionals. A proposal raisedin several working group reports is to create anew generation of para-professionals, who aretrained and possibly certified to respond to theday-to-day service requirements of the poor, butwho do not require the advanced studies of currentprofessionals, which are often inappropriatelyscheduled, expensive and include subjects oflimited relevance for the prospective client base.334

4.Bring existing technical solutions up to date.Particularly in the land sector, many of theexisting legal instruments are inadequate. Landinformation systems are often expensive, complicated,and bureaucratic and, as a result, quicklybecome outdated. Unfortunately, the systemsrequired, for example, to integrate innovativeforms of tenure (certificates, group rights, etc.)into the national spatial data infrastructure donot currently exist. As emphasised in Chapter 2of this report, the choice of long-term technicalsolutions must be driven by the willingness andability of the users to pay. Thus an importantelement in successful Legal Empowerment of thePoor implementation will be the appropriatenessof the underlying analysis and the existence orcreation of technical systems to support reform.5.Bring together technical expertise and grassrootsexperience. Technocrats dominate policymakingin Legal Empowerment of the Poor. While validreasons exist for some technical requirements,grassroots realities and community solutionsalso need to be understood and incorporated inthe reform process. If a law does not meet itsusers’ needs, it is useless to the poor.6.Dedicate resources to support participatoryprocesses and coordination. While technicalsolutions often attract significant donor andgovernment interest, capacity development forparticipation and coordination mechanisms isoften undervalued and therefore under-funded.Other kinds of support, for example, are translationof laws and regulations into local languages,or grants to local civil society groups to lay bareLegal Empowerment of the Poor issues and tofund dissemination campaigns. Specific supportis required for coordination, preparation of researchand options papers, and information dissemination.Peer exchanges (both inter-regionaland intra-regional) are another valuable pro-poortool for building commitment to reform and formaintaining momentum over time.7.Provide effective outreach. Under intense pressuresto deliver, information and communicationprogrammemes are often neglected during implementation.Yet without a dedicated outreachcampaign, clients will rarely adopt the proposedreforms. Feedback received from those involvedneeds to be cycled back into the reform process,to keep it homegrown and responsive to demand.8.Provide access to information. Two-way communicationbetween governments and the poorwill need to be improved. For example, access toinformation has helped people to secure tenureand to tackle job discrimination through a betterunderstanding of their rights. There are also examplesin post-disaster and post-conflict nationsof the importance of providing access to information.Mobilising resources to take advantage ofinformation in support of Legal Empowerment ofthe Poor presents a challenge because in manycountries information that is nominally ‘public’is in practice difficult to obtain. In India, for example,civil society organisations waged a fiercecampaign to gain access to public budget andexpenditure data using freedom of informationlaws in six states, which later culminated in thepassage of a national law. However, in countrieswhere civil society is weak, and where certainsocial groups have been marginalized over extendedperiods of time, the ability of the poor toengage in effective collective action is likely tobe limited and fragile.9.Bundle service delivery. The strategy of bundlingservices is highlighted in several chapters of thisreport; it is seen as a cost-effective strategy fordelivering a variety of services to the poor. Anexample is to deliver identity cards with vaccinationprogrammemes. Such bundling may alsohave the great potential of contributing to com-335

munity empowerment, especially if the deliveryis structured so as to reinforce transparencyand accountability in community institutions.Experience with delivering bundled municipalservices (e.g., licensing, registration, tax and feepayments) through one-stop shops offers relevantlessons of utility for Legal Empowermentof the Poor reforms as well. Membership-basedorganisations such as cooperatives, business associations,trade unions and grass-roots women’sorganisations can offer free or low-cost legalservices to the members.these suggestions for strategy and tactics, remainingtrue to the core values of the legal empowermentagenda. Where their efforts prove successful,they will make it possible for many more peoplenow mired in poverty to improve their lot in lifewithin the foreseeable future. While implementationsuccess cannot be guaranteed because of themany countervailing factors mentioned earlier,steady, modest progress in fighting poverty withlegal tools and rights is well within the realm ofpossibility in most countries.10. Support alternative dispute resolution. All fourworking groups emphasise the need to supportalternative dispute resolution mechanisms,including arbitration, mediation and conciliation.The fundamental challenge is to avoid thecost and expense of formal litigation in returnfor decisions that are made transparently andcan be enforced. Lessons learned from labourcourts may be instructive in other fields aswell.11. Collaborate with professional organisations.Professional organisations are promisingpotential allies. While lawyers, national barassociations, law reform commissions, andlaw schools are oriented towards meeting theneeds of the middle and upper classes, theyare also often willing to lend their professionalexpertise to the needs of the poor. Landsurveyors, valuators, and notaries often act asgatekeepers of rules that are often divorcedfrom the realities of the urban poor or evenholdovers from the colonial era, but they mayalso be amenable to reorienting their thinking.The role of urban planners and local authoritiesalso merits attention. It may be possibleto convert these stakeholders from possibleopponents into allies for change.Change agents are invited to consider and then try336

Annex 1: PolicyImplementation ToolsListed below are a variety of tools deemed usefulfor implementing policies that may help toadvance legal empowerment reforms:Advocacy/lobbying: These are attempts to influencethe outcomes of any policymaking system throughendorsements, publicity, discussions, etc.Best practices (collection and dissemination): Abest practice is a management idea that assumesthere is a technique, method, process, activity, incentiveor reward that is more effective at deliveringa particular outcome than any other technique,method or process. The idea is that with proper processes,checks, and testing, a desired outcome canbe delivered with lessproblems and fewer unforeseencomplications.Contextual analysis: This involves a system-widereview of economic, social, cultural, political, administrative,and institutional factors that affect theease of implementing a particular public policy in acountry, such as legal empowerment reforms.Community Mapping: A Community Map is a visualrepresentation of what the community perceives as itscommunity space. This includes showing the boundaryof the community as understood by communitymembers and all the elements recognised by themas part of their area. Most of the spatial informationis obtained through direct observation. The communitymembers themselves decide what does and doesnot go on the map. Some items of importance to thecommunity may not be noticeable to outsiders, suchas sacred sites or clan boundaries (ICMM, the WorldBank and ESMAP 2005).Competencies Assessment: Measuring and recordingthe skills of an individual or group is an essentialstarting point for any Legal Empowermentof the Poor implementation strategy. Competenciesmay include knowledge, skills, and abilities as wellas other characteristics such as initiative, motivation,legitimacy and values. Competencies can beassessed in the framework of a facilitated workshopprocess or on an individual basis, for example.Conflict resolution: Conflict is a normal part of relationshipsand occurs whenever people or groupshave different expectations of joint or intersectingactivities. Instead of seeking to avoid conflict atall costs, which would be unrealistic, it is better tolearn to recognise and manage conflict as part ofgood relationship building and maintenance. Notall conflicts can be resolved, but methods exist formanaging differences between stakeholders so thatdevelopment activities can continue (ICMM, theWorld Bank and ESMAP 2005).Domestic resource mobilisation: As defined in theMonterrey Consensus, domestic resource mobilisationincludes policies that foster good governancethat is responsive to the people’s needs; an appropriatepolicy and regulatory framework; the fightingof corruption at all levels; sound macroeconomicpolicies aimed at sustaining high growth rates, fullemployment, stability and poverty eradication; fiscalsustainability; investment in basic economic andsocial infrastructure; improvement in working conditions;strengthening and development of the domesticfinancial sector, enhanced by microfinanceand credit for micro- and small and medium-sizedenterprises, and the establishment of developmentbanks to further facilitate access to credit.Exchanges: Practitioners may visit or temporarilywork in a similar organisation or job assignment ina foreign country to gain practical and comparativeexperience about a policy such as legal empowerment.Focus groups: These are groups selected for their337

elevance to a particular area of investigation, whichare engaged by a trained facilitator in discussionsdesigned to share insights, ideas, and observationson the area of concern. Focus groups are typicallyopen-ended, discursive, and used to gain a deeperunderstanding of respondents’ attitudes and opinions.A key feature is that participants are ableinteract with each other. The group dynamic oftenprovides richer insights and data than would havebeen achieved by interviewing the participants individually(ICMM, the World Bank and ESMAP 2005)Force field analysis: Force field analysis helps clarifya group’s position on a particular policy. It is agraphical representation in which groups are placedon a continuum from ‘oppose’ to ‘favour’, where themiddle of the continuum is ‘neutral’. It is useful inproviding a quick overview of sources of major oppositionand support (Brinkerhoff and Crosby 2002).Fundraising: There are individuals, corporations,foundations, and national and international governmentbodies that may be approached for help infunding Legal Empowerment of the Poor.Gender audit: A participatory and self-assessmentapproach to promote organisational learning aboutgender mainstreaming (Moser 2005).Impact evaluation: An impact evaluation assesseschanges in the well-being of individuals, households,communities or firms that can be attributedto a particular project, programmeme or policy. Itis aimed at providing feedback to help improve thedesign of programmemes and policies. In additionto providing for improved accountability, impactevaluations are useful for dynamic learning, allowingpolicymakers to improve ongoing programmemesand ultimately better allocate funds acrossprogrammemes.Influence mapping: This technique identifies theindividuals and groups with the power to effect akey decision. It further investigates the positionand motives of each player and the best channelsthrough which to communicate with them (Start andHovland 2004).Institutional Analysis: Institutional analysis studiesthe institutional set-up in and around a givencommunity, including how important each institutionis, how they interact with each other and whoparticipates in them. This information can be gatheredthrough an interview process, for example, byasking community members to describe the institutionspresent in their community, their function,importance in relation to other institutions, and ifand how they participate in them. Institutional analysisis particularly useful in identifying institutionsat the community level that can play an importantrole in the legal empowerment process (ICMM, theWorld Bank and ESMAP 2005).Institutional twinning: Institutional twinning is aform of staff exchange. For instance, staff of a particularagency would visit a similar institution in aforeign country, with the aim of exchanging expertise.Often the exchange is two-way (Ouchi 2004).Internship programmemes: These are programmemesthat integrate study with planned and supervisedcareer-related work experience on practicalissues of implementation.Logical framework approach: LFA is an analytical,presentational and management tool that canhelp planners and managers to analyse the existingsituation during project preparation, establish alogical hierarchy of means by which objectives willbe reached, identify some of the potential risks, establishhow outputs and outcomes might best bemonitored and evaluated, and present a summary ofthe project in a standard format (Örtengren 2004).LFA is an overarching tool that may use other techniqueslisted here, for instance situational analysisand stakeholder analysis.338

MIS: A Management Information System is one offour components that establish an efficient policymonitoring system (see Section 5). MIS is used tocollect, analyse, store, and disseminate informationuseful for decision-making in a project. It trackstargeted indicators that help inform choices in aproject. Design of the MIS should be based on theprinciples of adaptation to user needs, and availabilityof resources, user participation, parsimony,and simplicity. It is important to understand fullywhat needs to be monitored.National symposium: This is a high-profile way topublicise Legal Empowerment of the Poor or otherpolicies.Opportunity Ranking: This is used to help communitymembers and development partners decideupon which projects to start implementing. Takingaccount of locally available resources, skills, andcapacities, it is built around a scoring system thatranks various options against agreed criteria.Outreach: Methods for publicizing Legal Empowermentof the Poor or other policies include mediacampaigns, school programmemes, public speakingengagements, publications, public hearings, studycircles. (Study circles, for example, are a method ofadult education and social change popular in Scandinavia._Para-professionals: These are people in variousoccupational fields, such as education, healthcare,and law, who have obtained a certificate by passingan exam that enables them to perform a task requiringsignificant knowledge, but without having theoccupational license to perform at the professionallevel in the field.Participatory budgeting: Participatory budgeting isa process of democratic deliberation and decisionmaking,in which ordinary residents decide how toallocate part of a municipal or public budget. Participatorybudgeting is usually characterised by severalbasic design features: identification of spendingpriorities by community members, election ofbudget delegates to represent different communities,facilitation and technical assistance by publicemployees, local and higher level assemblies todeliberate and vote on spending priorities, and theimplementation of local direct-impact communityprojects. Various studies have suggested that participatorybudgeting results in more equitable publicspending, higher quality of life, increased satisfactionof basic needs, greater government transparencyand accountability, increased levels of publicparticipation (especially by marginalised residents),and democratic and citizenship learning.Participatory Poverty Assessments: A PPA is a toolthat allows consultation of the poor directly. Findingsare transmitted to policymakers, thereby enablingthe poor to influence policy. APPA uses a variety offlexible participatory methods that combine visualtechniques (mapping, matrices, diagrams) and verbaltechniques (open-ended interviews, discussiongroups). It also emphasises exercises that facilitateinformation sharing, analysis, and action. The goalis to give the intended beneficiaries more controlover the research process. To ensure follow-up atthe community level (a principle of participatory research),many PPAs have involved the developmentof community action plans subsequently supportedby local governments or NGOs (Robb, 2000).Plain language: In many countries, the law is onlydrafted and administrated in the national language,which many of the poor may not speak or read.Translation of laws into local language is hence anobvious way of improving access of the poor to information.This may also involve rendering legal jargoninto everyday terms in the dominant country language.Policy briefings: These are summary reports that re-339

view the current state of practice and methodologiesand summarize critical issues and implications.Policy characteristics analysis: This analysis informsthe understanding of the reformers, on thedimensions and dynamics of the policy, its originsand where greatest support and opposition are mostlikely to lie. Its purpose is to provide a systematicunderstanding of the policy that can carry over intomore detailed appraisal such as the political mappingor the stakeholder analysis. It is designed toanswer questions such as the exact aim of the policy,its implementation context, how the public mayreact to change, how consequential the change willbe (Brinkerhoff and Crosby 2002).Political mapping: Political Mapping is a meansfor organising information about the political landscapein an illustrative way. Macro-political mappingprovides analysis of political alliances at themacro (national or sector) level, while micro-politicalmapping provides more disaggregated insightsinto the political landscape. Political mapping canbe used to illustrate concentrations of support forthe government.Problem Census: The Problem Census is usuallyconducted in a small group setting, at the localcommunity level, for example. Designed as a nonthreatening,focused discussion that uses smallgroup dynamics, its objective is to elicit a comprehensiveand ranked census of the problems, real orperceived, of households and the community as awhole as well as the community’s proposed solutions.This approach gives community members theopportunity to articulate and prioritise the problemsthey consider need addressing in their community,to discuss them as a group, and then collectively decideon which problems to solve (ICMM, the WorldBank and ESMAP 2005).Problem solving studies: Problem solving studiesare aimed at devising tailored and practical solutionsto implementation issues. As for MIS above,the design of problem-solving studies should bebased on the principles of adaptation to user needs,and availability of resources, user participation, parsimony,and simplicity. (Also see Section 5.)Problem tree: Problem-tree analysis serves toidentify immediate and direct causes and effects ofa focal problem assisted by graphic representation.The technique helps illustrate context and interrelationshipof problems as well as possible impactswhen targeting projects and programmemes towardsspecific issues.Social Baseline Study: A base line study consistsof collecting and analysing baseline data that describesthe social and economic environment of anarea of interest as well as the characteristics of atarget group. A social baseline study, for example,would observer demographic factors (population,population density, age, ethnicity, health, income,etc.), socio-economic determinants (e.g. factors affectingincome and productivity, land tenure, accessto productive inputs and markets, family composition,access to wage opportunities), social organisation(e.g. participation in local-level institutionsand decision-making processes, access to servicesand information), economic organisation (e.g. localand regional businesses and commercial structures,infrastructure supporting economic activity, government,and other economic/industrial developmentplans for the area), socio-political context (stakeholderorganisations, development goals, priorities,commitment to development objectives, controlover resources, experience, and relationship withother stakeholder groups), historical context (e.g.historical issues and events, migration, relocation),needs and values (stakeholder attitudes and valuesdetermining whether development interventionsare needed and wanted, appropriate incentives forchange, and capacity of stakeholders to manage theprocess of change), human rights context (prevail-340

ing human rights issues and country risks), institutions(role, governance, resources, capacities oflocal institutions as well as regulatory framework),cultural background (cultural norms and practicesand places of high cultural value) (ICMM, the WorldBank and ESMAP 2005).Social Impact and Opportunities Assessment: Thisis a process that identifies negative and positive impactsresulting from a given project. It then looksat ways of maximising opportunities that can arisefrom the positive impacts and offsetting or minimisingthe negative effects. Being able to demonstratepositive effects at the early stages of a project facilitateslocal engagement and participation (ICMM,the World Bank and ESMAP 2005).Stakeholder analysis: Stakeholder analysis is designedto identify those interests that should betaken into account when making a decision. It assessesthe nature of a policy’s constituents, theirexpectations, interests, intensity of their interest inthe issue at hand, and the resources they can bringto bear on the outcome of the policy. It helps ensurethat the policies are designed in ways that improvetheir chances of adoption and implementation. Inimplementation, it helps build an understanding ofthe relative importance of various groups and therole they might play. To be useful, it is importantthat the stakeholder analysis indicates why interestsshould be taken into account (Brinkerhoff andCrosby 2002).Stakeholder monitoring (household surveys, keyinformant interviews): Household surveys providedata on spending for different kinds of goods as wellas household characteristics, such as age, gender,education and occupation of family members. Dataobtained from household surveys is particularly usefulfor measuring income poverty and relating it tohousehold characteristics. They are the most valuableresource available for assessing economic outcomes,as well as some aspects of opportunity, andfor understanding how those outcomes are associatedwith household characteristics (Stern, Dethierand Rogers 2005). A key informant interview is aform of in-depth interview often used in the initialphase of a project and again in evaluation. Key informantsare selected for their first-hand knowledgeabout the topic of interest. Some of the people whomight be approached in a key-informant interviewinclude a community leader, the head of an NGOthat could become a partner, or the leader of a smallbusiness organisation. (See Section 5 of this chapterfor further discussion.)Strategic Planning Framework/SWOT/PEST: Strategicplanning is a general management techniqueof defining development objectives, planning toachieve those objectives, and deciding how to knowwhen you have succeeded. Strategic planning beginsinternally, and as it progresses toward detailed activityplanning, it needs to be shared and reviewed bystakeholders. SWOT Analysis stands for ‘Strengths,Weaknesses, Opportunities, and Threats’ and is aspecific strategic planning tool used to evaluatethose involved in a project or in a business venture.It involves specifying the objective of the projectand identifying the internal and external factorsthat are favourable and unfavourable to achievingthat objective. PEST analysis stands for ‘Political,Economic, Social, and Technological analysis,’ anddescribes a framework of macro environmental factorsused in environmental scanning. It is a part ofthe external analysis when doing strategic planningand gives a certain overview of the different macroenvironmental factors that the company has to takeinto consideration.Technical assistance: Technical assistance meanstransfer of new knowledge along with new technologyto others who do not know about it. The field of technicalassistance may include management, operationssystems, engineering and other technologies.341

Training (on leadership, group work and relatedmanagement issues): This tool covers a variety ofplanned, prepared, and coordinated programmemesto give group leaders and practitioners informationthey can use to perform their jobs better.Travel grants/internships for officials: These allowmid-career professionals and para-professionals toacquire practical knowledge by visiting or serving inorganisations in foreign countries.Web-based support: The Internet is an invaluabletool for disseminating information to change agentsand development practitioners about legal empowermentof the poor.Workshops: These are structured group meetingsat which a variety of key stakeholder groups,whose activities or influence affect a developmentissue or project, share knowledge and work towarda common vision. With the help of a workshop facilitator,participants undertake a series of activitiesdesigned to help them progress toward the developmentobjective (consensus building, informationsharing, prioritisation of objectives, team building,and so on). Stakeholder workshops are used to initiate,establish, and sustain collaboration in policiessuch as Legal Empowerment of the Poor (WorldBank 1996).Annex 2: Existing Toolkits:An InventoryAccess to justiceThere are several access-to-justice toolkits, focusingon different aspects of the justice question. Amongthe major ones are the following:• The Access Initiative Assessment (TAI) Toolkit. 13Although this has been designed with the environmentin mind, the concepts are capable ofbeing extended to more general access to justiceissues. There are four categories in the TAI toolkit— access to information, public participation, accessto justice, and capacity development. Moreimportantly, the indicators are divided into law,effort and effectiveness. Law indicators measurethe presence and scope of the law, its breadthand support for access and whether it providessufficient guidance for implementation and enforcement.Effort indicators assess governmentaction taken to provide access, including actionto implement laws. Effectiveness indicators assesswhether laws and government efforts haveresulted in effective access and whether theworld has changed because of the level of accessachieved. Given the focus of legal empowerment,adapted use of the access to justice indicators (onall three counts of law, effort and effectiveness)seems to be the most appropriate.• The Office on Drugs and Crime of the United Nations(UNODC) has a Criminal Justice AssessmentToolkit 14 This has separate segments on policing,access to justice, custodial and non-custodialmeasures and cross-cutting issues. Given thefocus of legal empowerment, adapted use of theaccess to justice indicators (covering four headsof the courts; the independence, impartiality andintegrity of the judiciary; the prosecution service;and legal defence and legal aid) seems to be the342

most appropriate.• Although not quite presented as a toolkit, UNDP’sPractitioner’s Guide on Access to Justice can beinterpreted as a toolkit 15 This has the additionaladvantage of bringing in a pro-poor angle. ‘Themeaning of access to justice is interpretativeand contextual. When people think of ‘access tojustice’, they are not necessarily thinking of thejustice system. For example, a UNDP participatorysurvey on people’s perceptions of justice inIndia found that slum dwellers prioritised accessto justice with regard to economic issues, whereasmembers of marginalised castes highlightedthe social dimensions of access, and indigenousminorities highlighted the political dimension.Therefore, the potential of formal and informalmechanisms to provide people with a sense of‘justice’ in a particular situation depends on thecontext, and is just one part of a bigger picture.’• The Asian Development Bank has a few toolkits inthe general law area, but the most relevant one isthe one on gender, law and policy 16 .Property rightsToolkits on property rights belong to different categoriesor segments — such as housing, land rights,minerals, forests and intellectual property. Amongthe major ones are the following:• The Housing and Land Rights Network (HLRN) ofthe Habitat International Coalition (HIC) has a toolkitfor the ‘housing rights defender’ 17 — ‘At theend of the last century, close to 1.2 billion peopleof the world survived in housing conditions thatwere unhealthy and precarious, including 100 millionwho were homeless. At least 600 million urbanresidents in developing countries, with thesenumbers swelling everyday, already live in housingof such poor quality and with such inadequate provisionof water, sanitation and drainage that theirlives and health are under continuous threat.’• USAID has a toolkit for situations where there isa link between land rights (or their lack) and conflict18 Today a ‘menu’ of approaches helps facilitatebroader access to land and engenders greaterequality in economic opportunity. In the past,land was typically taken from large landholdersand redistributed to the ‘land-needy’ by way ofexpropriation, usually with compensation or channelledthrough land funds. Increasingly, marketmediatedand community-managed efforts arebeing explored, including land rental market facilitation.There is a parallel USAID toolkit on therelationship between minerals and conflict 19 andyet another one on forests and conflict. 20Labour rights• Core Labour Standards Handbook, co-publishedby ADB (Asian Development Bank) and ILO. 21• The Public-Private Infrastructure Advisory Facilityof the World Bank group has a toolkit specificallyon the issue of how private participation in infrastructurecan affect the labour market, becauseof fears of job losses and changes in employmentstatus. 22 This is designed for policy-makers andpractitioners, especially in countries where thereis an absence of social safety nets.• The ADB has a toolkit, although it is described asa technical note, on labour issues in public sectorrestructuring. 23• ILO: Human Trafficking and Forced Labour Exploitation:Guidance for Legislation and Law Enforcement.24• D. Tajgman has edited, Extending Labour Law toAll Workers: Promoting Decent Work in the InformalEconomy in Cambodia, Thailand and Mongolia(ILO, Bangkok, 2006).• Ojeda Avilés, Métodos y prácticas en la soluciónde conflictos laborales: Un estudio internacional(ILO, Geneva, Dialogue Document No. 13, May2007). [Methods and practices in the resolution343

of labour disputes: An international study]• Informal Economy Resources Database, which includescase studies. 25• Labour legislation guidelines (which provide substantiveguidance on drafting legislation that iscompatible with core labour standards) features achapter covering elements to take into account inany legislative drafting process. 26• Child Workers in Asia/ILO (2006). Raising onevoice: Training manual for advocates of the rightsof child domestic workers. 27• ILO’s Gender Mainstreaming Strategy (GEMS) andToolkit for Asia and the Pacific includes elementsthat can be applied to law reform processes toensure their gender inclusivity. 28• ILO: Gender Equality and Decent Work — SelectedILO Conventions and Recommendationspromoting Gender Equality. 29• The ILO Gender, Poverty and Employment (GPE)Programmeme has included law reform as onemeans of tackling exclusion that keeps women inpoverty. Its capacity-building and policy developmenttools, used in countries in all regions, arecaptured in the GPE Package, which is available inEnglish and Spanish (Arabic forthcoming). 30• ILO: Sustainable Enterprises. (Report of the Director-General,International Labour Conference,96th Session, 2007), and the Conclusions onsustainable enterprises adopted at the Conference(Provisional Record No. 20), set out featuresof legislation promoting both sustainable entrepreneurshipand protection for labour rights.Belgium, Netherlands, India, Mexico, Hungary,Georgia, Kenya and Belarus. 31 Second, there isa parallel and complementary toolkit on goodpractices for business inspections 32 that lists outbenchmarks that can be used as guidelines by reformers.Third, there is a guide on the design andimplementation of business registration reformsat the national level, with good-practice casesand examples of reform from several countries. 33Fourth, there is a toolkit for the simplification ofbusiness regulations at the sub-regional level,with a focus on the municipal level. 34• The Commonwealth Secretariat has a CommonwealthYouth Credit Initiative Toolkit to help governments,development agencies and NGOs toimplement micro-credit programmemes. 35• A micro-credit rating toolkit was prepared by theUNDP’s regional centre in Colombo, based on micro-creditexperience in Bangladesh, India, Myanmar,Sri Lanka and Sudan. 36• The Office on Drugs and Crime of the United Nations(UNODC) has an anti-corruption toolkit, underthe framework of the Global ProgrammemeAgainst Corruption (GPAC). 37• Transparency International has a range of corruption-fighters’toolkits for monitoring public institutionsand demanding and promoting accountableand responsive public administration. 38Business• Business licensing is often a major barrier to doingbusiness and over-regulation and red tape areassociated with low income, low productivity andlarge levels of informality and corruption. First,the World Bank group has a business licensingreform toolkit, with eight case studies from344

Annex 3: Existing Indicatorsand Indices — An InventoryAccess to justice• Bertelsmann Transformation Index (BTI), withdata since 2004 for 119 developing countries.The status index (SI) of BTI has a question on ruleof law. 39• Business Environment Risk Intelligence’s OperationRisk Index (ORI) has data on 50 countriessince 1996, with a question on enforceability ofcontracts. 40• Columbia University’s State Capacity Survey hasdata since 1999 on 108 countries and has aquestion on the degree to which ethno-culturaland/or religious conflict posed a threat to politicalstability in the country. 41• Columbia University’s State Capacity Survey hasdata since 1999 on 108 countries and has a questionon the state’s adherence to rule of law. 42• Since 1997, the Economist Intelligence Unit(EIU) maintains a database on the economicand business environment in approximately 120developed and developing countries. There aresix questions on violent crime, organised crime,fairness of the judicial process, enforceability ofcontracts, speediness of the judicial process, andconfiscation/appropriation. 43• Freedom House has three separate rankings; buttwo — Nations in Transit and Countries at theCrossroads — are only applied to a limited numberof countries. The one that can be used readilyis Freedom in the World, in existence since 1978and currently with a database of 192 countries.There is a question in determining the ranking asto whether cultural, ethnic, religious and otherminority groups have reasonable self-determination,self-government, autonomy and participation.There is a separate question on whethercitizens are equal under the law, with access toan independent, non-discriminatory judiciary. Yetanother question can be included in this accessto justice head and this is about whether there arepersonal social freedoms, including gender equality,property rights, freedom of movement, choiceof residence and choice of marriage and size offamily. 44• Since 2004, Transparency International and Galluphave the Global Barometer Survey for 69 developedand developing countries. There are twoseparate questions on trust in the legal systemand concern with the level of crime. 45• Since 1996, Global Insight’s Global Risk Servicecovers 117 developed and developing countriesand has a question on losses and costs of crime. Italso has two separate questions on enforceabilityof government contracts and private contracts. 46• Since 1996, Global Insight’s Business Conditionsand Risks Indicators cover 202 developed and developingcountries. This has two separate questionson judicial independence and crime. 47• Since 1995, Heritage Foundation and the WallStreet Journal produce an index of economic freedomthat covers 161 countries. This has a questionon the size of the black market. 48• Since 1996, Institute for Management Developmentbrings out a World Competitiveness Yearbookthat has data on 49 developed and developingcountries. This has a question on whether thelegal environment is detrimental to the country’scompetitiveness. There is also an additionalquestion on whether justice is fairly administeredin society. 49• Since 1982, Merchant International Group Limitedhas data for 155 developed and developing countries.This has a question on legal safeguards. 50• Since 1982, Political Risk Services produces dataon country risks. The financial and economic risk345

categories don’t interest us. But within the politicalrisk category (140 developing and developedcountries), there is a law and order question,divided into two-subcomponents of law andorder. 51• The US State Department has a Trafficking inPeople Report, started in 2001 and covering 149developed and developing countries. 52• The Cingranelli-Richards Human Rights Datasetcovers 192 developed and developing countries.It has a question on independence of the judiciaryand another one on imprisonments becauseof ethnicity, race, and political or religious beliefs.53• The World Bank’s World Business EnvironmentSurvey has existed since 1998 and covers 80developed and developing countries. This hasseveral questions on access to justice and ruleof law — predictability of changes in rules andlaws, quality of the police, organised crime, streetcrime, fair and impartial courts, affordable courts,consistent/predictability of courts, enforcementof court decisions, dishonesty in courts and functioningof the judiciary. 54• Since 1996, the World Economic Forum hasbrought out the Global Competitiveness Reportand this covers 104 developed and developingcountries. This has questions on common crime,organised crime, money laundering (through banksand non-banks), quality of police, independenceof the judiciary, legal framework to challenge thelegality of government action, settlements outsidethe court system, compliance with court rulingsand/or arbitration awards, enforcement of commercialcontracts and use of illegal means to adjudicatedisputes. 55• The World Bank’s World Development Indicatorsdatabase can be used for female work participationrates, unemployment among women and femalerepresentation in national parliament. Thisgives data on 184 countries. 56• Although developed for the environment area, TheAccess Initiative’s (TAI) 148 indicators for 40countries can also be selectively used. 57 Theseindicators are divided under law, effort and effectiveness.One should probably concentrate onlaw indicators, rather than effort and effectiveness.The last two essentially belong to a tool-kitcategory. The law indicators are again divided intoaccess to information, public participation andaccess to justice. We would propose applying thelast heading, on access to justice, in which case,there are 23 questions to consider. Questionslinked to free legal aid, government immunity,confidentiality of information on government actionand independence of appellate bodies shouldcertainly be picked up.Property rights• Bertelsmann Transformation Index (BTI) has datasince 2004 for 119 developing countries. Thestatus index (SI) of BTI has a question on privateproperty. 58• The World Bank’s Country Policy and InstitutionalAssessment (CPIA) database has data on 136 developingcountries. The creation of the databasegoes back to the late 1970s. There is a questionon property rights. 59• Since 1997, Economist Intelligence Unit (EIU)has a database on the economic and businessenvironment in 120 developed and developingcountries. There are two separate questions onintellectual property rights protection and privateproperty protection. 60• Since 1996, Institute for Management Developmentbrings out a World CompetitivenessYearbook that has data on 49 developed anddeveloping countries. This has a question onwhether personal security and private propertyare adequately protected and a separate question346

on whether patent and copyright protection isadequately enforced. 61• The World Bank’s World Business EnvironmentSurvey has existed since 1998 and covers 80developed and developing countries. This hastwo questions on confidence in the judicial systemin ensuring property rights and violation ofpatents. 62• Since 1996, World Economic Forum has broughtout the Global Competitiveness Report and thiscovers 104 developed and developing countries.This has questions on protection of financial assetsand protection of intellectual property. 63• UNDP’s Human Development Report (HDR) hasbeen in existence since 1990 and now covers177 countries. This has data on patents grantedto residents. 64• The International Property Rights Index (IPRI) isextremely new, 2007 being the first year whenthe index was constructed for 70 countries.It covers both physical property rights (PPR)and intellectual property rights (IPR) and alsoincludes a third category titled Legal and PoliticalEnvironment (LP), IPRI being obtained byaggregating across all three categories. 65• Centre on Housing Rights and Evictions (COHRE)has been collecting national data regardingevictions for several years. 66 As ‘freedom fromevictions’ should be the minimum set of ‘protections/security’to which anyone is entitled, thisindicator is vital to assessing the state of legalempowerment regarding land and property rights.COHRE has also developed a tool for monitoringthe ‘Right to Adequate Housing’ which includes asub-index on ‘security of tenure’.• International Land Coalition/CAPRi (Collective Actionon Property Rights) are developing an indexfor common property resources, a crucial issuefor many rural communities, including indigenousgroups. 67• African Union, the Economic Commission for Africa,Millennium Challenge Corporation, the UN-HABITAT, and World Bank map land indicators forAfrica. A joint initiative to develop a comprehensiveset of land indicators for Africa is to be linkedto, inter alia, the African Peer Review Mechanismand the Expert Group meeting will be held on 3-4May 2007.• UN-HABITAT Global Urban Observatory has beendeveloping a Secure Tenure Index to monitor Target11 of the MDGs related to the slum challenge.Secure land tenure is the proxy for the achievementof progress in this target. 68• UN-HABITAT Housing Rights Indicators (HRI)is under development, with the United NationsHigh Commissioner for Human Rightsand includes an indicator related to security oftenure. 69Labour rights• Since 1997, Economist Intelligence Unit (EIU)has a database on the economic and businessenvironment in 120 developed and developingcountries. There is a question on freedom of association.70• Freedom House has three separate rankings, buttwo — nations in transit and countries at thecrossroads — are only used for a limited numberof countries. The one most frequently used isFreedom in the World, in existence since 1978,and now with a database of 192 countries. Thereis a question on whether there are free tradeunions or peasant organisations or their equivalentsand whether there is effective collective bargaining.There is yet another question on whetherthere is equality of opportunity, which includesfreedom from exploitation by, or dependency on,landlords, employers, union leaders, bureaucratsor any other obstacle that prevents access to legitimateeconomic gains. 71347

• Since 1996, Institute for Management Developmentbrings out a World Competitiveness Yearbookthat has data on 49 developed and developingcountries. This has a question on whetherlabour regulations hinder business activities. 72• UNDP’s Human Development Report (HDR) hasbeen in existence since 1990 and now covers177 countries. Data on ratification of some conventions(child labour, elimination of discriminationagainst women, elimination of forced andcompulsory labour, freedom of association andcollective bargaining, elimination of all forms ofracial discrimination can be used). 73• The ILO database can be extensively used. Indicatorsare broadly of two categories: those thatcontain information on ratification of selectedinternational labour conventions, and those thatmeasure specific aspects of work, often linked topoverty/empowerment and the lack thereof. Internationallabour conventions set minimum standards,and information on ratification is availablefor 180 member countries. 74 Ratification doesn’tsolve the problem of implementation per se, butratification in itself signifies political will. Theratified convention database can be divided intothree broad segments, beyond which there is arich database on statistics: 751. Eight fundamental conventions that concernfundamental principles and rights atwork, such as Conventions 29 and 105 onelimination of forced labour, Conventions 138and 182 on child labour, Conventions 100and 105 on discrimination in employment andprotection, and Conventions 87 and 98 onfreedom of association and right to engage incollective bargaining.2. Conventions that provide a basic institutionalframework aimed at protecting againstexploitation, such as Convention 95 on protectionof wages, Convention 155 on occupationalsafety and health, Convention 81 onlabour inspection, Convention 129 on labourinspection for agriculture, Convention 144 ontripartite consultation, and Convention 122 onemployment policy.3. Conventions that address situations thatoverlap with poverty, as, for example, Convention149 on indigenous and tribal people, 76Conventions 97 and 143 on migration foremployment and migrant workers, Convention183 on maternity protection, and Convention137 on rural workers’ organisations.Business• Business Environment Risk Intelligence’s OperationRisk Index (ORI) has data on 50 countriessince 1996 and has a question on bureaucraticdelays. 77• Columbia University’s State Capacity Survey hasdata since 1999, on 108 countries and has aquestion on the severity of corruption within thestate and several separate questions on nepotism,cronyism and patronage. 78• The World Bank’s Country Policy and InstitutionalAssessment (CPIA) database has data on 136 developingcountries; the creation of the databasegoes back to the late 1970s. There is a questionon transparency, accountability and corruption inthe public sector. 79• Since 1997, Economist Intelligence Unit (EIU)has a database on the economic and businessenvironment in 120 developed and developingcountries. There are three separate questions onorderly transfers, vested interests and accountabilityof public officials. There is a separate questionon excessive bureaucracy/red tape. There isa separate question on corruption among publicofficials. 80• Freedom House has three separate rankings, buttwo nations in transit and countries at the cross-348

oads — cover only a limited number of countries.The one that can be used freely is Freedom in theWorld, in existence since 1978 and now with adatabase of 192 countries. There are two separatequestions on whether there are free professionaland other private organisations and whether thereare free businesses or cooperatives. There is alsoa question on whether there is freedom from extremegovernment indifference, and corruption. 81• Since 2004, Transparency International and Galluphave the Global Barometer Survey for 69 developedand developing countries. There are fiveseparate questions on percentage who believe thegovernment is corrupt, frequency of corruption,frequency of household bribery, extent of grandcorruption and extent of petty corruption. 82• Since 1996, Global Insight’s Global Risk Servicecovers 117 developed and developing countriesand has a question on costs of corruption. 83• Since 1996, Global Insight’s Business Conditionsand Risks Indicators, covers 202 developedand developing countries. This has two separatequestions on whether the necessary business lawsare in place and whether there are outstandinggaps and on corruption. 84• Since 1995, Heritage Foundation and the WallStreet Journal produce an index of economic freedomthat covers 161 countries. This has a questionon corruption. 85• Since 1996, Institute for Management Developmentbrings out a World Competitiveness Yearbookthat has data on 49 developed and developingcountries. This has three separate questionson ease of starting a business, the size of the paralleleconomy and bribery and corruption. 86• Since 1982, Merchant International Group Limitedhas data for 155 developed and developingcountries. This has a question on corruption. 87• Since 1982, Political Risk Services producesdata on country risks. The financial and economicrisk categories don’t interest the Commission. Butwithin the political risk category (140 developingand developed countries), there is a question oncorruption. 88• The World Bank’s World Business EnvironmentSurvey has existed since 1998 and covers 80 developedand developing countries. This has questionson regulations on starting new businesses,dishonesty in courts, frequency of additional payments,corruption as obstacle to business andbribery. 89• Since 1996, World Economic Forum has broughtout the Global Competitiveness Report and thiscovers 104 developed and developing countries.This has questions on ease of starting a company,burden of administrative regulations, percentageof firms that are unofficial/unregistered, frequencyof bribery, frequency of firms making extra paymentsand the extent to which firms’ illegal paymentsor influence impose costs on other firms. 90349

Chapter 5 Endnotes1 These international agreements include the UniversalDeclaration of Human Rights (UDHR), the International Covenant onCivil and Political Rights (ICCPR) and the International Covenant onEconomic and Social Rights (ICESR), ILO fundamental Conventionson freedom of association/collective bargaining, and elimination offorced labour, child labour and discrimination; and for indigenouspeoples, the Indigenous and Tribal Peoples Convention, 1989(ILO Convention No. 169). In addition, there is an internationallyrecognised ‘Right to Adequate Housing,’ which includes security oftenure as one of its six components.2 Two useful approaches to analysing stakeholder interestsin development are DFID’s drivers of change (http://www.gsdrc.org/go/topic-guides/drivers-of-change) and SIDA’s power analysis(http://www.sida.se/sida/jsp/sida.jsp?d=118&a=24300&language=en_US).3 Stakeholder analysis is a standard strategic management tool.It is often applied to development programmes and policies. See,for example, the Overseas Development Institute’s Tools for PolicyImpact. Start and Hovland. 2004 and Chapter 5 of the InternationalDevelopment Research Centre’s text on Cultivating Peace, by(Ramirez. 1999. Also see Bianchi and Kossoudji, 2001.4 ‘Rent seeking’ refers to efforts to get government to createeconomic rents, which can then be captured for private gain.Economic rent is simply extra income that would not exist in acompetitive marketplace. Rent-seeking behavior benefi ts theindividual doing it, but is a loss for society due to the ineffi ciencies itcreates.5 Where a country has ratifi ed the United Nations Convention onCorruption (140 have done so to date), formal political commitment(if not true political will) already exists to fi ght corruption.6 There are tools that have been used for refugee return andrestitution in the Balkans and in Afghanistan that are useful in thisregard (e.g., Aursnes and Foley 2005).7 This typology is based on one that fi rst appeared inWilson.1973., ch. 16. Similar matrixes are widely used in publicadministration and development texts (e.g., Brinkerhoff and Crosby2002).8 A side payment is a term from game theory referring to acompensation paid to the game’s loser. Logrolling is the exchangingof political favours to support projects that are of interest only to oneside or the other.9 See for example the work of the ‘Barefoot College’ (Social Workand Research Centre) in Vilonia, Rajasthan, India.10 Development practitioners wanting to mix and match toolsmay refer to the following easily found toolkits and handbooks: TheAccess Initiative Assessment Toolkit (www.accessinitiative.org/how_to_guide.html); the World Bank/International Council on Miningand Metals Community Development Toolkit (http://www.icmm.com/library_pub_detail.php?rcd=183); the UNDP’s Practitioner’s Guide onAccess to Justice (www.undp.org/governance/guidelines-toolkits.htm);the Housing and Land Rights Network of the Habitat InternationalCoalition toolkit for the ‘housing rights defender’ (www.toolkit.hlrn.org/English/start.htm); the Overseas Development Institute’s Researchand Policy in Development (RAPID) Toolkits (http://www.odi.org.uk/publications/toolkit2.html); USAID’s toolkit for situations where thereis a link between land rights (or their lack) and confl ict (www.usaid.gov/our_work/cross-cutting_programmes/confl ict/publications/docs/CMM_Land_and_Confl ict_Toolkit_April_2005.pdf); the Core LabourStandards Handbook, co-published by the Asian Development Bankand ILO (www.adb.org/Documents/Handbooks/Core-Labor-Standards/default.asp); the ILO’s toolkit for mainstreaming employmentand decent work: http://www.ilo.org/public/english/bureau/dgo/selecdoc/2007/toolkit.pdf; Transparency International’s corruptionfi ghters’ toolkits for monitoring public institutions and demandingand promoting accountable and responsive public administration(www.transparency.org/tools/e_toolkit); the CIVICUS and Aga KhanFoundation resource mobilisation toolkit (http://www.akdn.org/agency/akf_trainer.html). See Annex 2 for a comprehensive inventory oftoolkits.11 Available at http://go.worldbank.org/KUDGZ5E6P0.12 The World Resources Institute is one organisation that hasdeveloped participatory monitoring and evaluation techniques. Thesemay be adapted for use in Legal Empowerment of the Poor activitiesto help countries track progress (and lost ground), and allow themensure that reforms actually do lead to empowerment of the poor. Alsosee the Participatory Methods Toolkit prepared by the King BaudouinFoundation and the Flemish Institute for Science and TechnologyAssessment: http://www.viwta.be/fi les/ToolkitPartAssessment.pdf.13 www.accessinitiative.org/how_to_guide.html .14 www.unodc.org/unodc/criminal_justice_assessment_toolkit.html15 Programmeming for Justice: Access for All, UNDP, 2005, www.undp.org/governance/guidelines-toolkits.htm, especially Chapter 2.16 Gender, Law, and Policy in ADB Operations: A Tool Kit, 2006,www.adb.org/Documents/Manuals/Gender-Toolkit/Gender-Law-Policy-Toolkit.asp17 The Housing and Land Rights monitoring ‘Toolkit’, 2005, www.toolkit.hlrn.org/English/start.htm18 Land & Confl ict, A Toolkit for Intervention, USAID, 2005, www.usaid.gov/our_work/cross-cutting_programmes/confl ict/publications/docs/CMM_Land_and_Confl ict_Toolkit_April_2005.pdf19 Minerals & Confl ict, A Toolkit for Intervention, USAID, 2004,www.iisd.org/pdf/2004/envsec_minerals_confl ict.pdf20 Forests & Confl ict, A Toolkit for Intervention, USAID, 2005, www.usaid.gov/our_work/cross-cutting_programmes/confl ict/publications/docs/CMM_Forests_and_Confl ict_2005.pdf21 Core Labour Standards Handbook, ADB and ILO, 2006, www.adb.org/Documents/Handbooks/Core-Labour-Standards/default.asp.22 Labour Issues in Infrastructure Reform: A Toolkit, PPIAF, 2004,www.ebookmall.com/ebook/168641-ebook.htm23 Labour Issues in Public Enterprise Restructuring, TechnicalNote, Asian Development Bank, 2006, available at www.adb.org/Documents/Reports/Labor-Issues-PublicEnterpriseRestructuring/Labor-Issues-PER.pdf24 Geneva 2005.25 http://www.ilo.org/dyn/infoecon/iebrowse.search?p_lang=en26 http://www.ilo.org/public/english/dialogue/ifpdial/llg/index.htm27 http://www.ilo.org/ipecinfo/product/viewProduct.do;jsessionid=0a038009ce90d3a489e22af427195a29dfeb2dc51ec?productId=3060350

28 http://www.ilo.org/dyn/gender/genderresources.details?p_lang=en&p_category=NEW&p_resource_id=31329 http://www.ilo.org/dyn/gender/genderresources.details?p_lang=en&p_category=NEW&p_resource_id=30930 http://www.ilo.org/dyn/gender/genderresources.details?p_lang=en&p_category=NEW&p_resource_id=13831 Business Licensing Reform: A Toolkit for DevelopmentPractitioners, The World Bank Group, 2006, available at www.businessenvironment.org/dyn/be/docs/137/LicensingReform32 Good Practices for Business Inspections, Guidelines forReformers, Small and Medium Enterprises Department, TheWorld Bank Group, 2006, available at www.ifc.org/ifcext/sme.nsf/AttachmentsByTitle/BEEGood+Practices+for+Business+Inspection/$FILE/Bus+Inspect+Book.pdf33 Reforming Business Registration Regulatory Procedures atthe National Level, A Reform Toolkit for Project Teams, Small andMedium Enterprises Department, The World Bank Group, 2006,available at www.ifc.org/ifcext/sme.nsf/AttachmentsByTitle/BEEReformBusRegNational/$File/Bus+Reg+book.pdf34 Simplifi cation of Business Regulations at the Sub-NationalLevel, A Reform Implementation Toolkit for Project Teams, InternationalFinance Corporation, The World Bank Group, 2006, available at www.ifc.org/ifcext/sme.nsf/AttachmentsByTitle/BEESubnational/$File/BeeToolkit05_full.pdf35 The Commonwealth Youth Credit Initiative Toolkit,Commonwealth Secretariat, 2002.36 http://topics.developmentgateway.org/microfi nance/rc/ItemDetail.do~1053.37 Anti-Corruption Toolkit, United Nations Offi ce on Drugs andCrime, 2004, available at www.unodc.org/unodc/corruption_toolkit.html38 www.transparency.org/tools/e_toolkit39 http://www.bertelsmann-transformation-index.de/atlas.0.html?&L=140 http://www.beri.com41 http://www.columbia.edu42 http://www.columbia.edu43 http://www.eiu.com44 http://www.freedomhouse.org45 http://www.gallup-international.com46 http://www.globalinsight.com47 http://www.globalinsight.com48 http://www.heritage.org49 http://www.imd.ch50 http://www.merchantinternational.com51 http://www.prsgroup.com52 http://www.state.gov/g/tip/rls/tiprpt/53 http://www.humanrightsdata.com54 http://www.ifc.org/ifcext/economics.nsf/Content/IC-WBESConditions55 http://www.weforum.org56 http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS57 http://research.accessinitiative.org/?module=research.methodology58 http://www.bertelsmann-transformation-index.de/atlas.0.html?&L=159 http://www.worldbank.org60 http://www.eiu.com61 http://www.imd.ch62 http://www.ifc.org/ifcext/economics.nsf/Content/IC-WBESConditions63 http://www.weforum.org64 http://www.undp.org65 http://internationalpropertyrightsindex.org/index.php?content=home66 http://www.cohre.org67 http://www.landcoalition.org/programme/polcompropstudy.htm68 http://millenniumindicators.un.org/unsd/mdg/Metadata.aspx?IndicatorId=3269 http://www.unhabitat.org70 http://www.eiu.com71 http://www.freedomhouse.org72 http://www.imd.ch73 http://www.undp.org74 http://.www.ilo.org/ilolex75 Obviously relevant only if such people exist in the countryconcerned.76 http://laborsta.ilo.org. Employment in the informal economy,child labour statistics, decent work indicators, forced labour andgender discrimination are instances of areas where this databasecan be mined.77 http://www.beri.com78 http://www.columbia.edu79 http://www.worldbank.org80 http://www.eiu.com81 http://www.freedomhouse.org82 http://www.gallup-international.com83 http://www.globalinsight.com84 http://www.globalinsight.com85 http://www.heritage.org86 http://www.imd.ch87 http://www.merchantinternational.com88 http://www.prsgroup.com89 http://www.ifc.org/ifcext/economics.nsf/Content/IC-WBESConditions90 http://www.weforum.org351

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The Commission on Legal Empowerment of the Poor aims to make legal protection andeconomic opportunity not the privilege of the few but the right of all.This is a wholly different approach to thepoverty debate …our Commission will focus ona unique and overlooked aspect of the problem:the inextricable link between pervasive povertyand the absence of legal protections forthe poor.– Madeleine K. AlbrightThe law is not something that you invent in auniversity – the law is something that youdiscover. Poor people already have agreementsamong themselves, social contracts, and what youhave to do is professionally standardize thesecontracts to create one legal system that everybodyrecognizes and obeys.– Hernando de Sotowww.undp.org/legalempowermentdesign: cynthiaspence.com