Making The Law Work for Everyone Commission on Legal ... - ISSAT

In reply to its expression of sorrow and concern, the <strong>Commission</strong> 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 <strong>for</strong>ced 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.<strong>The</strong> 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 af<strong>for</strong>d to lose.Creating an infrastructure of laws, rights, en<strong>for</strong>cement, and adjudication is not anacademic project, of interest to political scientists and social engineers. <strong>The</strong> establishmentof such institutions can spell the difference between vulnerability and security,desperation and dignity <strong>for</strong> 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 <strong>Commission</strong> report, with its recommendations, will help point the way to that goaland to a better and more equitable future <strong>for</strong> us all.Respectfully,Madeleine K. AlbrightHernando de SotoCo-chairs<strong>Commission</strong> 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 <strong>Law</strong>, is the outcome of the working groupchaired by <strong>Commission</strong> member Lloyd Axworthy, <strong>for</strong>mer 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 <strong>Commission</strong>member Ashraf Ghani, Dean of Kabul University and <strong>for</strong>mer 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 <strong>Commission</strong>member Allan Larsson, <strong>for</strong>mer 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 <strong>Commission</strong>member Medhat Hassanein, <strong>for</strong>merly 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 <strong>for</strong> Implementation of Re<strong>for</strong>ms, is the outcome of the workingi

group chaired by <strong>Commission</strong> members Hilde Frafjord Johnson, <strong>for</strong>mer Norwegian Ministerof International Development, and Milinda Moragoda, Sri Lanka’s <strong>for</strong>mer Ministerof Economic Re<strong>for</strong>ms, 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 <strong>for</strong> their tireless ef<strong>for</strong>ts, particularly to Timothy Dolan <strong>for</strong>the production of this publication and Jill Hannon <strong>for</strong> Secreteriat management. Specialthanks also go to Kristin Cullison <strong>for</strong> 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 <strong>Commission</strong>.Apart from participating as members in our <strong>Commission</strong>, 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 <strong>for</strong> 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 <strong>Commission</strong> whose generous contributions helped to make this <strong>Commission</strong>a reality and to the in-kind support provided by USAID.We are also grateful to UNDP and its Administrator, Kemal Dervis, , <strong>for</strong> hosting the <strong>Commission</strong>.We are especially grateful the role played by Olav Kjørven and Maaike de Langen.Last, but not least, thanks go to Tevia Abrams <strong>for</strong> his editorial work and Cynthia Spence<strong>for</strong> the design and layout of this publication.Co-chair Executive Director Co-chairii

so that their in<strong>for</strong>mal contracts have the protection of the law, and that a safe, secureand equitable way is found <strong>for</strong> their integration within the mainstream economy. Thisis considered necessary <strong>for</strong> empowering them to derive due benefits from the growingnational and global economy.<strong>The</strong> key elements of the strategy to achieve the desired outcomes are as follows:• Create political climate <strong>for</strong> 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 <strong>Law</strong>, PropertyRights, Labour Rights, and Legal Mechanisms to Empower In<strong>for</strong>mal Businesses.<strong>Work</strong>ing 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 <strong>Commission</strong>), 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 re<strong>for</strong>ms at the country level.Gender equality and the rights of indigenous communities are central to the legalempowerment agenda. <strong>The</strong>se issues have been mainstreamed across the work of the<strong>Commission</strong>, 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 <strong>Commission</strong> on Legal Empowermentof the Poor and consists mainly of the outcomes of five working groups establishedto in<strong>for</strong>m the <strong>Commission</strong>’s deliberations through substantive work in thethematic areas of Access to Justice and Rule of <strong>Law</strong>, Property Rights, Labour Rights,Business Rights and with respect to overall implementation strategies. <strong>The</strong> 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 <strong>Law</strong>, 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. <strong>The</strong> working group consideredthe top-down and bottom-up processes necessary <strong>for</strong> generating effective re<strong>for</strong>ms 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 <strong>for</strong> their legal empowerment.Chapter 3, Labour Rights, looks into how the poor can be legally empowered andpoverty reduced when the gap between the <strong>for</strong>mal and in<strong>for</strong>mal economy is bridgedand labour rights are respected. <strong>The</strong> working group studied the factors that constrainparticipation in the <strong>for</strong>mal economy and the challenges to en<strong>for</strong>cing labour rights. <strong>The</strong>group made practical recommendations on how to facilitate convergence between <strong>for</strong>maland in<strong>for</strong>mal systems and the en<strong>for</strong>cement of labour standards.Chapter 4, Business Rights, studies the factors that preclude the poor from benefitingfrom full participation in the <strong>for</strong>mal economy, with a specific focus on the regulatoryenvironment <strong>for</strong> micro, small and medium sized businesses. It also examined localfinancial capacity and incentives <strong>for</strong> lenders to expand access to credit <strong>for</strong> individualsand enterprises owned or operated by the poor.Chapter 5, Road Maps <strong>for</strong> Implementation of Re<strong>for</strong>ms, synthesises the key practicaloutputs of the work of the other chapters / working groups into a tool kit <strong>for</strong> useby policymakers around the world. <strong>Work</strong> in this chapter draws on existing guidelines,frameworks, manuals, indices, indicators and other related aids, which can help thekey audiences of the <strong>Commission</strong> and facilitate the implementation of its policy recommendations.<strong>The</strong> aim of the tool kit is to support policymakers in proposing re<strong>for</strong>msand, once implemented, in measuring their results.<strong>The</strong> chapters contained in this volume reflect the views of the respective working groupmembers, though not necessarily the view of the <strong>Commission</strong>.Naresh C. Singh,Executive Director of the <strong>Commission</strong>v

Table of contentsChapter 1 Access to Justice and the Rule of <strong>Law</strong>......................................... 1Introduction ...................................................................................................... 1An Access to Justice Cornerstone: Legal Identity...................................................... 4<strong>The</strong> 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 In<strong>for</strong>mation and Creating Incentives to Register ............................. 10Strategies to Create Af<strong>for</strong>dable, Inclusive and Fair Justice ....................................... 12<strong>The</strong> Nature of the Problem ............................................................................ 12<strong>The</strong> Social Realities of Access to Justice ..................................................... 12Increasing Quality and Reducing Transaction Costs ...................................... 15Enabling Self Help with In<strong>for</strong>mation and Community Organising ....................... 18In<strong>for</strong>mation about Norms: Legal Education .................................................. 19Self Help Interventions: Forming of Peer Groups .......................................... 22Broadening the Scope of Legal Services <strong>for</strong> 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 Re<strong>for</strong>ms ............................................. 36Standard Routes <strong>for</strong> the Most Urgent Legal Needs ....................................... 37Bundling Claims: Class Actions .................................................................. 39Other Ways to Reduce Costs of Access Wholesale ......................................... 40Improving In<strong>for</strong>mal and Customary Dispute Resolution .................................... 42Education and Awareness Campaigns ......................................................... 43Tailored Legal Aid Services ........................................................................ 44Targeted Constraints on In<strong>for</strong>mal Justice ..................................................... 44Structuring Institutional Relationships ........................................................ 45Improving Access to Justice in the Government Bureaucracy .................................... 47<strong>The</strong> Nature of the Problem ............................................................................ 49Public Administration Re<strong>for</strong>m ....................................................................... 49

External Monitoring ................................................................................... 49Structural Re<strong>for</strong>ms .................................................................................... 50Administrative <strong>Law</strong> Re<strong>for</strong>m ........................................................................... 53Legal Mechanisms to Facilitate Participation and Monitoring ........................ 53Judicial Review of Administrative Decisions................................................. 54Conclusions and Recommendations ............................................................ 56Chapter 1 Endnotes ..................................................................................... 58Chapter 1 Bibliography ................................................................................. 58Boxes1 Rule of <strong>Law</strong> and Justice ........................................................................... 32 Coping with Legal Pluralism in Relations to Women’s Rights in Ethiopia ...... 46Tables1 Needs <strong>for</strong> Norms and Interventions .......................................................... 15Chapter 2 Empowering the Poor Through Property Rights ......................... 63Introduction .................................................................................................... 73Faltering Property Rights: <strong>The</strong> Nature And Scale Of <strong>The</strong> 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 <strong>The</strong> 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 Re<strong>for</strong>m And Improved Action................................................ 86

<strong>The</strong> Economics of In<strong>for</strong>mality and the Debate on Labour Regulations ...................... 157<strong>The</strong> Economic Impact of Labour Regulation: An Overview of Key Results......... 158<strong>The</strong> Consequences of Labour Market Regulation ........................................ 159<strong>The</strong> Impact of Labour Market Regulation: Country Studies .......................... 161Towards a More Nuanced Understanding of Labour Regulations ...................... 162Interpretation of Regulations .................................................................... 163<strong>The</strong> Institutional Environment .................................................................. 164Heterogeneity in the Regulatory Architecture ............................................. 164Conclusions............................................................................................... 165Principles and Practices of Labour Rights and Legal Empowerment ................................<strong>The</strong> Basis Principles <strong>for</strong> Inclusive Re<strong>for</strong>mBoth Promotion of Change — and Management of Change .......................... 166Both Property Rights — and Labour Rights ............................................... 166Lessons from National Re<strong>for</strong>m Practice ........................................................ 167Legal Identity ......................................................................................... 167Voice and Representation ........................................................................ 167Social Protection Re<strong>for</strong>m ......................................................................... 168Improvement of the Quality of Labour Market Institutions ........................... 168Legal Empowerment Through Alternative Dispute Resolution ....................... 169Improved Business Environment ............................................................... 169Simplification of Contracting Procedures ................................................... 169Conclusions <strong>for</strong> National Strategies <strong>for</strong> Legal Empowerment ........................... 170Towards a new social contract: Policies and Processes <strong>for</strong> Legal Empowerment........ 170Policy Recommendations ............................................................................ 170Process Recommendations ......................................................................... 173Towards a New Social Contract .................................................................... 175Annex 1........................................................................................................ 176Recent and Current Initiatives to Improve Statistics on the In<strong>for</strong>mal ............... 176Annex 2........................................................................................................ 177Case 1 Extending Thailand’s Labour <strong>Law</strong> Through the MinisterialRegulation <strong>for</strong> Home <strong>Work</strong>ers ...................................................................... 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 <strong>for</strong> Unorganised <strong>Work</strong>ers ................................... 182Case 7 Social Security <strong>for</strong> all in the Philippines ............................................ 183Case 8 Minimum Living Standard Security System in China ........................... 184Case 9 Labour protection <strong>for</strong> 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 <strong>for</strong> LegalEmpowerment ........................................................................................... 187Case 13 Revising bidding and procurement practices in Senegal .................... 187Chapter 3 Endnotes ................................................................................... 189Chapter 3 Bibliography ............................................................................... 191Boxes 1 Different Categories of In<strong>for</strong>mal <strong>Work</strong>ers and Corresponding Challenges ..1412 Relationships Between In<strong>for</strong>mality and Growth: Cross-country Evidence .1423 ILO’s Convention on Indigenous and Tribal Peoples 1989 (No. 169) 1454 Social case <strong>for</strong> Labour Regulation ................................................. 1485 ILO Conventions and Recommendations Pertinent to theIn<strong>for</strong>mal Economy .......................................................................... 150Figures 1 Segmentation in the In<strong>for</strong>mal Labour Market .................................. 140Tables 1 Mean Measures of Regulation, by Income Level.............................. 158Chapter 4 Business Rights ........................................................................ 195<strong>The</strong> In<strong>for</strong>mal Entrepreneur .......................................................................... 197Legal Empowerment and Legal Identity ........................................................ 198An Integrated Economy Approach ................................................................ 199<strong>The</strong> Re<strong>for</strong>m Agenda ................................................................................... 200Introduction and Framework ............................................................................. 202Why Business Rights? And Why Now? .......................................................... 203In<strong>for</strong>mal Economy and In<strong>for</strong>mal 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 <strong>for</strong> Change .................................................................. 209To Sum Up ................................................................................................ 210In<strong>for</strong>mal Economy and In<strong>for</strong>mal Businesses .................................................. 210In<strong>for</strong>mal-Formal Continuum ........................................................................ 210Poverty and In<strong>for</strong>mal Economy .................................................................... 211In<strong>for</strong>mal Enterprises ................................................................................... 211In<strong>for</strong>mal Enterprises and Productivity .......................................................... 212Mapping of In<strong>for</strong>mal Economies .................................................................. 214Women in the In<strong>for</strong>mal Economy ................................................................. 215

Indigenous Peoples and In<strong>for</strong>mal Businesses ................................................ 216Empowering In<strong>for</strong>mal Businesses ................................................................ 217To Sum Up ................................................................................................ 219Business Rights: Unlocking Barriers/Constraints to Empower In<strong>for</strong>mal Enterprises ............220Barriers and Constraints to Business Rights .................................................. 222Legal, Regulatory and Administrative Barriers ............................................... 223Costs of In<strong>for</strong>mality .................................................................................... 227Rights-based Legal Empowerment ............................................................... 229To sum up ................................................................................................. 230Empowering In<strong>for</strong>mal 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 <strong>Making</strong> a Difference <strong>for</strong> In<strong>for</strong>malEnterprises — an Evidence-based Approach ..................................................... 242Innovations which Demonstrate Business Rights and Legal Empowerment ....... 244Starting a Business ................................................................................. 244Operating a Business .............................................................................. 247Expansion .............................................................................................. 248En<strong>for</strong>cing Contracts ................................................................................ 250Exit ....................................................................................................... 251Successful Initiatives taken by Businesses ................................................ 251An Integrated Economy Approach ................................................................ 253To Sum Up ................................................................................................ 255Pursuing the Agenda <strong>for</strong> Change ....................................................................... 256Changes have to be Context Specific ............................................................ 257Re<strong>for</strong>m Processes Must Be Participatory and Gender Responsive .................... 257Legal Empowerment of In<strong>for</strong>mal Business Should be Prioritized as aGgovernance Issue ..................................................................................... 257Strategies and Institutions to Support In<strong>for</strong>mal Businesses ............................ 258Market Based Institutions <strong>for</strong> the poor ......................................................... 259Adding Value and Supply Chain to the Labour of the Poor and In<strong>for</strong>malBusinesses ................................................................................................ 259

Taking Microcredit Out of the Ghetto ........................................................... 259Mutual Funds <strong>for</strong> the Poor .......................................................................... 260Institutionalising the Collective Identity of Poor and In<strong>for</strong>mal Businesses ........ 261Business Rights - Provides Value Based Change Process ................................ 262Pillars of Change ....................................................................................... 263Conclusions............................................................................................... 265Recommendations and Key Messages .......................................................... 266Objectives of Empowerment Process ......................................................... 266Means to Meet Objectives ........................................................................ 266<strong>The</strong> Formalisation Debate ........................................................................ 266Chapter 4 Endnotes ................................................................................... 267Chapter 4 Bibliography ............................................................................... 271Boxes 1 Empowering Indigenous People through Entrepreneurship ............... 2172 Unlocking Barriers: Legal Mechanisms to Empower In<strong>for</strong>malBusinesses .................................................................................... 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 <strong>for</strong> Rural In<strong>for</strong>mal Businesses—VegCARE, Kenya ..................................................................................... 232Linking Markets: Promoting Sustainable Tourism Development withIndigenous and Rural Communitiesin Latin America ................................... 234Alternate Model of In<strong>for</strong>mal Credit: SMEs Helping In<strong>for</strong>mal Enterprises in Peru ..235Construmex (Mexico) — Helping Migrants with Remittances ....................... 238Durban: A Heterogeneous Solution Through Public Private Partnership ........ 240Buy-back Centres <strong>for</strong> Waste Collectors: A Public-Private-CommunityPartnership Model .................................................................................. 240“Tell us How to Make Legal Mechanisms and Tools <strong>Work</strong> <strong>for</strong> In<strong>for</strong>malBusinesses.” President Benjamin Mkapa, Tanzania .................................... 243Business Registration Re<strong>for</strong>m in Uganda ................................................... 245Identity, Voice And Association In <strong>The</strong> In<strong>for</strong>mal Economy —A Long Journey Of Self-employed Women’s Association (Sewa), India .......... 254Technology and the In<strong>for</strong>mal 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 In<strong>for</strong>mal Enterprises ................... 2234 Regulatory Environment and In<strong>for</strong>mality ........................................ 2255 Legal Empowerment of In<strong>for</strong>mal Enterprises .................................. 263

Chapter 5 Road Maps <strong>for</strong> Implementation of Re<strong>for</strong>ms: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 ................................................................................... 300In<strong>for</strong>mality ................................................................................................ 302Policy Characteristics ................................................................................. 308Complexity ................................................................................................ 308Ambiguity ................................................................................................. 309Discord ..................................................................................................... 310Diagnosing the Influence on Policy Implementation ....................................... 312An Approach to Implementation <strong>for</strong> 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 Re<strong>for</strong>m ............................................. 325Choosing the Appropriate Country Level Process ........................................... 326Tools to Support Legal Empowerment Re<strong>for</strong>ms .............................................. 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 <strong>Work</strong>s Contracts .............................. 2865.2 Ancestral Domain Sustainable Development and ProtectionPlan of the Bago and Bugkalot Tribes ............................................... 2935.3 Empowering <strong>Work</strong>ers 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 Coordination<strong>for</strong> 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 Re<strong>for</strong>ms ............................................................... 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 <strong>for</strong> a Demand-led Assessment of Implementation ... 331

1. Introduction<strong>The</strong> <strong>Commission</strong> on Legal Empowerment of thePoor (CLEP) emphasises re<strong>for</strong>ms 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 <strong>for</strong> 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. <strong>The</strong> 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. <strong>The</strong> challenge <strong>for</strong> the justicesystem, those who govern and their internationalpartners is <strong>for</strong>midable: How to turn the law intoan effective tool <strong>for</strong> those living in absolute poverty— people living with less than a dollar a day?<strong>The</strong> optimistic goal of our working group <strong>for</strong>Chapter 1 was to identify promising strategies <strong>for</strong>legally empowering poor people to have accessto justice. In the process, we investigated bestavailable practices and solicited suggestions duringa series of national consultations organised bythe <strong>Commission</strong> (CLEP), and we reviewed evaluationstudies of access to justice programmesconducted by various NGOs. It was apparent thatacademic research had delivered many case studiesabout in<strong>for</strong>mal 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 <strong>for</strong> 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 in<strong>for</strong>mation about themost promising strategies <strong>for</strong> providing access tojustice. <strong>Law</strong> and development, operating underthe name of legal empowerment, is one particularstrand the <strong>Commission</strong> 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 <strong>for</strong> the Poor programme.In addition to issues of practice and theory, wewill consider legal principles. It may be difficult2

to achieve access to justice <strong>for</strong> the poor througha <strong>for</strong>mal 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 <strong>Commission</strong>er 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 <strong>for</strong> 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 <strong>for</strong>mallegal recognition, and as a result they are completelyexcluded from the <strong>for</strong>mal protections ofthe state legal system and as beneficiaries ofpublic goods and services. Section 3 turns to thebasic challenge <strong>for</strong> 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.<strong>The</strong>n 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 in<strong>for</strong>mal justice.Box 1 Rule of <strong>Law</strong> and Justice<strong>The</strong> 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 en<strong>for</strong>ced 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 be<strong>for</strong>e 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 <strong>for</strong> the rights of the accused, <strong>for</strong> the interests ofvictims and <strong>for</strong> the well-being of society at large. It isa concept rooted in all national cultures and traditionsand, while its administration usually implies <strong>for</strong>maljudicial mechanisms, traditional dispute resolutionmechanisms are equally relevant. <strong>The</strong> internationalcommunity has worked to articulate collectively thesubstantive and procedural requirements <strong>for</strong> the administrationof justice <strong>for</strong> more than half a century(Rule of <strong>Law</strong> and Transitional Justice in Conflict andPost-Conflict Societies Report of the Secretary-General;S/2004/616 of 23 August 2004).<strong>The</strong> <strong>Law</strong> is superior to, and thus binds, the governmentand all its officials.<strong>The</strong> <strong>Law</strong> 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.<strong>The</strong> law must respect the dignity and preserve thehuman rights of all persons.<strong>The</strong> <strong>Law</strong> must establish and respect the constitutionalstructures necessary to secure a free and decent societyand to give all citizens a meaningful voice in <strong>for</strong>mulatingand enacting the rules that govern them.<strong>The</strong> <strong>Law</strong> must devise and maintain systems to adviseall persons of their rights and just expectations, andto empower them to seek redress <strong>for</strong> grievances andfulfilment of just expectations without fear of penalty orretaliation. (Kennedy 2007).3

<strong>The</strong>oretical perspectives that in<strong>for</strong>m this analysisare reducing transaction costs, as well as remedyingmarket failure like imperfect in<strong>for</strong>mation.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 1<strong>The</strong> Nature of the ProblemOne important basis of legal empowerment is ‘legalidentity’: the <strong>for</strong>mal, legal recognition by thestate that a person exists. In developed countries,citizens take this <strong>for</strong> 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 <strong>for</strong>overcoming 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 <strong>for</strong>mal legalidentity are often unable to take advantage ofanti-poverty programmes specifically designed <strong>for</strong>them. Those who lack a <strong>for</strong>mal identity may alsobe especially vulnerable to exploitative practices,including child labour and human trafficking.<strong>The</strong> importance of providing all people with <strong>for</strong>mallegal recognition has long been recognised.Indeed, the Universal Declaration of HumanRights announced over 50 years ago that, “<strong>Everyone</strong>has the right to recognition everywhere asa person be<strong>for</strong>e the law” (Art. 6). <strong>The</strong> 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. <strong>The</strong> 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 <strong>for</strong>mal recognition of a fundamentalindividual right to a <strong>for</strong>mally 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, <strong>for</strong> 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 <strong>for</strong>m 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 <strong>for</strong>mal 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 there<strong>for</strong>e 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 <strong>for</strong> re<strong>for</strong>m.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 <strong>for</strong> providing accessible,reliable, and low-cost registration services <strong>for</strong>all people who would like to <strong>for</strong>mally 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 <strong>for</strong>mal legal recognition becauseof a political decision to exclude them.• Third, some poor individuals may lack <strong>for</strong>mallegal 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 <strong>for</strong>mal registration in particular,may be entirely rational. Formal legal registrationmay also make one more vulnerable totaxation, conscription, or various <strong>for</strong>ms 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.<strong>The</strong>se 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 there<strong>for</strong>ebe tailored to the particular situation. Proposedre<strong>for</strong>ms 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 <strong>for</strong> 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 <strong>for</strong>poor people in remote areas with limited disposableincome. And, of course, petty corruption maysubstantially raise the costs of <strong>for</strong>mal 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 of<strong>for</strong>ms 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 re<strong>for</strong>m is theelimination of fees <strong>for</strong> registration and acquisitionof a first copy of the necessary identificationdocuments. <strong>The</strong> usual arguments <strong>for</strong> user fees <strong>for</strong>government services do not apply <strong>for</strong> 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 <strong>for</strong> poor individuals, the <strong>for</strong>mer approachis generally preferable as it eliminates the administrativecosts associated with determiningwho is eligible <strong>for</strong> a waiver. <strong>The</strong> 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 <strong>for</strong>cing 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 <strong>for</strong> her. Second, having multipleproviders of registration services reduces the opportunities<strong>for</strong> 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 <strong>for</strong> 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 in<strong>for</strong>mationtechnology infrastructure, it might also bepossible <strong>for</strong> 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 <strong>for</strong>all poor communities, but where it is feasible, itmay be a better alternative to relying on paper<strong>for</strong>ms 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.<strong>The</strong> difficulty of reaching poor communities, especiallydispersed rural communities, remains achallenge. <strong>The</strong>re are several strategies that governmentsand interested organisations might use toimprove the outreach and efficacy of registrationef<strong>for</strong>ts. 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, <strong>for</strong> example, UNDP and the UnitedNations Mission to Congo succeeded in registeringapproximately 25.7 million Congolese in 2006 inadvance of the national elections. <strong>The</strong>y 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). <strong>The</strong> 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. <strong>The</strong> 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 been<strong>for</strong>mally registered (UNICEF 2006).Another potentially valuable approach to improvingregistration ef<strong>for</strong>ts is to ‘bundle’ registrationwith other service delivery programmes. For example,many countries have, or are considering,extensive vaccination programmes <strong>for</strong> children inpoor communities. It may often be relatively easy<strong>for</strong> 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 <strong>for</strong> 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 ef<strong>for</strong>t, thus profiting from a fitting chainregistration service. Similarly, some poor women— sadly, not nearly enough — receive some <strong>for</strong>mof 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 ef<strong>for</strong>ts.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 <strong>for</strong> 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 <strong>for</strong>m 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 ef<strong>for</strong>ts.Another sort of ‘bundling’ strategy might link<strong>for</strong>mal 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 <strong>for</strong>mality 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. <strong>The</strong> local chief canboth provide in<strong>for</strong>mation to the community anddeal with the state authorities.8

Thus, reaching out to local cultural and religiousleaders, and empowering them to <strong>for</strong>mally 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 <strong>for</strong>mal 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 <strong>for</strong>mal 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 <strong>for</strong>mal registration in place. Forexample, in the case of the Peruvian highlanders,<strong>for</strong>mal 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 ef<strong>for</strong>ts 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 be<strong>for</strong>e international human rights tribunals.<strong>The</strong> track record of this strategy is mixed,however: while international human rightslitigation has sometimes succeeded in raisingawareness, the tribunal decisions themselveshave typically not been en<strong>for</strong>ced 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 en<strong>for</strong>cementof 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 ef<strong>for</strong>ts. It may there<strong>for</strong>e 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 ef<strong>for</strong>ts 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 In<strong>for</strong>mation 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 <strong>for</strong>mal registration, or they do not understandthe benefits of a <strong>for</strong>mal legal identity. Anotherreason may be that the poor are suspiciousof the state and its agents, and this warinessleads them to avoid <strong>for</strong>mal registration even whenit would be in their interests. Yet a third possibilityis their rational calculation that the expectedcosts of <strong>for</strong>mal 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 in<strong>for</strong>mation 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 registrationef<strong>for</strong>ts have relied on paralegals, NGOs andlaypeople to assist poor individuals and communitiesin completing the <strong>for</strong>mal registrationprocedure.For example, the Egyptian Centre <strong>for</strong> 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 re<strong>for</strong>ms 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 avoid<strong>for</strong>mal registration <strong>for</strong> rational reasons — <strong>for</strong>example, 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 <strong>for</strong>mal registration orincreasing the benefits associated with <strong>for</strong>malregistration, 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 in<strong>for</strong>med and rational, in11

3. Strategies to CreateAf<strong>for</strong>dable, Inclusive andFair Justice<strong>The</strong> Nature of the Problem<strong>The</strong> Social Realities of Access to Justice<strong>The</strong> 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 <strong>for</strong>emost, 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 <strong>for</strong>ce diminish the humanresources people have left <strong>for</strong> seizing opportunities.This also requires legal protection <strong>for</strong> 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. <strong>The</strong> 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 en<strong>for</strong>cement mechanismsthat resolve conflicts (see Chapter 2). Similarly,their interests as employees and as entrepreneursshould be recognised <strong>for</strong>mally, as well as protectedagainst attempts of others to take advantage oftheir ef<strong>for</strong>ts (see Chapters 3 and 4).Surveys consistently show that the needs ofindividuals <strong>for</strong> legal interventions are concentratedaround the major transitions or changesin personal status in a lifetime. A likely reason<strong>for</strong> this is that property and other assets oftenaccrue within a relationship. This is especiallytrue <strong>for</strong> poor people. <strong>The</strong>ir homes usually belongto families and kinships. <strong>The</strong>y make use of theirarable land where the different members are designateddifferent tasks, roles and rights, whilst<strong>for</strong>mal officially recognised ownership is uncleareven though a clear in<strong>for</strong>mal regime may exist.<strong>The</strong>y 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. <strong>The</strong>se closerelationships are powerful tools <strong>for</strong> value creation,but they also build on inter-dependent relations.<strong>The</strong> 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 ef<strong>for</strong>t in thefamily and its assets than their husbands. Thatmakes it difficult to leave the relationship, andmakes them vulnerable to exploitation.<strong>The</strong> <strong>for</strong>mal (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). <strong>The</strong>assumption 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 <strong>for</strong>mally 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 <strong>for</strong>eseeevery 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 <strong>for</strong>property development are the most common transitions.<strong>The</strong>se 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 <strong>for</strong> 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. <strong>The</strong> claimsof those returning home create extra transitionproblems and thus legal needs.<strong>The</strong> paths to justice available to the poor in orderto cope with these problems and <strong>for</strong> 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 <strong>for</strong>mal registrationsystem is lacking, some person may start collectingin<strong>for</strong>mation 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 <strong>for</strong>mal or in<strong>for</strong>malprinciples 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 <strong>for</strong>the poor is often present in the <strong>for</strong>m of religiousnorms and faith based dispute resolution mechanisms.<strong>The</strong> scope of these mechanisms may belimited, however, to family issues and crime.<strong>The</strong>y are less likely to extend to property rights,employment problems, and the issues related tosetting up businesses on which the <strong>Commission</strong>on Legal Empowerment of the Poor focuses.In some communities, in<strong>for</strong>mal dispute resolutionmechanisms exist. A recent survey of in<strong>for</strong>maljustice systems identified the following commoncharacteristics of these systems (Wojkowska2006). <strong>The</strong> problem is viewed as relating to thewhole community as a group — there is strongconsideration <strong>for</strong> the collective interests at stakein disputes. Decisions are based on a process ofconsultation. <strong>The</strong>re is an emphasis on reconciliationand restoring social harmony. Arbitratorsare appointed from within the community on thebasis of status or lineage. <strong>The</strong>re is often a highdegree of public participation. Rules of evidenceand procedure are flexible and no professionallegal representation is needed. <strong>The</strong> 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. <strong>The</strong> decisionis based on consensus, providing a high levelof acceptance and legitimacy. <strong>The</strong>re are no cleardistinctions between criminal and civil cases,and between in<strong>for</strong>mal justice systems and localgovernance structures. En<strong>for</strong>cement 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. <strong>The</strong>se often workagainst the poor. In<strong>for</strong>mal systems tend to rein<strong>for</strong>ceexisting 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 <strong>for</strong>mallegal system is often out of reach. As we haveseen, fees <strong>for</strong> birth registration can already be unaf<strong>for</strong>dable,and a court action to protect propertyrights or to en<strong>for</strong>ce a contract with a tenant is outof the question. <strong>The</strong> 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.<strong>The</strong>y 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 <strong>for</strong>mal legal rules and the threatof intervention by neutral courts, even if just aremote possibility, should not be underestimated(Kauffmann 2003).<strong>The</strong> actual situation from which processes improvingaccess to justice have to start can be summarisedas follows. <strong>The</strong> 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. <strong>The</strong>y may havesome options to access their rights, throughspontaneous arrangements, through faith-basedsystems, through in<strong>for</strong>mal justice, or through the<strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong>med, or interpreted to becomeeasily applicable (such as the ones on division orcompensation in property disputes or on terminationof an employment contract). Likewise, theneeds <strong>for</strong> 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, <strong>for</strong> commercial transactionssimple en<strong>for</strong>cement of debts may be the14

Table 1 Needs <strong>for</strong> 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 per<strong>for</strong>m positiveduties > Section 4NormsResponsibility to protectRespect <strong>for</strong> others’ human rightsRules that deal with standard complicationsefficientlyDefault rules <strong>for</strong> fair treatment duringrelationshipRules of thumb <strong>for</strong> division of assets atterminationRules regarding reasonable qualityexpectationsSimplifi ed contractual regimesRegulation of government conductRespect <strong>for</strong> human rightsNorms relating to positive dutiesIntervention capacityGeneral prevention strategiesRetributive/restorative/criminaljustice <strong>for</strong> 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-en<strong>for</strong>cement through reputationmechanismsEn<strong>for</strong>cement of simple contractsComplaint procedures with independenten<strong>for</strong>cementResponsive governmentComplaint procedurespriority, and complaints against government mayhave to be used primarily as a tool <strong>for</strong> 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 <strong>for</strong> justice are not unlimited orunrealistic. <strong>The</strong> poor need some norms in particularto protect them and to give them opportunities.<strong>The</strong>y do not need a court or lawyers <strong>for</strong> 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 ofen<strong>for</strong>cement. 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 TransactionCosts<strong>The</strong> 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. <strong>The</strong>reason <strong>for</strong> this is three-fold. First, access to legalservices — and, <strong>for</strong> that matter, access to justice— is not valuable in and of itself. <strong>The</strong> legal systemis a means <strong>for</strong> 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 <strong>for</strong> food, clothing,shelter, land, medical care, transportation, credit,leisure time, and virtually every other scarce resource.<strong>Everyone</strong> who advocates spending socialresources on providing justice services to the poorshould there<strong>for</strong>e 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 <strong>for</strong>m 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. <strong>The</strong> point is notthat general redistribution in the <strong>for</strong>m of welfarebenefits should always be preferred to re<strong>for</strong>mstargeted specifically at justice services. Rather,thinking about the comparison to general redistributionis useful because it <strong>for</strong>ces 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 <strong>for</strong> 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.<strong>The</strong> 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. <strong>The</strong>secosts can have many different <strong>for</strong>ms. 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.<strong>The</strong> 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 <strong>for</strong>the complex interventions of the legal system.Establishing the rule of law requires a smooth interactionof many different institutions that cooperateto per<strong>for</strong>m complicated tasks. A functioninglegal system has mechanisms <strong>for</strong> lawmaking inplace, but also <strong>for</strong> facilitating settlement, neutralfact-finding, neutral decisions in disputes, anden<strong>for</strong>cement of rights. Police, courts, prisons,lawyers, and clients themselves <strong>for</strong>m a very complicatedsupply chain. This is also true to someextent <strong>for</strong> in<strong>for</strong>mal systems. What its clients getdepends on local mechanisms that create socialnorms, the possibilities to challenge them if necessary,the quality of the <strong>for</strong>um 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. <strong>The</strong>y 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 in<strong>for</strong>malprocedures and <strong>for</strong>mal ones. Choices between different<strong>for</strong>ms 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 <strong>for</strong> 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.<strong>The</strong> case of registration also shows in which directionto search <strong>for</strong> approaches to reduce thecosts of legal services. Interactive computer systemsthat let people per<strong>for</strong>m 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 in<strong>for</strong>mation, 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 <strong>for</strong>med. A legalsystem functions by <strong>for</strong>ging productive links: between<strong>for</strong>mal and in<strong>for</strong>mal; 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, in<strong>for</strong>mation, 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).<strong>The</strong> last lesson is that politics matters. Exclusionor limiting access can be profitable <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>ged inorder to facilitate inclusion.- <strong>The</strong> 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 in<strong>for</strong>mationabout 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 <strong>for</strong>mal legal infrastructure,the market failure framework both offersmore guidance on how to allocate scarcelegal aid subsidies and suggests other sorts ofstructural re<strong>for</strong>ms 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 imperfectin<strong>for</strong>mation. <strong>The</strong>n 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.<strong>The</strong> potential of in<strong>for</strong>mal justice, and its links tothe <strong>for</strong>mal legal system, are discussed at the endof this section.Enabling Self Help with In<strong>for</strong>mationand 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 <strong>for</strong> legal empowerment may be toenhance the possibilities <strong>for</strong> self-help in the areaof access to justice.18

<strong>The</strong> <strong>Work</strong>ing Group has noted that this is a topicthat has not yet attracted sufficient attention inacademic thinking about access to justice. <strong>The</strong>reis 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 in<strong>for</strong>mation about legal rights anddispute resolution is an essential tool <strong>for</strong> empowerment,as well as <strong>for</strong> prevention of social strife.<strong>The</strong> UK government even set up a Public LegalEducation and Support (PLEAS) Task Force. Atthis stage, however, the available in<strong>for</strong>mation islimited, and this is certainly an issue on whichfurther research is warranted.In<strong>for</strong>mation 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 in<strong>for</strong>mationengenders 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, <strong>for</strong> instance, the governmentonly publishes a small number of copiesof the statutes passed by Parliament, and thesewere available only to those who pay a fee. <strong>The</strong>few 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 <strong>for</strong> a trained legal professional (ADB2002). Furthermore, many countries draft andadminister the law only in the national language(often the language of the <strong>for</strong>mer colonial government),which many of the poor do not speak. Thislanguage barrier creates a significant transactioncost <strong>for</strong> poor people who might otherwise availthemselves of the legal system. 4An obvious way to remedy this is to in<strong>for</strong>m peoplemore broadly about norms and interventions thatthey may have to rely on. In<strong>for</strong>mation technologyis arguably the most promising avenue <strong>for</strong>this, now that the poor will increasingly have accessto internet connections close to the placeswhere they live. Preferably, such in<strong>for</strong>mationmust 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 <strong>for</strong> help if police harass them; or how to press<strong>for</strong> re<strong>for</strong>ms of laws that have not yet <strong>for</strong>malisedtheir 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 basis<strong>for</strong> hope, confidence and activism in favour ofequal rights. <strong>The</strong> in<strong>for</strong>mation should also begeared towards the best practices <strong>for</strong> solving theproblems the poor face. What are the rules andthe best ways <strong>for</strong> solving inheritance problems? Afarmer working <strong>for</strong> 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 <strong>for</strong> settling such aproblem, instead of getting abstract in<strong>for</strong>mationfrom 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 <strong>for</strong> the re<strong>for</strong>m of bad laws or theimplementation of good ones. Non-<strong>for</strong>mal legaleducation (NLE, as opposed to <strong>for</strong>mal 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 ef<strong>for</strong>ts 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.Be<strong>for</strong>e interventions are considered, however, itis useful to investigate what causes the lack ofin<strong>for</strong>mation, why market <strong>for</strong>ces do not provide asolution <strong>for</strong> this, and what are the consequencesof this lack of in<strong>for</strong>mation <strong>for</strong> the provision ofjustice services to the poor. In an efficient market<strong>for</strong> justice services, prospective consumers wouldbe able to evaluate their own legal needs andseek out appropriate providers. Furthermore, consumerin<strong>for</strong>mation about the nature and qualityof the legal services offered would ensure that themarket price <strong>for</strong> legal services reflects the valueof that service to consumers. Not all prospectiveconsumers need to be perfectly in<strong>for</strong>med,because the prices themselves would conveyin<strong>for</strong>mation (cf. Schwartz and Wilde 1979).Nonetheless, a critical mass of in<strong>for</strong>med potentialconsumers is necessary <strong>for</strong> the market to allocatelegal services efficiently. If a population of potentialconsumers lacks sufficient basic in<strong>for</strong>mationon 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 in<strong>for</strong>mation about legal rightsand entitlements, and about available legal services,is thus problematic <strong>for</strong> the poor themselvesand also causes justice services to be insufficientlyresponsive to the needs of the poor. Butwhy does this lack of in<strong>for</strong>mation arise? In mostmarkets, consumers learn in<strong>for</strong>mation about serviceavailability and quality from three sources.<strong>The</strong> first source of in<strong>for</strong>mation is the suppliers,who typically have an incentive to disseminatein<strong>for</strong>mation about the services they provide. <strong>The</strong>second source of consumer in<strong>for</strong>mation consistsof other consumers — either directly of indirectlythrough the price mechanism. <strong>The</strong> third sourceof in<strong>for</strong>mation is general media coverage. Ifthese three sources of in<strong>for</strong>mation are sufficientin most consumer markets, why might they notbe sufficient to communicate in<strong>for</strong>mation aboutrights and legal services to poor communities?Understanding the answer to this question willhelp re<strong>for</strong>mers design interventions that are appropriatelytargeted to the underlying problems.We consider first the question. Why might legalservice providers not disseminate the relevantin<strong>for</strong>mation? <strong>The</strong>re 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 in<strong>for</strong>mationis a consequence of some other market failure.This suggests that lack of legal in<strong>for</strong>mation maysometimes be more symptom than disease. Second,general in<strong>for</strong>mation 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 disseminatingin<strong>for</strong>mation to that community are relatively high,there may be insufficient incentives <strong>for</strong> any onejustice provider to supply in<strong>for</strong>mation. <strong>Law</strong>yers,courts, or ADR providers may have little reasonto in<strong>for</strong>m their possible clients about the rulesthey need to solve their problems. This problemis likely especially acute with respect to legalin<strong>for</strong>mation that is not immediately connected tothe need to hire a legal professional. Third, somecountries impose stringent restrictions on advertising<strong>for</strong> 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 in<strong>for</strong>mation,they may also make it difficult <strong>for</strong> service providersto disseminate useful in<strong>for</strong>mation (Rhode2000, Barton 2001).<strong>The</strong>se observations suggest that eliminating manyof the other market failures discussed later in thischapter may also redress the in<strong>for</strong>mational 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 in<strong>for</strong>mationabout legal rights is the first step in promotingaccess to justice, it may sometimes turn outthat improvements on this dimension follow otherre<strong>for</strong>ms without the need <strong>for</strong> substantial additionalgovernment or donor spending. Also, an in<strong>for</strong>mation-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 in<strong>for</strong>mation. Inaddition to relying on individual service providersto disseminate in<strong>for</strong>mation, bar associationsand other lawyers’ organisations are a naturalcandidate <strong>for</strong> 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 in<strong>for</strong>mationabout legal rights. Bar associations, however,might have too little incentive to disseminatein<strong>for</strong>mation about legal services providers otherthan lawyers, such as paralegals.With respect to the second source of in<strong>for</strong>mation,other consumers, when a serviceis consumed only rarely within a given population,then other potential consumers are unlikelyto be a useful source of in<strong>for</strong>mation. This suggeststhe possibility of a vicious circle in which adearth of in<strong>for</strong>mation about legal rights and legalservices leads to limited use of the legal system,and limited use of the legal system perpetuatesthe lack of in<strong>for</strong>mation about law and legal services.This problem is likely to be especially acutewhen social networks <strong>for</strong> sharing in<strong>for</strong>mation arerelatively small and insular. To address this problem,re<strong>for</strong>mers should strengthen in<strong>for</strong>mationsharingnetworks that allow transmission of in<strong>for</strong>mationabout law and legal in<strong>for</strong>mation. Buildingnetworks of legal service providers, NGOs, andcommunity advocacy groups can go a long way toincreasing the in<strong>for</strong>mal dissemination of legal in<strong>for</strong>mation.Additionally, the dissemination of legalin<strong>for</strong>mation is likely to be more effective when legalservices are integrated with other social servicesprovided by an umbrella NGO. Unin<strong>for</strong>medpotential 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 <strong>for</strong>m of legal redress.This is yet another argument <strong>for</strong> ‘bundling’ legalservices with other social services (ADB 2001a).Third, even when all the above strategies havebeen implemented, there is likely to be a residualneed <strong>for</strong> governments or donor-subsidised disseminationof legal in<strong>for</strong>mation, especially generalizedlegal in<strong>for</strong>mation or in<strong>for</strong>mation that is notimmediately connected to an ongoing or imminentdispute. For this sort of targeted legal in<strong>for</strong>mationdissemination, 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 in<strong>for</strong>mationinto 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 <strong>for</strong> 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 <strong>for</strong>mationaround relatively ‘safe’ development issues such aslivelihood, micro-credit or reproductive health canpave the way <strong>for</strong> 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

(Asian Development Bank 2001a). In Nepal, theyhave similarly gained through a multi-faceted empowermentproject that included non-<strong>for</strong>mal legaleducation (Thomas and Shrestha 1998).Community-based legal education seems to havea great empowering potential. Improving legalliteracy may be one goal of legal education.However, if the ef<strong>for</strong>ts are additionally targetedat establishing and maintaining peer supportnetworks, legal education can be a powerful participatorystrategy that enables people to helpthemselves and to assist others in current andfuture situations. Peer support networks can beaimed at the ongoing dissemination of generallegal in<strong>for</strong>mation, provide preventive education,share knowledge, or teach practical skills. Peergroups can also be tailored to specific legal needsor community groups, such as women wanting tostart a small business. Moreover, peer groups canbe a means to organise people, e.g. to identify,set and promote community priorities, build influence,gain negotiation power, or even developpilot programmes. Paralegals and other legaleducators can accommodate peer networks, e.g.by conjointly developing legal and non-legal strategiesthat match the needs of the community, orhelp building partnerships with the local authorities,and the <strong>for</strong>mal legal system.Broadening the Scope of LegalServices <strong>for</strong> the PoorThis brings us to the next strategy to improveaccess to justice. Like other users of the legalsystem, and even when they become more empoweredto solve problems themselves, the poorwill often need help. Without assistance, theywould likely be incapable of finding the rules thatapply to their situation, and would there<strong>for</strong>e beunable to induce the ‘other party’ to meet theirrightful demands. Where, then, could the poorfind legal services that fit their problems andtheir resources? Our working group suggests thatef<strong>for</strong>ts be focused on following approaches: (1)lower cost delivery models; (2) legal services thatcontribute to empowerment; (3) alternative disputeresolution; (4) bundling legal services withother services to the poor, and (5) removing artificialconstrictions of supply.<strong>The</strong> gist of this strategy is that the poor couldbenefit from an expanded conception of what ‘legalservices’ might involve. <strong>The</strong>re are many functions,beyond legal education and conventionallegal representation, which justice services providerslike paralegals can usefully per<strong>for</strong>m. <strong>The</strong>seinclude mediating conflicts, organising collectiveaction, and advocating with both traditionaland <strong>for</strong>mal authorities. This breadth of functionsmakes alternative service providers attractive intheir own right, and not merely cheap substitutes<strong>for</strong> lawyers. It is worth highlighting that legalservices have an important role to play in the categoriescovered within the other three chapters ofthis volume; namely, in helping people to securelegal identities, to navigate plural legal systems,and to hold the state accountable. Instead ofviewing legal services narrowly as lawyers providingaccess to courts via <strong>for</strong>ensic representation,our working group argues that we should conceiveof them more broadly, as follows:- That they may include non-lawyers like community-basedparalegals.- That they could also function in the areas ofadvocacy, mediation, education, and organising.That their aims as legal service providers includeempowering poor people, increasing the accountabilityof public and private institutions, and decreasingimpunity <strong>for</strong> violators of basic rights.23

From an economic perspective this strategyaims create an efficient, effective system <strong>for</strong>delivering legal services. <strong>The</strong> following analysiswill again be in<strong>for</strong>med 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 <strong>for</strong> various <strong>for</strong>ms of legal aid.<strong>The</strong> usual discussion then focuses on the <strong>for</strong>mthat 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 <strong>for</strong>th. 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 <strong>for</strong>legal services, a variety of approaches other thandirect subsidisation emerge, and the appropriatescope <strong>for</strong> 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. <strong>The</strong> term ‘paralegal’ may be somewhatmisleading insofar as it suggests an assistantwho per<strong>for</strong>ms 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 <strong>for</strong>Justice 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).<strong>Law</strong> 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). <strong>The</strong>re<strong>for</strong>e, 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 af<strong>for</strong>dable by the poor, nor perhaps bygovernments or donors who might subsidise legalaid, there could be a role here to be played bybar associations. <strong>The</strong>y could help to gather anddisseminate in<strong>for</strong>mation in the legal communityabout access to justice issues, and provide useful<strong>for</strong>mal or in<strong>for</strong>mal oversights. <strong>The</strong>y could, moreover,offer political support <strong>for</strong> access to justicere<strong>for</strong>m and increased funding <strong>for</strong> necessary legalaid services, help to determine the most worthycandidates <strong>for</strong> 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 re<strong>for</strong>m (such as thosethat call <strong>for</strong> increasing competition in the provisionof legal services or reducing the demand<strong>for</strong> legal services); or, they might be excessivelyenthusiastic about other approaches (those, <strong>for</strong>example, that call <strong>for</strong> large government or donorsubsidies to lawyers who offer legal aid services).Access to justice re<strong>for</strong>mers 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 <strong>for</strong> any givenlegal claim. Some legal services ef<strong>for</strong>ts 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 <strong>for</strong> 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 <strong>for</strong> appropriate training.<strong>Work</strong>ing with the poor involves a set of skills thatis quite different from what most law schoolsteach and what most lawyers practice. Mechanisms<strong>for</strong> inculcating these development-orientedskills and perspectives are NGO internships <strong>for</strong>law students and young lawyers and law schoolclinical legal education programmes. <strong>The</strong> 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 <strong>for</strong> carryingout non<strong>for</strong>mal 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 re<strong>for</strong>m 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 <strong>for</strong>m 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 <strong>for</strong>m of broadening legal services is toexpand the use of various <strong>for</strong>ms of alternativedispute resolution (ADR), including small claimscourts, as well as arbitration, mediation, and conciliation(Lopez-de-Silanes 2002, Hammergren25

2007). Such mechanisms prove preferable <strong>for</strong>the poor because they are more accessible thancourts, af<strong>for</strong>dable, comprehensible and (often)effective. <strong>The</strong>y can include government administrativetribunals, where paralegals can sometimesprovide representation, such as <strong>for</strong> agrarianre<strong>for</strong>m and labour disputes in the Philippines.Third party arbitration courts have been set up inmany countries of the <strong>for</strong>mer Soviet Union where,in connection with livelihood projects, the partiesselect arbitrators <strong>for</strong> 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 <strong>for</strong>handling criminal conduct, particularly violentconduct (though non-state systems are oftenstill used <strong>for</strong> 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 <strong>for</strong> 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. Re<strong>for</strong>mers should attempt, when possible,to steer private disputes into appropriate<strong>for</strong>ms of ADR, and to husband scarce judicialresources <strong>for</strong> 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, re<strong>for</strong>mers might also address the demand<strong>for</strong> 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 be<strong>for</strong>e easy accessible, low-cost consumercommittees. A similar strategy <strong>for</strong> reducingdemand <strong>for</strong> expensive judicial services is to adoptre<strong>for</strong>ms that allow <strong>for</strong> the resolution of certaintypes of disputes according to customary law orother traditional practices of the non-state sector.<strong>The</strong>se 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.<strong>The</strong> 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. <strong>The</strong>first is that these programmes are often biasedin favour of powerful interests and lack adequatesafeguards to protect less sophisticated parties(UNDP 2005).<strong>The</strong> 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. <strong>The</strong> 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, <strong>for</strong> 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 <strong>for</strong>providing 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. Re<strong>for</strong>mers have already begun to experimentwith incorporating health and educationservices within existing MFIs, and early indicationssuggest this integration has been effective (Dun<strong>for</strong>d2002). 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.<strong>The</strong> integration with community organising andgroup <strong>for</strong>mation 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 <strong>for</strong> the<strong>for</strong>mer and agricultural technologies <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong> legal services. <strong>The</strong>re are two primaryreasons why the supply of legal service providersmight be artificially constricted. <strong>The</strong> 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 <strong>for</strong>mal 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 <strong>for</strong> privatelaw schools to enter the market.<strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong> providinglegal education, <strong>for</strong> example by relaxing accreditationrequirements or encouraging distancelearning. Elite lawyers might sneer at ‘nightschool’ or ‘trade school’ lawyers, but expandingthe opportunities <strong>for</strong> 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 <strong>for</strong> paralegalsor other non-lawyer service providers (McLymontand Golub 2000), as well as training programmes<strong>for</strong> practicing lawyers who want to move intopractice areas that emphasise the provision oflegal services to poor or otherwise disadvantaged28

clients. <strong>The</strong> 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 <strong>for</strong> 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. <strong>The</strong> 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 in<strong>for</strong>mationdissemination.In addition to expanding opportunities <strong>for</strong> legaleducation and training, re<strong>for</strong>ming the nature oflegal education at the elite law schools couldmake it easier <strong>for</strong> young lawyers to pursue careersthat include a substantial amount of public servicework or compensated representation of poorclients. <strong>The</strong>re is no one right way to do this, anddifferent law schools will necessarily take differentapproaches to curricular re<strong>for</strong>m. With that caveat,possible re<strong>for</strong>ms 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 <strong>for</strong> 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 models<strong>for</strong> other members of their communities.<strong>The</strong> 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 un<strong>for</strong>tunate 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 <strong>for</strong> elite practice, that the benefits of expandingthe opportunities <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>complete elimination of prohibitions on the unauthorisedpractice of law, and in other quarters <strong>for</strong>more modest changes that would allow paralegalsand lay people to per<strong>for</strong>m 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 re<strong>for</strong>mers to liberalise the market <strong>for</strong>legal services, other legal professional associationshave fiercely opposed any re<strong>for</strong>ms that mightthreaten their monopoly on legal services (Hammergren2007, Messick 1999). <strong>The</strong> 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 <strong>for</strong> 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 per<strong>for</strong>m 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 <strong>for</strong> legal services — in the <strong>for</strong>m ofweakening restrictions on who can provide particularlegal services — is likely to improve access tojustice <strong>for</strong> the poor substantially, while imposingrelatively few costs on society so long as alternativequality-control institutions are in place.A major attraction of a re<strong>for</strong>m strategy that emphasisesthe liberalisation of the market <strong>for</strong> legal servicesis that, compared to many other legal re<strong>for</strong>mstrategies, liberalisation may require fewer governmentor donor expenditures, at least in the medium-to long-term. Instead of compensating <strong>for</strong> amarket distortion through continuous payments tothe individuals, the liberalisation strategy focuseson curing a market distortion through a change inthe regulatory scheme. <strong>The</strong> 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 <strong>for</strong> legalservices. Though the appropriate implementationstrategy will depend on the specific circumstancesof each individual case, as a rule of thumb it isprobably advisable <strong>for</strong> re<strong>for</strong>mers to work with thebar to find points of agreement and opportunities<strong>for</strong> 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 <strong>for</strong>ms of liberalisation that increase theparticipation of non-lawyers in contexts were fewlawyers currently offer services.For example, re<strong>for</strong>mers could support special ex-30

ceptions to ‘unauthorised practice’ restrictions <strong>for</strong>paralegals that want to offer legal services in poorrural communities that are not currently servedby many lawyers. Or, re<strong>for</strong>mers could encouragearrangements where non-lawyers provide servicesunder the nominal supervision of a licensed legalprofessional (cf. Maru 2006). <strong>The</strong>se gradual firststeps may build political support <strong>for</strong> 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 <strong>for</strong> 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.<strong>The</strong> fundamental point here is that the legal servicesmarket will not operate efficiently <strong>for</strong> 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. <strong>The</strong>re<strong>for</strong>e, re<strong>for</strong>mers shouldadopt measures, appropriate to the particular circumstances,to eliminate both distortions in thesystem of legal education and restrictions on themarket <strong>for</strong> legal services, when these distortionsand restrictions artificially restrict the supply oflegal service providers <strong>for</strong> poor communities.Financing of Claims: Legal Insurance andTargeted Legal Aid<strong>The</strong> 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. <strong>The</strong>se 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 <strong>for</strong> litigation and en<strong>for</strong>cement.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 <strong>for</strong> providingoptimal insurance against legal risks are oftenunavailable or inadequate.• Second, many poor people lack access to awell-functioning private market <strong>for</strong> 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.<strong>The</strong> 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: <strong>The</strong> 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 <strong>for</strong> legal services havedeveloped in some parts of Europe (Killian 2003,Regan 2003), they are generally rare elsewhere inthe world. <strong>The</strong> lack of effective insurance againstlegal risk burdens the poor much more than theaffluent, because the affluent are better able toself-insure — <strong>for</strong> example, by having large ‘rainyday funds’ available to cover un<strong>for</strong>eseen emergencyexpenditures.One reason <strong>for</strong> 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 straight<strong>for</strong>wardredistribution of wealth rather than any re<strong>for</strong>mtargeted at legal services specifically. Anotherreason may be that poor people lack sufficientaccess to in<strong>for</strong>mation about the benefits of legalinsurance. This consideration is a variant on thegeneral concern about the lack of adequate legalin<strong>for</strong>mation, considered in a later section.Other reasons <strong>for</strong> a failure in the market <strong>for</strong> legalinsurance involve problems with insurance marketsgenerally. <strong>The</strong> first problem is ‘moral hazard’:those with insurance are less likely to take care toavoid taking actions that are likely to trigger theneed <strong>for</strong> insurance coverage. <strong>The</strong> 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. <strong>The</strong>se mechanisms may not beadequate to address the problem in the context oflegal insurance, however. <strong>The</strong> 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 straight<strong>for</strong>ward solution to pervasive failuresin the market <strong>for</strong> legal insurance is <strong>for</strong> the stateor the international donor community to step in toprovide universal insurance against certain typesof legal risks. <strong>The</strong> most obvious and widespread<strong>for</strong>m of government-administered legal insuranceis the provision of public defenders <strong>for</strong> 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

<strong>The</strong> case <strong>for</strong> 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 <strong>for</strong>m of the opportunitycosts of the resources spent on emergencylegal services <strong>for</strong> 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 re<strong>for</strong>mersmight employ to redress the failures in the market<strong>for</strong> 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. <strong>The</strong> 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.<strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong> financing of claims, <strong>for</strong> 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. <strong>Law</strong>yers whorepresent such plaintiffs are reimbursed <strong>for</strong> 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 <strong>for</strong>individuals with facially weak claims to have accessto a lawyer. CLAF may also be an attractive‘middle way’ <strong>for</strong> 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 <strong>for</strong> emergency legal insurance:greater reliance on relatively small, communitybasedrepresentative organisations. In addition toproviding support <strong>for</strong> members who are facing alegal emergency, these organisations could alsoprovide financial support <strong>for</strong> members who need tohire a legal professional to pursue a legal claim <strong>for</strong>damages against some other party; the claimant,if victorious, could then pay back the organisation<strong>for</strong> fronting the money. Alternatively organisationslarge enough to retain their own legal servicescould ‘loan’ their legal representatives to membersin need without charge.<strong>The</strong> 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.<strong>The</strong>re 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. <strong>The</strong> individualclaimant, however, does not internalie thefull value of this deterrence benefit (Shavell 1997).Second, where an individual seeks a remedy thatinvolves the re<strong>for</strong>m 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 <strong>for</strong> beneficial legal re<strong>for</strong>m (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 <strong>for</strong> legal services willbe too low from a social perspective. In thesesituations, re<strong>for</strong>ms that provide an incentive tosecure legal services specifically (as opposed toef<strong>for</strong>ts to redistribute income generally) may beappropriate.One approach to redressing this type of marketfailure would be <strong>for</strong> 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, <strong>for</strong> 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.<strong>The</strong>se 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 <strong>for</strong>m 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 <strong>for</strong> example, by liberalising standingrequirements and expanding the availabilityof representative actions, two re<strong>for</strong>ms 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 advisable<strong>for</strong> 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.<strong>The</strong> 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 <strong>for</strong> 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 re<strong>for</strong>m remedies or changesin the substantive law.• Third, governments and donors should encourageand facilitate the organisation of localgroups that can provide legal representation(or funding <strong>for</strong> 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. <strong>The</strong>seorganisations also provide more effective monitoringand allocate resources more efficientlythan states or donor organisations.Reducing Transaction Costs:Wholesale Re<strong>for</strong>ms<strong>The</strong> preceding section concluded with an analysisof the situation where one lawsuit creates benefits<strong>for</strong> a large number of poor people. This is anexample of a more general strategy to look <strong>for</strong> 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 <strong>for</strong> 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, re<strong>for</strong>mersshould 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 ef<strong>for</strong>ts 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 basicin<strong>for</strong>mation 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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> commonailments. <strong>The</strong>se protocols are in<strong>for</strong>med byresearch and make implied trade-offs betweenquality (risk) and costs. <strong>The</strong> 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 <strong>for</strong> propertydevelopment are the most common transitionsin a life time. <strong>The</strong>y 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 <strong>for</strong> economies of scale.Standard in<strong>for</strong>mation leaflets <strong>for</strong> clients can savethe costs of intake and leave clients better in<strong>for</strong>med.Best practices <strong>for</strong> the settlement processcan be designed. Rules of thumb <strong>for</strong> division ofproperty can be defined, if necessary with standardexceptions when common reasons <strong>for</strong> 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.<strong>The</strong>ir clients, often opponents in a conflict, arenot very likely to cooperate in order to find themost efficient process. <strong>The</strong> incentives on lawyers,who are in a unique position as professionalsbecause they can directly create work <strong>for</strong> eachother, are very different from those in a normalsupply chain. <strong>The</strong>re, producers, distributors andclients all have the same incentives to cut thetransaction costs, because there is an exposureto outside competition. <strong>The</strong> incentives on judgesand other neutrals may also work against standardisation.<strong>The</strong>y 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.<strong>The</strong>se issues regarding the management of thejustice supply chain have, as far as the <strong>Work</strong>ingGroup could establish, not yet been studied indepth (Hadfield 2000 is one of the exceptions).An open question is, <strong>for</strong> instance, why legalservices to individuals tend to be per<strong>for</strong>med byindividual lawyers, or small partnerships, and notby bigger companies that offer standard services<strong>for</strong> common problems, such as is the case <strong>for</strong>banking and insurance. Another issue is wherethe responsibility <strong>for</strong> the design and improvementof procedures should be located: Is this primarilythe task of the legislator, of the judiciary, or isthere a role here <strong>for</strong> 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 morein<strong>for</strong>mal 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 sufficientin<strong>for</strong>mation 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.<strong>The</strong>re 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 <strong>for</strong> the needs <strong>for</strong>nuances and detail. Administering laws in smallclaims courts or in<strong>for</strong>mal tribunals entails dispensingwith some of the procedural safeguardsthat attend more <strong>for</strong>mal legal proceedings, andthe adjudicators in such <strong>for</strong>ums 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 in<strong>for</strong>mation, andnecessitates designing ‘simple’ procedures that38

at least meet certain quality thresholds.Nonetheless, legal and adjudicative simplificationmay drastically reduce the transactioncosts of access to justice <strong>for</strong> a very largenumber of potential consumers of justice services(NCLEP Tanzania 2007, NCLEP Uganda 2007).<strong>The</strong> 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 <strong>for</strong>malistic court procedures may alsobe altered to accommodate poor people or peoplewho have had little contact with <strong>for</strong>mal statestructures be<strong>for</strong>e 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 re<strong>for</strong>ms is that many ofthem reduce the demand <strong>for</strong> the services offeredby attorneys or other legal professionals; indeed,that is part of the point of such re<strong>for</strong>ms. 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.<strong>The</strong> 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 reducingre<strong>for</strong>ms 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 re<strong>for</strong>ms 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 re<strong>for</strong>msto reduce aggregate transaction costs, and havebeen a powerful ally of pro-poor re<strong>for</strong>mers. It isthere<strong>for</strong>e important to cultivate the support ofthe legal profession when pursuing these sorts ofre<strong>for</strong>ms.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 <strong>for</strong>m of aggregate multi-party or representativelitigation, so that a small number of legalservice providers can represent a large group ofsimilarly situated individual.One model <strong>for</strong> 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 <strong>for</strong> disadvantaged groups inthe United States (Bloom 2006). In the developingworld, class action suits have also producednotable successes <strong>for</strong> 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 <strong>for</strong> certain types of issues (Gidi2003). While these re<strong>for</strong>ms have their problemsand detractors, there is some evidence that theclass action mechanism has improved access tojustice <strong>for</strong> the poor. In Brazil, <strong>for</strong> example, classactions against municipal governments have successfullychallenged illegal taxes and illegal fareincreases <strong>for</strong> 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 af<strong>for</strong>d 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 <strong>for</strong> legalservices, expanding the availability of collectivelitigation devices tends to increase the demand<strong>for</strong> legal services and there<strong>for</strong>e should appeal tothe legal profession (at least its more entrepreneurialmembers). Political opposition to this sortof re<strong>for</strong>m 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,<strong>for</strong> 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 <strong>for</strong> procedures, that isseldom addressed explicitly. <strong>The</strong>re is an obvioustrade-off between the costs of the registration proceduresand processes to settle disputes or to en<strong>for</strong>cerights and the costs of error if the wrong factsare established. Requiring unnecessary documentsor evidence can be a serious barrier to access.<strong>The</strong> 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 re<strong>for</strong>mmakes 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 <strong>for</strong>mal documents can be expensive.As a result, poor people may simply <strong>for</strong>egothe activity in question (which is inefficient),may <strong>for</strong>ego 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. <strong>The</strong> advantage of this approachis that the legal service can be tailored tothe individual client’s needs. <strong>The</strong> 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 service<strong>for</strong> the larger community. An alternative strategymight be <strong>for</strong> 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-<strong>for</strong>m documents<strong>for</strong> 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.<strong>The</strong> bottom-line message is: <strong>The</strong> 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, re<strong>for</strong>mers 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 re<strong>for</strong>m strategiesinclude both re<strong>for</strong>ms that eliminate thesource of significant legal transaction costs <strong>for</strong>large numbers of individuals (e.g., legal stand-41

ardisation and simplification) and also re<strong>for</strong>msthat enable large numbers of potential claimantsto pool their resources to pursue their commonlegal interests rather than <strong>for</strong>cing them all to pursuetheir individual claims separately (e.g., classaction mechanisms).Improving In<strong>for</strong>mal and CustomaryDispute Resolution 6Most poor people — especially the poorest of thepoor — have little or no contact with the <strong>for</strong>mallegal system, and are not likely to do so even ifall aspects of the legal empowerment agendaare implemented. <strong>The</strong>y instead seek justice fromcustomary law (which may be highly <strong>for</strong>malisedand is sometimes officially recognised by thestate system) and from in<strong>for</strong>mal 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 <strong>for</strong>mal system because of their illegal statushave established in<strong>for</strong>mal 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 <strong>for</strong> more than 80 percent ofcases settled throughout Afghanistan (AfghanistanHDR 2007). <strong>The</strong>se 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 in<strong>for</strong>mal sector tothe <strong>for</strong>mal, while at the same time integratinguseful norms and practices from in<strong>for</strong>mal or customarysystems. <strong>The</strong>se approaches are discussedin detail in the chapters prepared by the <strong>Commission</strong>’sworking groups on property rights, labour,and business, and we will, there<strong>for</strong>e, not focuson the <strong>for</strong>malization of the in<strong>for</strong>mal sector or onfacilitating the transition from the in<strong>for</strong>mal sectorto the <strong>for</strong>mal. Formalization is not always possible,however, and indeed, not always desirable, asthe other working groups discuss in detail in theirchapters within this volume. In<strong>for</strong>mal 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 <strong>for</strong>mal state institutions, includingthe <strong>for</strong>mal justice system (NCLEP Uganda 2007).For these and other reasons, many countries haveopted to <strong>for</strong>mally recognise, or tacitly accept, thelegitimacy of customary law in certain geographicregions or substantive areas. And some systemsare <strong>for</strong>mally integrated in the <strong>for</strong>mal legal systemand reflected in substantive legislation and thestructure of the judiciary. Regulations have alsobeen enacted to provide <strong>for</strong>mal procedures <strong>for</strong>what legal system to chose and <strong>for</strong> how far thecustomary system may reach in the <strong>for</strong>mal judiciaryand justice system. In<strong>for</strong>mal or customarysystems, of course, have serious problems, and itwould be a mistake to romanticize or glamorizethem. In<strong>for</strong>mal and customary law can be oppressiveto women. <strong>The</strong>y are almost totally excludedfrom participating in the decision making ofjirgas/shuras resulting in serious consequences<strong>for</strong> their status and the protection of their rights(Afghanistan HDR 2007). In<strong>for</strong>mal 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 <strong>for</strong>mal justice institutions, marginalizedmembers of poor communities may find it difficultto achieve equal access to the institutionsof customary or in<strong>for</strong>mal justice (NCLEP India2007, NCLEP Philippines 2007). Nonetheless,despite these problems, re<strong>for</strong>mers must acknowledgethat in many situations replacing in<strong>for</strong>mal orcustomary justice systems with the <strong>for</strong>mal legalor bureaucratic institutions of the state is eitherimpossible or would do more harm than good.<strong>The</strong>re<strong>for</strong>e, alongside programmes to improvethe state justice systems, re<strong>for</strong>mers should seekout opportunities <strong>for</strong> strategic interventions thatimprove the operation of in<strong>for</strong>mal or customaryjustice systems and facilitate the efficient integrationof the <strong>for</strong>mal and in<strong>for</strong>mal systems.Ultimately, re<strong>for</strong>ms and improvements to thenon-state justice system must emerge ‘bottomup’from the participants in that system. Whilea government’s role in facilitating re<strong>for</strong>m 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. Re<strong>for</strong>merscan encourage trans<strong>for</strong>mation from within simplyby providing in<strong>for</strong>mation about individuals’ legalrights under the constitution and about the normsof the <strong>for</strong>mal legal system. In Bangladesh, <strong>for</strong>example, the Constitution <strong>for</strong>bids the practice o<strong>for</strong>al divorce, but in poor rural communities, thepractice is still widespread. A Bangladeshi NGOfound that simply in<strong>for</strong>ming the members of localcustomary courts that oral divorce was <strong>for</strong>biddenby 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 ef<strong>for</strong>ts 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 <strong>for</strong>mal system. Educationef<strong>for</strong>ts 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 in<strong>for</strong>mation 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 allow<strong>for</strong> 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 in<strong>for</strong>mation sharing not onlyabout the norms of the <strong>for</strong>mal legal system, butalso about the norms adopted by other custom-43

ary or in<strong>for</strong>mal 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 ef<strong>for</strong>ts toprovide more legal services to the poor emphasiseaccess to the <strong>for</strong>mal legal system. Hence,a significant fraction of legal aid resources aretargeted at subsidising lawyers or reducing costsassociated with using the <strong>for</strong>mal court system.But as it turns out, many poor people tend torely on in<strong>for</strong>mal 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. <strong>The</strong>se vulnerable individualsmay also be subject to abuses by the local eliteswho administer traditional justice systems.Re<strong>for</strong>mers should, there<strong>for</strong>e, consider targetinglegal aid resources and legal service providerswho can help poor people deal with both thecustomary and the <strong>for</strong>mal state system. <strong>The</strong>paralegal programme in Sierra Leone discussedearlier is exemplary in this regard (Maru 2006).<strong>The</strong>se paralegals have a basic training in <strong>for</strong>mallaw, but they are also drawn from the local communityand are familiar with local traditions andcustomary law. <strong>The</strong>y can there<strong>for</strong>e assist clientswith the non-state justice system. <strong>The</strong>y can alsomonitor abuses, and are better positioned to adviseclients on when they should threaten to takea dispute to the <strong>for</strong>mal state system. Particularlyin light of the fact that markets <strong>for</strong> representationservices <strong>for</strong> 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 In<strong>for</strong>mal Justice<strong>The</strong> most straight<strong>for</strong>ward strategy <strong>for</strong> trying toreap the benefits of non-state justice while avoidingits flaws is to accept (<strong>for</strong>mally 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 <strong>for</strong>malizethe in<strong>for</strong>mal system entirely, government re<strong>for</strong>mersmight 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 in<strong>for</strong>mal or customary practices.Because this question implicates the appropriatedesign of <strong>for</strong>mal 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 <strong>for</strong>mal law shouldtrump in<strong>for</strong>mal 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 <strong>for</strong> intrinsic moral reasons— reflected in the human rights principles laidout in the Convention <strong>for</strong> the Elimination of AllForms of Discrimination Against Women — and<strong>for</strong> 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 lobbied<strong>for</strong> the passage of a ‘Recognition of CustomaryMarriages Act’ that <strong>for</strong>mally recognised marriagesconcluded in accordance of customary law,but only if customary law provided <strong>for</strong> equality ofhusband and wife in terms of status, decisionmakingauthority, property ownership, and childcustody (Centre <strong>for</strong> Applied Legal Studies 2002).Tanzania has enacted two Land Acts that confer<strong>for</strong>mal 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 re<strong>for</strong>m built around a political compromise:<strong>for</strong>mal recognition of customary law in exchange<strong>for</strong> 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 re<strong>for</strong>mstrategies cannot be imposed immediatelyfrom the top down. Where cultural practices anddiscriminatory attitudes are deeply entrenched,successful legislative re<strong>for</strong>m requires sustainedconsultation, lobbying, and political organisingef<strong>for</strong>ts. Also, in some cases the pursuit of genderequity goals might need to be tempered bypragmatic considerations, and it might be betterto pursue a gradual re<strong>for</strong>m strategy that starts bytargeting only the most extreme <strong>for</strong>ms 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 Relationships<strong>The</strong> 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. (<strong>The</strong> absence of choice may be de jure— as when the <strong>for</strong>mal law gives customary courtsin a particular area have exclusive jurisdictionover family relations or property disputes — or defacto — as when the <strong>for</strong>mal 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. <strong>The</strong>provision 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 <strong>for</strong>mal legal perspective, theissue of women’s inheritance and property rights is stillcomplex. This is demonstrated <strong>for</strong> 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 <strong>for</strong> the deaths of their husbands and subsequently<strong>for</strong>ced 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. <strong>The</strong>aim was to build the capacity of the <strong>for</strong>mal and in<strong>for</strong>maljustice 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. <strong>The</strong> study provided a solid empiricalfoundation and underlined the strength of Ethiopianlaw. However, the substantive laws are not being appliedor en<strong>for</strong>ced. This is a result of a number of factors,including lack of awareness, lack of en<strong>for</strong>cementand ineffectiveness of the court system. Additionalchallenges include a lengthy and costly legal process,which most Ethiopians cannot af<strong>for</strong>d, 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.<strong>The</strong> conflict between religious law and constitutionallaw has also come to the <strong>for</strong>e. 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.’<strong>The</strong> conflict arises out of provisions in the Shariá lawthat contradict the terms set <strong>for</strong>th 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 re<strong>for</strong>m 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 af<strong>for</strong>dable option.) Some have arguedthat integrating the customary system of disputeresolution into the mainstream legal system maybe an effective way to import desirable features ofthe <strong>for</strong>mal system — including norms of genderequality and regularity — into the more accessiblecustomary system (NCLEP Uganda 2007).Others praise NGO ef<strong>for</strong>ts that have not focusedon a <strong>for</strong>mal integration of the <strong>for</strong>mal and in<strong>for</strong>malsystems (Golub 2007), such as the Bangladeshiprogrammes that have taken up the issue of legalempowerment <strong>for</strong> women (UNDP 2002). Rather,some of these ef<strong>for</strong>ts have used the threat or realityof litigation (that is, the <strong>for</strong>mal system) as anincentive <strong>for</strong> resistant or recalcitrant parties to46

participate in the in<strong>for</strong>mal system and <strong>for</strong> suchparties to honour agreements they have made. <strong>The</strong>de facto impact has been to increase women’spower and well-being in in<strong>for</strong>mal systems that arevery gradually becoming less gender-biased.When there is overlapping jurisdiction betweenlegal systems, a second issue arises:What should the rules be <strong>for</strong> choosing a <strong>for</strong>umand 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 <strong>for</strong>mal court system. <strong>The</strong>se 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 GovernmentBureaucracy<strong>The</strong> Nature of the Problem<strong>The</strong> preceding section focused on access to the<strong>for</strong>mal (adjudicative) legal system and to in<strong>for</strong>maljustice mechanisms. But courts and out-of-courtfacilities are not the only institutions that en<strong>for</strong>ceindividual 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 <strong>for</strong> and responsive to the needs andinterests of poor individuals, then it will not bepossible to legally empower the poor throughbureaucratic means. <strong>The</strong>re<strong>for</strong>e, 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 <strong>for</strong>ce.Public order and security are essential publicgoods, and a well-functioning law en<strong>for</strong>cementapparatus 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 en<strong>for</strong>cement, state bureaucra-47

cies (including local authorities) are also responsible<strong>for</strong> providing a variety of other services,including clean water, health care, education,transportation, infrastructure, and social insurance.<strong>The</strong> 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. <strong>The</strong> great variety of governmentfailures can be grouped into three majorcategories: malfeasance, underper<strong>for</strong>mance, andincompetence.‘Malfeasance’ is the tendency of bureaucrats,or bureaucratic organisations, to abuse theirpower to pursue illegitimate goals. <strong>The</strong> mostwell-known and comprehensively studied <strong>for</strong>m 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 <strong>for</strong> entrenching theirown power rather than a means <strong>for</strong> improvingpublic welfare. Whatever the <strong>for</strong>m of malfeasance,the results <strong>for</strong> the poor are fairly similar:deprivation of services, of (avenues to) sharedpower, and of security. <strong>The</strong>se problems are pervasiveand much discussed throughout the developingworld. Malfeasance may also take moresubtle <strong>for</strong>ms. For example, even well-meaningbureaucrats may be prone to subconsciousprejudices resulting in a continuous neglect ofcertain interests or measures with unintendeddiscriminatory effects <strong>for</strong> 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.<strong>The</strong> second category of bureaucratic failure,‘underper<strong>for</strong>mance’, refers to the tendencyof even well-meaning bureaucrats to pursue theirmissions with a socially insufficient level of ef<strong>for</strong>t(Bueno de Mesquita and Stephenson 2007). <strong>The</strong>basic problem is that the rewards a bureaucratreceives are imperfectly correlated to how hardshe works or how well she per<strong>for</strong>ms. 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 ef<strong>for</strong>t to come up with betterones. Another <strong>for</strong>m of underper<strong>for</strong>mance 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, underper<strong>for</strong>mance,or incompetence problems, and the poorare powerless to change this. Remedying thissituation requires re<strong>for</strong>m along two related dimensions:• <strong>The</strong> first dimension is public administration:How can we design bureaucracies that per<strong>for</strong>mtheir assigned functions with integrity, ef<strong>for</strong>t,and responsiveness to their clients? How canwe structure service processes, bureaucraticgrievance and dispute resolution proceduresthat are fair, efficient and user-focused?• <strong>The</strong> second dimension of bureaucratic justicere<strong>for</strong>m 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 Re<strong>for</strong>mTo improve access to bureaucratic justice throughre<strong>for</strong>m of public administration, re<strong>for</strong>mers shouldwork to strengthen external monitoring and toimplement structural re<strong>for</strong>ms that will improvebureaucratic incentives and capabilities. <strong>The</strong>right mix of re<strong>for</strong>m 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 administrationre<strong>for</strong>m 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 re<strong>for</strong>m that many countries haveimplemented to improve monitoring is the establishmentof an independent ombudsman’s officeto respond to complaints and investigate allegationsof malfeasance. In Peru, <strong>for</strong> example, theombudsman was able to resolve a dispute involvingallegations that an agency had overchargedconsumers <strong>for</strong> electricity and telephone services:After the ombudsman investigated, issued areport, and credibly threatened litigation, theagency took action to address the consumer complaints.<strong>The</strong> 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.<strong>The</strong> effectiveness of ombudsman offices mayalso depend on their resources. <strong>The</strong> Philippines,<strong>for</strong> 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 <strong>for</strong> 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). <strong>The</strong>se and other examples suggestthat while an ombudsman or and similar institutionaldevice may be helpful, it is not a panacea.Other legal and institutional re<strong>for</strong>ms may improveaccess to bureaucratic justice by aidingthe ef<strong>for</strong>ts 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 legalin<strong>for</strong>mation 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 bureaucraticper<strong>for</strong>mance. 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 <strong>for</strong> per<strong>for</strong>mance that are fit to bemeasured and benchmarked by the bureaucracy,independent agencies and the community itself.In this way the public has a yardstick <strong>for</strong> assessingpublic service delivery. An illustrative bottomup example of the citizenry measuring publicper<strong>for</strong>mance are the ef<strong>for</strong>ts of citizens’ groups inBangalore, India — these groups conducted consumersurveys regarding the per<strong>for</strong>mance of localgovernment agencies and published the resultsin order to create pressure <strong>for</strong> re<strong>for</strong>m. This ‘namingand shaming’ approach spread to other statesin India as well (Narayan 2002). Where feasible,modern in<strong>for</strong>mation technology (e.g. Internet, cellphones, etc.) could be used to disseminate in<strong>for</strong>mationon bureaucratic per<strong>for</strong>mance more broadly,which would facilitate external monitoring.Structural Re<strong>for</strong>msAs useful as it may be to improve external monitoringmechanisms, significant progress towardimproving access to bureaucratic justice may requiremore systematic re<strong>for</strong>ms of the bureaucraticinstitutions themselves. A starting point is theimprovement of each agency’s internal adjudicativeprocedures, monitoring mechanisms, appealsprocesses, and grievance procedures. <strong>The</strong> 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 responsible<strong>for</strong> delivering essential services and <strong>for</strong> interventionsin relationships between citizens shouldhave a well-functioning system <strong>for</strong> providingen<strong>for</strong>cement and mediation services, addressingcomplaints, resolving disputes, and providing50

edress. <strong>The</strong>se systems should be cost-efficient,transparent, user-friendly and swift.Asecond strategy <strong>for</strong> 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). <strong>The</strong> 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. <strong>The</strong> municipality wholly owns thePorto Alegre Municipal Department of Water andSewage, but it is a separate legal entity with financialand operational autonomy. <strong>The</strong> 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 <strong>for</strong> high-quality service delivery(UNDP 2006).Other countries have also experimented with participatoryregulatory decision-making. Vietnam,<strong>for</strong> example, recently established a legal framework<strong>for</strong> 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 ef<strong>for</strong>ts it will possibly take.Issues that need attention are, among others, thedesign of the procedure <strong>for</strong> 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. <strong>The</strong> provision of supportivefacilities could be necessary, or the involvement ofneutrals and experts who can help to process in<strong>for</strong>mation,assess options and facilitate negotiations.And even so, not all issues might be equally suited<strong>for</strong> 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, <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> improving access to bureaucraticjustice would emphasise re<strong>for</strong>ms that institutionalisestandards of good governance andpromote public services morale. By giving bureaucraticmanagers sufficient means to offer theirsubordinates incentives <strong>for</strong> good per<strong>for</strong>mance, todiscipline bad per<strong>for</strong>mance, 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 <strong>for</strong> decades they and their members haveenjoyed almost complete tenure and salary protections,little oversight, and few serious demands. Itmay there<strong>for</strong>e be risky <strong>for</strong> the government to takeon the civil service unions by proposing re<strong>for</strong>msthat would threaten the power or livelihoods ofthese unions and their members. <strong>The</strong>re<strong>for</strong>e, 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 underper<strong>for</strong>mance,and provide safeguards <strong>for</strong> justified concernsregarding job security, wage guarantees andstatus. Approaching this delicate issue there<strong>for</strong>erequires skilful politicians to enter into a consensus-buildingprocess with stakeholders and puttogether ‘package deals’ in which the existing civilservice establishment is given benefits in exchange<strong>for</strong> accepting re<strong>for</strong>ms that promote greaterbureaucratic productivity and efficiency. As analternative or complementary strategy, re<strong>for</strong>merscould try to build a countervailing coalition thatwould push <strong>for</strong> bureaucratic re<strong>for</strong>m.A fourth type of strategy might promote decentralisation,bureaucratic redundancy, or somedegree of privatisation in service delivery, at least<strong>for</strong> certain types of service. <strong>The</strong> 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 <strong>for</strong> theirservices, redundancy may lead to healthy competitionbetween providers. Third, redundancymay facilitate experimentation and innovation.Bureaucratic redundancy also has costs, however.<strong>The</strong> first and most obvious is the extra budgetarycost of staffing two or more offices to provide essentiallythe same service. <strong>The</strong> 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 <strong>for</strong> money, proximity tothe client and hands-on mentality are some appealingelements of this basic change towardsgovernance (Rhodes, 1997). <strong>The</strong> 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 <strong>for</strong>corruption. Some high-profile scandals have doneserious damage to the image of privatisation as are<strong>for</strong>m strategy. While these cautionary tales illustratethe dangers of ill conceived or badly managedprivatisation ef<strong>for</strong>ts, 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.<strong>The</strong> scheme is widely viewed as effectivein providing clean water to poor communitiesefficiently and equitably (UNDP 2006).Administrative <strong>Law</strong> Re<strong>for</strong>mIn addition to general public administrationre<strong>for</strong>ms, there are a number of strategies <strong>for</strong>improving access to bureaucratic justice thatemphasise a more direct role <strong>for</strong> the legal andjudicial system. Administrative law may affectbureaucratic per<strong>for</strong>mance in two distinct ways.First, legal rules en<strong>for</strong>ced by courts may facilitateor en<strong>for</strong>ce the public administration re<strong>for</strong>mstrategies 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 <strong>for</strong> the poor. Thus,in this area of administrative law re<strong>for</strong>m, the issuesof access to bureaucratic justice and accessto legal justice overlap.Legal Mechanisms to Facilitate Participation andMonitoringThree major types of administrative law re<strong>for</strong>mmay enhance the efficacy of external monitoringmechanisms: freedom of in<strong>for</strong>mation (FOI) laws,‘impact statement’ requirements, and whistleblowerprotections.FOI laws are meant to increase the transparencyby giving citizens entitlement to in<strong>for</strong>mationabout 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 <strong>for</strong> their own benefit. Despite this, recognitionof the benefits of FOI legislation seems tobe on the rise: 65 countries currently have some<strong>for</strong>m 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.<strong>The</strong>re<strong>for</strong>e, 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 re<strong>for</strong>mers 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 be<strong>for</strong>e the agency takes action.<strong>The</strong> 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. <strong>The</strong> 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 <strong>for</strong> under-fundedor low-capacity agencies. Saddling bureaucracieswith too many impact statement requirementsmay induce ‘paralysis by analysis’. <strong>The</strong> appropriatebalance between these competing interestscannot be resolved in abstract or general terms.Whistleblower protection statutes are a third<strong>for</strong>m of administrative law re<strong>for</strong>m that seeks toimprove transparency and political accountability.Without credible protections, individuals withina bureaucratic organisation who learn about corruptionor other <strong>for</strong>ms of malfeasance will be reluctantto come <strong>for</strong>ward 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 <strong>for</strong>ward either by offering them a set ‘bounty’<strong>for</strong> useful in<strong>for</strong>mation 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 en<strong>for</strong>cement 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 en<strong>for</strong>ce rulesthat enable other actors — NGOs, politicians, andthe media — to monitor bureaucratic per<strong>for</strong>mancemore effectively. Thus, increasing the abilityof individuals and groups to make sure these lawsare en<strong>for</strong>ced 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 <strong>for</strong>ms.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. <strong>The</strong> judiciarythen assumes the role of public monitor,ensuring that the agency has acted lawfully.<strong>The</strong> second <strong>for</strong>m of litigation is so-called ‘publicinterest litigation’ (PIL). Citizen groups typically54

ing PIL suits to effect broader legal change orinstitutional re<strong>for</strong>m. PIL has played a significantrole in the strategy of social re<strong>for</strong>m 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). <strong>The</strong> 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 re<strong>for</strong>mist 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 <strong>for</strong>m 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. <strong>The</strong>se 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 institutionalre<strong>for</strong>m 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 re<strong>for</strong>mers, 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.<strong>The</strong> three concerns cited are all valid, and litigationshould generally not be the first line ofdefence (or offence) in dealing with an abusive,unaccountable, or underper<strong>for</strong>ming bureaucracy.Nevertheless, having available litigation as aweapon of last resort may be vital in making theother mechanisms of bureaucratic justice functioneffectively. <strong>The</strong> 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:re<strong>for</strong>mers should work to eliminate failures inthe market <strong>for</strong> 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 re<strong>for</strong>mer should provide more optionsand resources <strong>for</strong> non-judicial relief of administrativedisputes, and should require exhaustionof administrative remedies as a precondition <strong>for</strong>judicial 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. <strong>The</strong> three substantive cornerstones ofthe legal empowerment agenda are property law,labour law, and law <strong>for</strong> small business. Re<strong>for</strong>mof 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 <strong>for</strong> injusticerequires ef<strong>for</strong>ts to develop and/or strengthen linkagesbetween <strong>for</strong>mal and in<strong>for</strong>mal 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 re<strong>for</strong>m, internationalattention, engaging national humanrights machineries, stakeholder consultations,and community involvement.• Creating incentives to register one’s legal identitywith the state by providing in<strong>for</strong>mation,working through trustworthy local intermediaries,and minimising the adverse consequencesof <strong>for</strong>mal registration.In Section 3 of this chapter, we identified fourstrategies to improve access to justice, taking thejustifiable problems of the poor as starting points.<strong>The</strong>y build on the options poor people have availableto address these problems and to en<strong>for</strong>cetheir rights: spontaneous ordering mechanisms,in<strong>for</strong>mal, faith-based and customary justice, aswell as the <strong>for</strong>mal legal system. <strong>The</strong> common aimof these strategies is to lower costs that may beinvolved and increase justness and fairness of theoutcomes poor people may obtain. <strong>The</strong>se 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 in<strong>for</strong>mation and <strong>for</strong>mationof peer groups (self-help strategies). This canbe done by strengthening in<strong>for</strong>mation-sharingnetworks across consumer groups and organisations,by using in<strong>for</strong>mation technology, non<strong>for</strong>mallegal education and media campaigns,tailored to the target population and theirproblems.• Broadening the scope of legal services <strong>for</strong> 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 in<strong>for</strong>mal system as well as the statesystem. Moreover, the market <strong>for</strong> legal servicesshould gradually be liberalised by reducingregulatory entry barriers (such as ‘unauthorisedpractice of law’ restriction) <strong>for</strong> 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 legalre<strong>for</strong>m) and to situations with very high stakes<strong>for</strong> the individual (such as criminal defence).• Reducing aggregate legal transaction costs byadopting a combination of legal simplificationand standardisation re<strong>for</strong>ms, expanded opportunities<strong>for</strong> representative or aggregate legalclaims, and improving the climate <strong>for</strong> fair settlementsin the shadow of law, by ensuring acredible threat of a neutral intervention.• Combining <strong>for</strong>mal or tacit recognition of thein<strong>for</strong>mal justice system with education andawareness campaigns that promote evolutionof the in<strong>for</strong>mal state system, targeted constraintson the in<strong>for</strong>mal system (in particularlimits on practices that perpetuate the subordinationof women), and appropriately structuringthe relationship between state and nonstatesystems so that the in<strong>for</strong>mal system canprovide an efficient means of resolving privatedisputes, but people are able to use the <strong>for</strong>malsystem when crime and fundamental publicvalues are implicated.and obtain necessary services, access to justicere<strong>for</strong>m 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 re<strong>for</strong>ms, includingre<strong>for</strong>ms that improve external monitoringand also structural re<strong>for</strong>ms (such as improvingbureaucratic adjudication and grievanceprocedures, expanding public participationin administrative decision-making, pursuingcivil service re<strong>for</strong>m to expand opportunities <strong>for</strong>per<strong>for</strong>mance incentives in government administration,and increasing decentralisation andredundancy in bureaucratic service provisionto improve efficiency and combat corruption.• Administrative law re<strong>for</strong>ms, including appropriately-tailoredexpansions of freedom ofin<strong>for</strong>mation 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) <strong>for</strong>m the basis of much of thematerial in this section. <strong>The</strong>se organisations have taken an importantleadership role by bringing this problem to the attention of the internationalcommunity - gathering vital in<strong>for</strong>mation on the nature andscope of the problem and developing possible strategies <strong>for</strong> re<strong>for</strong>m.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 <strong>Work</strong>ers, 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. <strong>The</strong> Nubians and Statelessness: History in Defi ningModern Lives, available at http://www.justiceinitiative.org/statelessness_meeting.Afroz, T. 2006. ‘Access to <strong>Law</strong>: <strong>The</strong> Bangladesh Perspective.’ availableat http://www.adb.org/Documents/Books/Strengthening-Criminal-Justice-system/chap04.Anderson, M.2003. Access to Justice and Legal Process: <strong>Making</strong> LegalInstitutions Responsive to Poor People in LDCs (IDS <strong>Work</strong>ingPaper 178, Feb. 2003).Ardaya, G. and G. Sierra.2002. Toward an Inclusive Elections Process:Final Report of Pro-Citizens’ Participation Consortium.UKDepartment <strong>for</strong> International Development. La Paz, Bolivia.Amnesty International.2005. Myanmar: <strong>The</strong> Rohingya Minority: FundamentalRights Denied. available at: http://www.justiceinitiative.org/statelessness_meeting.Asian Development Bank (ADB). 2001a. <strong>Law</strong> and Policy Re<strong>for</strong>m 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 <strong>for</strong> 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/<strong>Law</strong>_ADB/lpr_2001_Part_2.pdf._____. 2002. Technical Assistance Completion Report — Disseminating<strong>Law</strong>s and Strengthening the Legal In<strong>for</strong>mation System,TA 3238-TAJ, available at http://www.adb.org/Documents/TACRs/TAJ/tacr_taj_3238.pdf._____. 2004., Technical Assistance <strong>for</strong> Establishing Legal Identity <strong>for</strong>Social Inclusion, R188-04 (Oct. 4, 2004)._____. 2005. Inception Report: Establishing Legal Identity <strong>for</strong> SocialInclusion, RETA No. 6188 Aug.10, 2005)._____. 2007. Legal Identity <strong>for</strong> 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 <strong>Law</strong>yers?: An EconomicAnalysis of the Justifi cations <strong>for</strong> Entry and ConductRegulation.’Arizona State <strong>Law</strong> Journal 33:429-490.Bloom, A.2006. ‘<strong>The</strong> Economics of Civil Justice: From Justice to GlobalPeace: A (Brief) Genealogy of the Class Action Crisis.’Loyolaof Los Angeles <strong>Law</strong> Review. 39:719.Bolton, P. and M. Dewatripont.2005. Contract <strong>The</strong>ory. Cambridge andLondon: MIT Press.Bueno de Mesquita, E. and M. Stephenson. 2007. ‘Regulatory QualityUnder Imperfect Oversight.’ American Political ScienceReview. 101(3):605-620.58

Buscaglia, E. and T. Ulen. 1997. ‘A Quantitative Assessment of theEffi ciency of the Judicial Sector in Latin America.’ InternationalReview of <strong>Law</strong> and Economics. 17:275.Cantrell, D. 2004. ‘Deborah L. Rhode’s Access to Justice: <strong>The</strong> Obligationof Legal Aid <strong>Law</strong>yers To Champion Practice by Nonlawyers.’Fordham <strong>Law</strong> Review. 73:883.Capper, D. 2003. ‘<strong>The</strong> Contingency Legal Aid Fund: A Third Way toFinance Personal Injury Litigation.’ Journal of <strong>Law</strong> andSociety. 30(1):66-83.Carothers, T. 2003: ‘Promoting the Rule of <strong>Law</strong> Abroad: <strong>The</strong> Problem ofKnowledge.’ Carnegie Endowment WOrking Paper No. 34.Washington, D.C. January 2003Centre <strong>for</strong> Applied Legal Studies.2002. Final Report on Gender, Citizenshipand Governance Project.Damazo, J. 2006. Registering a New Sense of Identity, available athttp://www.adb.org/media/Articles/2006/11077-Cambodialegal-identity/.Dembowski, H. 2000. Taking the State to Court: Public Interest Litigationand the Public Sphere in India.Domberger, S. and A. Sherr.1989. ‘<strong>The</strong> Impact of Competition on Pricingand Quality of Legal Services.’ International Review of <strong>Law</strong>and Economics. 9:41-56.Dun<strong>for</strong>d, C. 2002.’Building Better Lives: Sustainable Integration ofMicro-fi nance with Education in Child Survival, ReproductiveHealth, and HIV/AIDS Prevention <strong>for</strong> the Poorest Entrepreneurs.’In: Daley-Harris, S. ed., Pathways Out of Poverty.Bloomfi eld, Conn: Kumarian Press, Inc.Faundez, J. 2006. ‘Should Justice Re<strong>for</strong>m Projects Take Non-State JusticeSystems Seriously? Perspectives from Latin America.’in <strong>The</strong> World Bank Legal Review: <strong>Law</strong>, Equity, and Development.Galanter, M. 1976., ‘Delivering Legality: Some Proposals <strong>for</strong> the Directionof Research.’ <strong>Law</strong> and Society Review. 11:225-246._____. M. 1974. ‘Why the ‘Haves’ Come Out Ahead: Speculations onthe Limits of Legal Change.’<strong>Law</strong> and Society Review. 9:95-160.Gidi, A. 2003. ‘Class Actions in Brazil — A Model <strong>for</strong> Civil <strong>Law</strong>Countries.’American Journal of Comparative <strong>Law</strong>. 51:311-.Girishankar, N. et al. 2002. ‘Governance,’ in Klugman, J., ed., A Sourcebook<strong>for</strong> Poverty Reduction Strategies, available at http://poverty2.<strong>for</strong>umone.com/fi les/4105_cahp8.pdf.Gloppen, S. 2005.,Public Interest Litigation, Social Rights and SocialPolicy, available at http://siteresources.worldbank.org/IN-TRANETSOCIALDEVELOPMENT/Resources/Gloppen.rev.3. pdf.Golub, S. 2000. ‘Beyond the Rule of <strong>Law</strong> Orthodoxy: <strong>The</strong> Legal EmpowermentAlternative.’ Carnegie Endowment <strong>Work</strong>ing PaperNo. 41. Washington, D.C. October 2003._____. 2003. <strong>The</strong> Legal Empowerment Alternative, in T. Carothers ed.,Promoting the Rule of <strong>Law</strong> Abroad, In Search of Knowledge._____. 2004., Forging the Future: Engaging <strong>Law</strong> Students andYoung <strong>Law</strong>yers in Public Service, Human Rights, andPoverty Alleviation (Open Society Justice Initiative IssuesPaper), available at http://www.justiceinitiative.org/db/resource2?res_id=101449._____. ‘Combating Corruption in Non-judicial Justice Systems.’ inGlobal Corruption Report 2007. Transparency International(London: Pluto Press, 2007).Grajzl, P. and P. Murrell. 2006. ‘<strong>Law</strong>yers and Politicians: <strong>The</strong> Impactof Organised Legal Professions on Institutional Re<strong>for</strong>ms.’Constitutional Political Economy.17(4):251-276.Hammergren, L. 2007. Access to Justice: Legal Assistance, SpecialCourts, ADR, and Beyond.Hay, J., A. Shleifer and R. Vishny.1996. ‘Toward a <strong>The</strong>ory of Legal Re<strong>for</strong>m.’European Economic Review. 40:559-567.Henisz, W. and B. Zelner.2001. ‘<strong>The</strong> Institutional Environment <strong>for</strong>Telecommunications Investment.’ Journal of Economics andManagement Strategy 10(1):123-147.Hershkoff, H. and A. McCutcheon.2000. ‘Public Interest Litigation:An International Perspective,’ in Many Roads to Justice:<strong>The</strong> <strong>Law</strong>-Related <strong>Work</strong> of Foundation Grantees Around theWorld. McClymont, M. and S. Golub, eds. New York: FordFoundation.Hoffman, M., P. Rubin and J. Shepherd.2005. ‘An Empirical Studyof Public Defender Effectiveness: Self-Selection by the‘Marginally Indigent’.’ Ohio State Journal of Criminal <strong>Law</strong>3:223-255.Huber, J. and N. McCarty. 2004. ‘Bureaucratic Capacity, Delegation,and Political Re<strong>for</strong>m.’ American Political Science Review.98(3):481-494.Inter-American Development Bank (IADB).2006. Hidden in Plain Sight:Undocumented Citizens in Latin America. Ideas <strong>for</strong> Developmentin the Americas 1 (Jan.-Apr. 2006).Kalvaitis, R. 1998. ‘Citizenship and National Identity in the BalticStates.’ Boston University International <strong>Law</strong> Journal.16:231.Kennedy, A.2007. Rule of <strong>Law</strong> (LEP <strong>Commission</strong> Discussion Paper).Killian, M. 2003. ‘Alternatives to Public Provision: <strong>The</strong> Role of LegalExpenses Insurance in Broadening Access to Justice: <strong>The</strong>German Experience.’ Journal of <strong>Law</strong> and Society. 30(1):31-48.Kocaoglu, N. and A. Figari. 2006. Using the Right to In<strong>for</strong>mation as anAnti-Corruption Tool. (Transparency International), availableat http://www.transparentnost.org.yu/aktivnosti/slobodan_pristup_inf/TI2006_europe_access_in<strong>for</strong>mation.pdf.Kritzer, H. 1997. ‘Rethinking Barriers to Legal Practice.’ Judicature81(3):100-103._____. 2004. Risks, Reputations, and Rewards: Contingency FeeLegal Practice in the United States.Laczo, M. 2003. ‘Deprived of an Individual Identity: Citizenship andWomen in Nepal.’Gender and Development. 11(3):76-82.Landes, W. and R. Posner. 1979. ‘Adjudication as a Private Good.’Journal of Legal Studies 8:235-284.Lane, Jan-Erik. 2000. New Public Management. New York: Routledge.Levy, B. and P. Spiller. 1996. Regulations, Institutions, and Commitment:A Comparative Analysis of TelecommunicationsRegulation. Cambridge: Cambridge University Press.Lin, Zixin. 2006. Thailand: Faster Citizenship <strong>for</strong> Hilltribes Pushed,available at http://www.newsmekong.org/thailand_faster_citizenship_<strong>for</strong>_hilltribes_pushed.59

Lopez-de-Silanes, F. 2002. <strong>The</strong> Politics of Legal Re<strong>for</strong>m (U.N. Conferenceon Trade and Development. G-24 Discussion PaperSeries No. 17), available at http://www.unctad.org/en/docs/pogdsmdpbg24d17.en.pdf.Lynch, M. 2005. ‘Lives on Hold: <strong>The</strong> Human Cost of Statelessness.’Refugees International 23.Lynch, M. and P. Ali. 2006. Buried Alive: <strong>The</strong> Kurds in Syria, RefugeesInternational. Jan. 2006.MacCormack, D.N. and R. Summers eds. 1991. Interpreting Statutes: AComparative Study._____. 1997. Interpreting Precedent: A Comparative Study.Maru, V. 2006. ‘Between <strong>Law</strong> and Society: Paralegals and the Provisionof Justice Services in Sierra Leone and Worldwide.’YaleJournal of International <strong>Law</strong>. 31:427-476.McClymont, M. and S. Golub, eds . 2000. Many Roads to Justice: <strong>The</strong><strong>Law</strong>-Related <strong>Work</strong> of Ford Foundation: Grantees Around theWorld. Ford Foundation. 2000.McQuoid-Mason, D.2000. “<strong>The</strong> Delivery of Civil Legal Aid Servicesin South Africa.’ Fordham International <strong>Law</strong> Journal. 24:S111-S142.Menon, N.R.M. 2007..’Legal Education and Training in Bangladesh.’In:Strengthening the CriminalJustice System . Asian DevelopmentBank.Messick, R. 1999. Judicial ‘Re<strong>for</strong>m and Economic Development: ASurvey of the Issues.’ <strong>The</strong> World Bank Research Observer.14(1):117-136.Michelson, E. 2007. ‘Climbing the Dispute Pagoda: Grievances andAppeals to the Offi cial Justice System in Rural China.’American Sociological Review. 72,2:459—485, 2007.Millennium Promise. 2007. ‘Millennium Villages: A Revolution Is Possible.’available at http://www.millenniumpromise.org/site/PageServer?pagename=mv_main.Murphy, K., A. Shleifer and R. Vishny.1991.’<strong>The</strong> Allocation of Talent:Implications <strong>for</strong> Growth.’ Quarterly Journal of Economics.106(2):503-530.Narayan, D. 2002.Empowerment and Poverty Reduction: A Sourcebook.________. 2005. Measuring Empowerment; Cross Disciplinary Perspectives,IBRD/World Bank.National Consultations on Legal Empowerment of the Poor (NCLEP)Ethiopia, Paper prepared on Access to Justice.2007._____. India, Paper prepared on Access to Justice. 2007._____. Indonesia, Paper prepared on Access to Justice.2007._____. Kenya, Paper prepared on Access to Justice.2007._____. Pakistan, Paper prepared on Access to Justice.2007._____. Philippines, Paper prepared on Access to Justice.2007._____. Tanzania, Paper prepared on Access to Justice. 2007._____. Uganda, Paper prepared on Access to Justice.2007.Open Society Institute . 2004. ‘Justice Initiatives: Legal Aid Re<strong>for</strong>mand Access to Justice.’ Feb. 2004, available at http://www.soros.org/resources/articles_publications/publications/justice_20040225/justice_initiatives_20040225_2.pdfPaldi, B. 2006. ‘A Step Towards Peace.’ ACE Electoral KnowledgeNetwork, available at http://aceproject.org/today/featurearticles/a-step-towards-peace.Posner, R. 1998. Creating a Legal Framework <strong>for</strong> Economic Development.World Bank Research Observer 13:1-11.Refugees International, Stateless Biharis in Bangladesh: A HumanitarianNightmare, available at http://www.refugeesinternational.org/content/article/detail/4666/.Regan, F. 2003. ‘<strong>The</strong> Swedish Legal Services Policy Remix: <strong>The</strong> Shiftfrom Public Legal Aid to Private Legal Expense Insurance.’Journal of <strong>Law</strong> and Society. 30(1):49-65.Rhode, D. 2000. In the Interest of Justice: Re<strong>for</strong>ming the legal profession.New York: Ox<strong>for</strong>d University Press._____. 2004. Access to Justice. New York: Ox<strong>for</strong>d University Press._____. Rhodes, R.A.W. 1997. Understanding Governance; Policy Networks,Governance,Refl exivity and Accountability. Buckingham, Philadelphia: Open UniversityPress.Russell-Einhorn, M. et al. 2002. ‘Strengthening Access to In<strong>for</strong>mationand Public Participation inTransition Countries — Latviaas a Case Study in Administrative <strong>Law</strong> Re<strong>for</strong>m.’ Administrative<strong>Law</strong> Review. 54:459-.Schwartz, A., and L. Wilde.1979. ‘Intervening in Markets on the Basisof Imperfect In<strong>for</strong>mation: A Legal and Economic Analysis.’University of Pennsylvania <strong>Law</strong> Review. 127:630-.Shavell, S. 1995. ‘Alternative Dispute Resolution: An Economic Analysis.’Journal of Legal Studies. 24:1-28._____. 1997. ‘<strong>The</strong> Fundamental Divergence Between the Private andthe Social Motive to Use the Legal System.’ Journal of LegalStudies. 26:575-612._____. 1982. ‘Suit, Settlement, and Trial: A <strong>The</strong>oretical Analysis UnderAlternative Methods <strong>for</strong> the Allocation of Legal Costs.’Journal of Legal Studies. 11(1):55-81.Shleifer, A., and R. Vishny.1993. ‘Corruption.’ Quarterly Journal ofEconomics 108(3):599-617.Sokoloff, C. 2006. Denial of Citizenship: A Challenge to Human Security.Spaulding, N.2004. ‘<strong>The</strong> Luxury of the <strong>Law</strong>: <strong>The</strong> Codifi cation Movementand the Right to Counsel.’ Fordham <strong>Law</strong> Review 73:983-.Thomas, G. and A. Shrestha. 1998. Breaking New Ground: A Case Studyof Women’s Empowerment in Nepal, Women’s EmpowermentProgramme (USAID/Nepal)Ting, M.2003. ‘A Strategic <strong>The</strong>ory of Bureaucratic Redundancy.’ AmericanJournal of Political Science. 47(2):274-292.Tsikata, D. 2003. ‘Securing Women’s Interests Within Land TenureRe<strong>for</strong>ms: Recent Debates in Tanzania.’ Journal of AgrarianChange. 3:149-183.UNICEF. 2006. Birth Registration in Bangladesh, available at http://www.unicef.org/bangladesh/Birth_Registration_in_Bangladesh.pdf._____. 2005. <strong>The</strong> ‘Rights’ Start to Life: A Statistical Analysis of BirthRegistration, available at http://www.childinfo.org/areas/birthregistration/docs/Full%20text%20English.pdf.______. 2003. Birth Registration, available at http://www.unicef.org/southafrica/protection_761.html.______. 2002. ‘Birth Registration: Right from the Start.’ InnocentiDigest 9:1.60

United Nations Development Programme (UNDP). 2005. Programming<strong>for</strong> Justice: Access <strong>for</strong> All; A Human Rights-Based Approachto Access to Justice, available at http://regionalcenterbankok.undp.or.th/practices/governance/a2j/tools/index1.htm._____. 2006. U.N. Human Development Report 2006 — BeyondScarcity: Power, Poverty, and the Global Water Crisis._____. 2007. Human Security in Bangladesh: In Search of Justice andDignity._____. (UNDP Indonesia.) 2007 Justice For All? — An Assessment ofAccess to Justice in Five Provinces of Indonesia.United States Agency <strong>for</strong> International Development (USAID).2002.Achievements in Building and Maintaining the Rule of <strong>Law</strong>:MSI’s Studies in LAC, EandE, AFR, and ANE. OccasionalPaper Series by USAID. Nov. 2002, available at http://www.usaid.gov/our_work/democracy_and_governance/publications/pdfs/pnacr220.pdf._____. 2006. Administrative <strong>Law</strong> and Procedural Systems (ALPS)Re<strong>for</strong>m in Bosnia and Herzegovina, 3rd Annual Report,available at http://www.usaid.ba/Assessments/Admin%20<strong>Law</strong>%20Assessments/IRIS_ALPS%202005%20Annual%20Report.doc.Van Rooij, B. 2007. Bringing Justice to the Poor: Bottom-up LegalDevelopment Cooperation, <strong>Work</strong>ing paper available athttp://siteresources.worldbank.org/INTJUSFORPOOR/Resources/VanRooijBringingJusticetothePoor.pdfVigoda, E. 2002. ‘From Responsiveness to Collaboration: Governance,Citizens, and the Next Generation of Public Administration.’Public Administration Review. 62: 527-538.Wojkowska, E. 2006. Doing Justice: How In<strong>for</strong>mal Justice Systems CanContribute (UNDP, Oslo Governance Centre), available athttp://www.undp.org/oslocentre/docs07/DoingJusticeEwa-Wojkowska130307.pdf.World Bank. 2007. ‘Promoting the Right of Egyptian Woman To Claim<strong>The</strong>ir Identity and <strong>The</strong>ir Futures.’ Development MarketplaceProject Stories. Available at http://go.worldbank.org/3DKFL6QT90._____. 1997. ‘Restraining Arbitrary State Action and Corruption.’ In:World Development Report. Washington, D.C.: Ox<strong>for</strong>d UniversityPress.Yeazell, S. 2006, ‘Socializing <strong>Law</strong>, Privatizing <strong>Law</strong>, Monopolizing<strong>Law</strong>, Accessing <strong>Law</strong>.’ Loyola of Los Angeles <strong>Law</strong> Review.39(2):691-717.61

ChapterTWOEmpowering thePoor ThroughProperty Rights63

EXECUTIVE SUMMARYProperty Rights are Human Rights‘<strong>Everyone</strong> 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 <strong>The</strong> body andmind are the first and most immediateproperty of persons and thus respect <strong>for</strong> 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 <strong>for</strong> social and politicalcontestation.Absence of Property Rights andPoverty<strong>The</strong> 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 <strong>The</strong> 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 <strong>for</strong> 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 Per<strong>for</strong>mance and InstitutionalAssessment (CPIA) ratings <strong>for</strong> 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 en<strong>for</strong>ced, 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, <strong>for</strong>example, 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 <strong>for</strong> 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 <strong>for</strong>land 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 re<strong>for</strong>m ef<strong>for</strong>ts.Equally, indigenous people around the world tendto suffer from weak or prescribed property rightsnot adequately recognised by law. <strong>The</strong>se 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. <strong>The</strong> AbayandaPygmies in Uganda, <strong>for</strong> 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 <strong>for</strong> property ownership, effectivelymaking it impossible <strong>for</strong> 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 <strong>for</strong> the ILO convention on the rights ofindigenous and tribal peoples. 12 Global re<strong>for</strong>mof property rights regimes must allow <strong>for</strong> <strong>for</strong>malrecognition of customary land rights as the basis<strong>for</strong> inclusive property systems that include indigenouspeoples. <strong>The</strong>re are some good examplesin <strong>The</strong> 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 <strong>for</strong> poor indigenousgroups will certainly remain key to tackling thischallenge in both OECD and developing countries.Urban slum dwellers are also excluded from<strong>for</strong>mal 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. <strong>The</strong>reality of urban slum dwellers is sub-standardhousing conditions, <strong>for</strong>ceful evictions, extortion,social exclusion, and environmental degradation,among other problems. <strong>The</strong> situation preventsdevelopment of adequate housing stock and theemergence of robust property and credit markets.In<strong>for</strong>mal 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 <strong>for</strong> various groupsis clearly an over-arching and universal issuethat should be at the centre of global ef<strong>for</strong>ts 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 <strong>for</strong> economic growth. <strong>The</strong> globaleconomy grew very slowly until the beginning ofthe 19 th Century. Be<strong>for</strong>e then, and <strong>for</strong> 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. <strong>The</strong> trans<strong>for</strong>mation frompredominantly extralegal property systems to <strong>for</strong>malproperty rights entrenched in law has sincecome to support functioning market economiesand polities.<strong>The</strong> 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 the<strong>for</strong>mation of networks of economic and legalrights and corresponding obligations. <strong>The</strong>credible en<strong>for</strong>cement of these rights and obligationsrequires a judicial mechanism thatallows <strong>for</strong> 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. <strong>The</strong>institutional 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 in<strong>for</strong>mation, has generatedthe possibility <strong>for</strong> further transparency and accountabilityin property systems as an instrumentof governance.3) As a functioning market <strong>for</strong> the exchange ofassets. A fully functional property system allowsland, houses, moveable property, equityshares, and ideas to be trans<strong>for</strong>med into assetsto be bought and sold at rates determinedby market <strong>for</strong>ces. This subjects the exchangeof property to a level of transparency and accountability,and allows <strong>for</strong> the developmentof financial mechanisms — including credit66

and insurance — to facilitate transactions andimprove economic outcomes. Land, housesand moveable property can thus be leveraged,and assets trans<strong>for</strong>med from static investmentsinto capital which can be bought andsold. However, property rights are a necessarybut not sufficient precondition <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong> assets.<strong>The</strong> 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 there<strong>for</strong>e fundamentally affect opportunities<strong>for</strong> the poor.Dysfunctionalities in PropertyManagement<strong>The</strong>se 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 en<strong>for</strong>ced, 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 rein<strong>for</strong>ceeach other when aligned towards commonobjectives, but when misaligned can underminestate legitimacy and accountability andweaken ties of citizenship. <strong>Law</strong> 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. <strong>The</strong>re 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. <strong>The</strong> resultwas a major gap between daily practices of thepeople and requirements of <strong>for</strong>mal law. Secondly,in urban areas, as de Soto has pointedout, ill-conceived laws have <strong>for</strong>ced millions ofpeople into in<strong>for</strong>mality, as gaining access toland <strong>for</strong> housing is a lengthy process, measuredin terms of years if not decades. 162) Misuse of rules governing property. While rules<strong>for</strong> 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

<strong>for</strong> empowerment of the many. Equally, landregulations, rather than providing a frameworkwithin which parameters <strong>for</strong> property managementare set and transactions enabled, canbecome mechanisms <strong>for</strong> restriction of propertyrights and bureaucratic mismanagement.3) Lack of access to in<strong>for</strong>mation and justice.Even where cadastres, land registers and otherrepositories of property titles, records anddocuments exist, restriction of access to suchin<strong>for</strong>mation reduces the transparency and efficiencyof property transactions. Governmentsmust work to make in<strong>for</strong>mation on propertyavailable to the general public and seek tocollect further data and opinion in innovativeways through the promotion of opportunities<strong>for</strong> 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. <strong>The</strong> 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(<strong>for</strong> depriving the poor of their assets),continues to be a problem. Re<strong>for</strong>m 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, <strong>for</strong> example, compensation valuingbillions of dollars remains unpaid in someregions without clear avenues of redress; (2)the basis <strong>for</strong> 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, andthere<strong>for</strong>e 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 <strong>for</strong> the creation ofopportunities <strong>for</strong> exercising rights, create entitlementsto rights <strong>for</strong> 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 en<strong>for</strong>cingobligations in a manner that incorporates accountability.<strong>The</strong> ‘user’ perspective is essential <strong>for</strong> thelegitimacy of the system, as legitimacy is the outcomeof the degree to which people, once granted68

Table 1 Mapping the dynamics of legal statusExternal<strong>The</strong> public, social movementsLegal community of practiceJudicial Review, civil society and mediaExcluded/ineligible peopleInternal<strong>The</strong> authorizing environment <strong>for</strong> 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. <strong>The</strong>y catalyse changes to existingcitizenship arrangements, in questioning thefairness or effectiveness of an existing legal status,and in the creation of new legal status <strong>for</strong> specificgroups. <strong>The</strong> 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 <strong>for</strong>, 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 conditions<strong>for</strong> 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 <strong>Commission</strong> reporton social inclusion. 21<strong>The</strong> 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 <strong>for</strong> 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.<strong>The</strong>re<strong>for</strong>e, context-based legal re<strong>for</strong>m is critical togovernance in developing countries. <strong>The</strong>re can beno blanket approach: expansion of property rightsin a coherent manner requires understanding oftrends and a tailoring of provisions to context.<strong>The</strong>re 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 <strong>for</strong> cooperativearrangements that underpin this dynamicand support transparent, effective property-basedeconomies. <strong>The</strong> 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 <strong>for</strong> thesystemic expansion of property rights.Key Elements of a Re<strong>for</strong>m 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 <strong>for</strong>the 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. Are<strong>for</strong>m strategy <strong>for</strong> effectively functioning propertysystems that empower the poor should be basedon land tenure security, creation of opportunity <strong>for</strong>investment, and adequate management of risk.<strong>The</strong> elements of such a strategy must:1) Promote Legitimacy by Adequate Participationand Deliberation. In general, future re<strong>for</strong>m willrequire a legitimate state. For implementationat all levels, re<strong>for</strong>ms 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 re<strong>for</strong>m.In Peru between 1996 and 2000, <strong>for</strong> example,3,500 meetings were held on land titling processesin different settlements around the country,helping to improve community satisfactionwith property re<strong>for</strong>m ef<strong>for</strong>ts. 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 <strong>for</strong> 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 <strong>for</strong>access 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 <strong>for</strong> new property owners to becomecompetitive. <strong>The</strong> 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 <strong>for</strong> in-70

creasing finance <strong>for</strong> land re<strong>for</strong>m and post-landacquisition services, including land banks,land-<strong>for</strong>-debt schemes and land <strong>for</strong> taxes. 243) Facilitate Private Sector Involvement. <strong>The</strong>state needs to set the parameters within whichprivate sector investment can take place, andremove any disincentives to this process. Fees<strong>for</strong> property transactions, which in some developingcountries can be as high as 30 percent,act as an unnecessary <strong>for</strong>m of taxation thatinhibits the free exchange of land throughmarket mechanisms and excludes the poor.Official land taxes must also be set at an af<strong>for</strong>dablelevel <strong>for</strong> the poor and subsidies andtax provisions that provide distorting privilegesto large-scale farmers should be removed. InMexico, <strong>for</strong> example, certain groups ‘prefer notto regularise the land <strong>for</strong> human settlementto evade having to paying land tax, which promotesin<strong>for</strong>mality 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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>mality of corporate ownershipand can trump unavoidable disadvantages.5) Create Systems <strong>for</strong> 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 re<strong>for</strong>ms that would allow the poorto leverage movable and intangible property.6) Co-management of Natural Resources. <strong>The</strong> majorityof the rural poor depend to a large extenton non-arable resources such as <strong>for</strong>ests, pastures,swamplands, and fishing grounds. <strong>The</strong>seresources require careful management to avoidrent-seeking and corrupt practices that resultin environmental degradation and economicinefficiencies. <strong>The</strong> 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.<strong>The</strong>se 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 other<strong>for</strong>ms 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 ef<strong>for</strong>t of issuingland registration documents. Moreover, moderntechnology can help to improve transparencyand at the same time make land administrationmore accessible. 29 <strong>The</strong>re 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 re<strong>for</strong>m 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 ef<strong>for</strong>ts already underway in various partsof the world, including analysis of conditions thatgave rise to such ef<strong>for</strong>ts, and possibilities <strong>for</strong> theirexpansion, will be instructive. We can developtransitional re<strong>for</strong>m mechanisms from experiencein the Philippines, <strong>for</strong> 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 <strong>for</strong>malised. 30Or we consider how the South African experiencewith Mzansi accounts, providing low-fee banking<strong>for</strong> poor people working in the in<strong>for</strong>mal 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 ef<strong>for</strong>ts. 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 re<strong>for</strong>m.<strong>The</strong> aid community understands that propertyrights must be a central tenet of any ef<strong>for</strong>ts 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 <strong>for</strong> the managementof public land, and strengthen the institutionalframework and mechanisms <strong>for</strong> land transfer andaccess. Property rights are too central to humandignity and prosperity <strong>for</strong> 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. <strong>The</strong>y demand not to be drivenoff their land just because it was declared stateproperty; they demand property documents or the<strong>for</strong>mal registration of documents in their possession;they demanded that unused state land beallocated to them, and they demand state protectionagainst violent guerrilla movements. <strong>The</strong>fulfilment of these demands, and the solution tomany other property-related problems identifiedin this report, requires strong, sustained and context-basedre<strong>for</strong>m. Such re<strong>for</strong>m 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 trans<strong>for</strong>mtheir impressive economic ef<strong>for</strong>ts into anincreased and secured asset base. <strong>The</strong> agendaimplies a general re<strong>for</strong>m of the law from an instrumentof domination into a system of effectiveprotections and opportunities <strong>for</strong> the poor. 32On the input side, the emphasis of legal empowermentis placed on participatory and accountable<strong>for</strong>ms 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 environment<strong>for</strong> 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 opportunities<strong>for</strong> diversifying livelihoods, thereby improvinglives. Escape from the poverty trap and creating amore decent life are seen as the principal aims.Property rights stand <strong>for</strong> the bundle of libertiesand claim rights tied to the allocation of aresource to a natural or legal person, corporation,collectivity, association, etc. <strong>The</strong> concept of propertyrights as human rights and as part of LegalEmpowerment of the Poor implies two agendas:legally en<strong>for</strong>ced 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 <strong>for</strong> 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.<strong>The</strong> increased social stability and trust emanatingfrom robust property rights systems create appropriateenvironments <strong>for</strong> 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 <strong>for</strong> 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 re<strong>for</strong>mwith 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 re<strong>for</strong>mactivities, and prepares the ground <strong>for</strong> the maindiscussion, in Section 5, on proposals within thefour building blocks of the property system. <strong>The</strong>proposals aim at re<strong>for</strong>ming 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. <strong>The</strong> suggestionsshould also help to re<strong>for</strong>m the propertysystem so it could serve as a <strong>for</strong>m 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 re<strong>for</strong>m work, sustained by constantmonitoring in all four dimensions, is advocatedin order to achieve real progress. Common<strong>for</strong>mal features of policy design and prioritisingare dealt with in a special paragraph of Section5. <strong>The</strong> establishment of fully functional propertysystems and positive effects <strong>for</strong> the poor is firstand <strong>for</strong>emost a national and local re<strong>for</strong>m 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 re<strong>for</strong>m 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, there<strong>for</strong>e, deserve to beseriously considered and further tailored to local-realitycontext by property rights re<strong>for</strong>m in thedeveloping world.Although not repeatedly mentioned throughoutthis chapter, the members of our working groupacknowledge the ef<strong>for</strong>ts of numerous governments,international organisations, and NGOs inthe field of property rights. And as many membersare themselves part of past and ongoing ef<strong>for</strong>tsin the field, our chapter was not written withany pretension to invent a ‘wheel’. <strong>The</strong> intent isthat it would serve to raise political awarenessand communicate a set of selected policy options<strong>for</strong> decision makers in the hope of improving substantiallyequitable property rights protection <strong>for</strong>the poor and societies at large. <strong>The</strong> 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. <strong>The</strong>reare 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 rights<strong>for</strong> 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 <strong>for</strong>the poor to work themselves out of poverty, othersstress the fact that market <strong>for</strong>ces marginalize thepoor and drive them into misery.Acloser look reveals that these diagnosticview points are often context-dependent. Torealise property rights <strong>for</strong> 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 re<strong>for</strong>med and morelegitimate state and a functional market that includesthe poor in the value chains. This chapterthere<strong>for</strong>e stresses the dynamic interdependenceof state and market and the equal importanceof their re<strong>for</strong>m in the ef<strong>for</strong>ts to empower thepoor through property rights. <strong>The</strong>re 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. <strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong>mal procedures. If propertyrights are to bring substantial benefits to the globalpoor, the <strong>for</strong>malised 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. <strong>The</strong> 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. 37<strong>The</strong> 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 <strong>for</strong>displacement, first and <strong>for</strong>emost is lack of securityof tenure <strong>for</strong> the poor, who have no en<strong>for</strong>ceableproperty rights or access to justice.Box 1 <strong>The</strong> 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. <strong>The</strong> poor live in mainly six regionsand particularly three: South Central Asia (whichincludes populous India), the even more populousChina, and Sub-Saharan Africa. <strong>The</strong>y 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 en<strong>for</strong>ceable property rights, residents ofin<strong>for</strong>mal settlements are often subject to <strong>for</strong>cefuleviction. <strong>The</strong>y must fend <strong>for</strong> 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 <strong>for</strong> 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. <strong>The</strong>poor and their potential business partners haveno criteria to establish or realise the potential oftheir assets. <strong>The</strong>re is no clear reciprocity <strong>for</strong> 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 account<strong>for</strong> 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 <strong>for</strong> 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 earlyplat<strong>for</strong>m of post-conflict re<strong>for</strong>ms, 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.<strong>The</strong> majority of rural poor depend upon<strong>for</strong>ests, pastures and swamplands. Forests aloneaccount <strong>for</strong> 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 <strong>for</strong>eshore 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.<strong>The</strong> 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. <strong>The</strong> World<strong>Commission</strong> on Water estimates that the demand<strong>for</strong> 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. <strong>The</strong> 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 <strong>The</strong>y constitute half the world’s popu-77

Table 2 <strong>The</strong> 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.** <strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong>cible 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 in<strong>for</strong>mal settlements and slums from urbanareas. <strong>The</strong> 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 <strong>for</strong>mallaws 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 en<strong>for</strong>cement of <strong>for</strong>mal rightsor of social norms.Creating en<strong>for</strong>ceable 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 plat<strong>for</strong>m <strong>for</strong>building 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 <strong>The</strong> Declarationon the Rights of Indigenous Peoples, draftingof which had begun in the 1980s. <strong>The</strong> 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 <strong>for</strong> indigenous asset holdersand society at large and is a critical issue, globally,<strong>for</strong> property rights re<strong>for</strong>m. 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 DisplacedPersons<strong>The</strong> 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 <strong>The</strong> 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 <strong>for</strong> orderly reestablishmentof property relations after disastersand <strong>for</strong> the development of reliable insuranceschemes. 60 Hurricane Katrina victims had propertyrights and insurance schemes that mitigatedtheir losses. <strong>The</strong> poorest people of the world lackand desperately need such securities.3. Barriers versusFacilitators of Change<strong>The</strong>re is evidence of enormous social and economicpotential in the establishment of propertyrights systems <strong>for</strong> 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. <strong>The</strong>y resist legalisationand undermine good governance. 63 <strong>Law</strong>yers 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 in<strong>for</strong>mal sector refrain from registeringbusinesses and property to avoid taxes and costlyregulations. 65Structural Obstacles andFacilitators of ChangeActors tackling the task of re<strong>for</strong>m also have tobe aware of structural causes of stagnation orchange. <strong>The</strong> 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 en<strong>for</strong>ce 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 re<strong>for</strong>ms onnon-poor groups with significant influenceis critical to assess potential support and opposition<strong>for</strong> re<strong>for</strong>ms. 69 Besides promoting pro-poorproperty rights it is there<strong>for</strong>e important to establishproperty rights systems that are beneficial<strong>for</strong> middle classes and groups with significantassets and political influence. <strong>The</strong> message to allis that in the absence of generalised and equitableproperty rights systems much of economicactivity does not develop its full potential even<strong>for</strong> powerful actors 70 ; there is a high likelihood ofsocial unrest 71 ; there may be under-accumulationof human capital resulting in a low quality labour<strong>for</strong>ce, and little demand <strong>for</strong> credit resulting in underdevelopedfinancial institutions and ultimatelyhindered growth. <strong>The</strong>re is also less <strong>for</strong>eign investmentor flight of capital when property rights arenot guaranteed.scenario. <strong>The</strong> 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 re<strong>for</strong>ms isa possibility where inequalities are less extreme.<strong>The</strong> issue of better understanding how to devisemechanisms <strong>for</strong> convincing the political authoritiesor circumventing their influence in orderto induce the re<strong>for</strong>m constitutes an importantchallenge. An important implication of this viewis that a drastic one-time re<strong>for</strong>m 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 <strong>for</strong>groups with significant assets and political influence.<strong>The</strong>y 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 re<strong>for</strong>ms, including equitableproperty rights, are illustrative of precisely this81

4. Learning from the PastLearning from previous re<strong>for</strong>ms in view of improvingpractices carries considerable burdens of judgmentas one tries to measure the possible applicabilityof particular lessons to future re<strong>for</strong>ms 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 in<strong>for</strong>medjudgment.Problematic Practices and OmissionsSix general lessons from past mistakes arepresented as follows:1) Disregarding that effective property rights <strong>for</strong>the poor are the result of power relations andsystemic interaction. Many ef<strong>for</strong>ts to give thepoor effective and en<strong>for</strong>ceable 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 anticipatedre<strong>for</strong>m benefits <strong>for</strong> the poor. Associationalpower of the poor, more symmetric in<strong>for</strong>mation,legal literacy, procedural assistance andinstitutional capacity building are as importantas the <strong>for</strong>mal 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 <strong>for</strong>eclosure 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 <strong>for</strong>eclosure 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 <strong>for</strong>malisationhas led to some important shifts in donor landpolicies in recent years. It is now acceptedthat <strong>for</strong> 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 there<strong>for</strong>e 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. <strong>The</strong> 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.<strong>The</strong> asset base of the poor can be extended byinnovative <strong>for</strong>ms of non-real estate and noncreditbased corporate shareholder ownershipand by using moveable property as collateral.Unlike land and housing, the reproductivepotential of non-tangible <strong>for</strong>ms 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. <strong>The</strong> risksof the land and financial market have invitedspecial policy measures which are supposedto protect the poor from predators and harmfulmarket <strong>for</strong>ces. Such practices mainly includeconditionality of <strong>for</strong>ming 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.<strong>The</strong> incentives to <strong>for</strong>m collectives are beneficialwhere they are related to and protectexisting communal structures. 80 <strong>The</strong>y 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 <strong>for</strong> capacity building. 816) Failure to conceive gender equitable propertyrights systems. In many countries, <strong>for</strong>malstatutory law operates in conjunction with customarylaw and cultural norms and practicesbased on patriarchal attitudes which makeit difficult to en<strong>for</strong>ce 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 <strong>for</strong> 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. Legalre<strong>for</strong>m does not improve the precarious propertyrights situation of women if there are noen<strong>for</strong>cement mechanisms, and if legal assistanceand support services are not af<strong>for</strong>dableor accessible <strong>for</strong> women. 82Lessons from mistakes related to land and realproperty:1) Failure to address the problem of landlessnessand extremely unequal land distribution.Market based re<strong>for</strong>ms 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 there<strong>for</strong>enot eligible <strong>for</strong> registration without conversioninto imported <strong>for</strong>ms. 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. <strong>The</strong>y 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 framework<strong>for</strong> private group-owned property. <strong>The</strong>y havebeen flexible and responsive to changing economiccircumstances. 86 <strong>The</strong>y limit the propertyrights bundle to a specific group of people asthe bearers of those rights. <strong>The</strong> household, thevillage, and the kin group often provide insur-83

ance against risks, access to in<strong>for</strong>mal credit,and security. Lineage rules of inheritance helpen<strong>for</strong>ce intergenerational transfers. <strong>The</strong> threatof social exclusion is a major instrument ofen<strong>for</strong>cement of the rules. In other words, essentialfunctions of the property rights systemare fulfilled by customary systems and ought tobe legally rein<strong>for</strong>ced. 873) Assuming high demand <strong>for</strong> <strong>for</strong>mal 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 <strong>for</strong>mal 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 <strong>for</strong>property 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 <strong>for</strong>credit 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 <strong>for</strong>the Least Advantaged Customer. In manycountries, land administration functions aredispersed among many Ministries (justice,environment, agriculture, urban, finance, landre<strong>for</strong>m, <strong>for</strong>est, mining, etc.). This createsgrey zones of overlapping competencies as abreeding ground <strong>for</strong> 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. <strong>The</strong>reshould be a strict focus on using eminentdomain as ultima ratio in providing essentialpublic services rather than as a means toimprove general public utility. <strong>The</strong> 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. <strong>The</strong>re has been lack of attentionto the possibility of community basednatural resource management in the case of<strong>for</strong>ests, fishery, and water. <strong>The</strong>re 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 <strong>for</strong>mal documentationmay have the effect of inadvertentlydisrupting existing tenurial arrangements.84

<strong>The</strong>re may be sound policy reasons <strong>for</strong> seekingto modify or eliminate some existing tenurialpractices. It is important, however, that anysuch re<strong>for</strong>ms are the result of in<strong>for</strong>med andparticipatory decision-making, and not theinadvertent result of poorly designed or implementedtitling processes.3) Concentration and Discrimination. In manycountries, including the countries of the <strong>for</strong>merSoviet 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 in<strong>for</strong>mation 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 <strong>for</strong>malisation 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 re<strong>for</strong>m project.5) Capitalisation: Difficult <strong>for</strong> 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 <strong>for</strong>ms 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 <strong>for</strong>mal property rights lead to more availabletime <strong>for</strong> 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 <strong>for</strong> 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 collateral<strong>for</strong> credit. 97 Tenure security and economicbenefits other than capitalisation via collateralof land property seem to be primordial <strong>for</strong>the 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 re<strong>for</strong>msthere<strong>for</strong>e now tend to be accompanied withtargeted credit <strong>for</strong> the poor.6) Costs and Benefits of Property Rights Protection.From the perspective of the poor andthe state, the costs of <strong>for</strong>mal titles have tobe weighed against the costs of insecurity oftenure, or against in<strong>for</strong>mal costs (bribes) inobtaining titles which harm the poor and thestate. 98 In many unre<strong>for</strong>med contexts, only few85

households can af<strong>for</strong>d 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 en<strong>for</strong>cedproperty rights systems are not necessarilycost ineffective and expensive. 1007) Fees and Taxes. <strong>The</strong> 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. <strong>The</strong> key elements that have tobe in place <strong>for</strong> property tax re<strong>for</strong>m: existence ofadequate technical expertise; appropriate landrecords and administration are required as thebasis <strong>for</strong> the property lists; sufficient flexibilityto allow the phasing in of major changes is essentialto <strong>for</strong>estall 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 <strong>for</strong>Re<strong>for</strong>m and ImprovedAction<strong>The</strong> 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 re<strong>for</strong>m process andparallel interventions inducing far-reaching andsustainable re<strong>for</strong>ms of the four building blocks ofthe property rights system; that is: (1) re<strong>for</strong>mingthe 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) re<strong>for</strong>ming it as a system of governanceso that targeted actions securing the propertyrights of the poor can be taken effectively and legitimately;(3) re<strong>for</strong>ming it as a functioning marketof assets to include the poor in the chains ofvalue addition enabling them to become capablemarket participants, and (4) re<strong>for</strong>ming the propertysystem as one of social policy with targetedmeasures of capacity building, in<strong>for</strong>mation, andaccess to property and housing. Parallel re<strong>for</strong>mwork 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.86Re<strong>for</strong>ming Rules Regarding Bearersand Bundles of Property RightsProperty rights stand <strong>for</strong> the bundle of libertiesand claim rights tied to the allocation of a resourceto a natural or legal person. <strong>The</strong> 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.<strong>Law</strong>s 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 <strong>for</strong> 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 <strong>for</strong> small entrepreneursin the developing world is the limited liability ofbusiness owners, allowing <strong>for</strong> controlled failurewithout disastrous consequences <strong>for</strong> 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, straight<strong>for</strong>wardmanner. Its main advantage is <strong>for</strong>mality ofbusiness ownership that trumps disadvantages of<strong>for</strong>mality such as tariffs and taxes, provided theseare af<strong>for</strong>dable.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. <strong>The</strong> association, aslegal person, is owner of the real property andcollectively responsible <strong>for</strong> 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. 104<strong>The</strong> idea is to provide a <strong>for</strong>m 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 <strong>for</strong>law to prescribe in too much detail the structureof local organisations and the rules by which theycan operate. At the same time, injecting greater<strong>for</strong>mality 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. <strong>The</strong>y 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 <strong>for</strong> the poorIn Pakistan, incremental expansion of urban servicesallowed conversion of in<strong>for</strong>mal 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. <strong>The</strong>re,the State Land (Regularisation of Tenure) <strong>Law</strong> of 1998paved the way <strong>for</strong> progressive issue of Certificates ofCom<strong>for</strong>t, Statutory Leases and Deeds of Lease to in<strong>for</strong>malsettlers 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 a<strong>for</strong>m of adverse possession over private land, so thereis no need <strong>for</strong> 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 <strong>for</strong>m of co-ownership. It is a <strong>for</strong>m of prescriptiveacquisition, a real right (in the legal sense), and nottemporary. It can be sold, inherited, etc., and there isno reason <strong>for</strong> banks not to accept it (Fernandes 2005).In India it is common practice to issue pattas givingrights to the poor over government land. <strong>The</strong> patta, adocument issued by the Land Revenue Department,may be freehold or leasehold (99/30/10/1yr), renewableor not. It specifies conditions <strong>for</strong> use, transfer andinheritance, and may be used to regularise occupationor assign new plots. <strong>The</strong> 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 <strong>for</strong> 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, af<strong>for</strong>dable by the poor.Recognising Customary Tenure and Communitiesas Bearers of Property Rights to Land and NaturalResourcesIndividual titling and/or alternative measures <strong>for</strong>incremental 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 other<strong>for</strong>ms of tenure security or replaced by new approachesto securing tenure to more fully cover thespectrum of the local economic practices and conditions.<strong>The</strong> 1990s and early 2000s are repletewith examples of legal re<strong>for</strong>ms 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). <strong>The</strong>seinnovations 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:• <strong>The</strong>y 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.• <strong>The</strong>y 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 re<strong>for</strong>mIn Namibia, legal re<strong>for</strong>ms in 1996 created a framework<strong>for</strong> community-based natural resource management(CBNRM). Namibians who <strong>for</strong>m 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. <strong>The</strong>y are empowered to build businessesbased on eco-tourism and related activities. <strong>The</strong>sebusinesses help to diversify livelihoods and providevaluable benefits <strong>for</strong> conservancy members.Namibia’s experience with CBNRM may provide astrong model <strong>for</strong> 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.• <strong>The</strong>y 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 <strong>for</strong>mat that is not adapted to localrealities.• <strong>The</strong>y 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, <strong>for</strong>ests, water, fisheries,in many poor countries are a special case of customarytenure and crucial <strong>for</strong> the improvement ofthe legal and economic status of the poor. <strong>The</strong>yare vulnerable to degradation and appropriationby powerful chiefs, outsiders, or state bureaucratsunless common property resource managementsystems are rein<strong>for</strong>ced 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 — <strong>for</strong> example, as an incorporateduser group — and having clear rules <strong>for</strong>conflict resolution that are respected by allinvolved. Arriving at culturally appropriate legal<strong>for</strong>ms <strong>for</strong> such bodies is key.• Ensuring that customary <strong>for</strong>ms of tenure canevolve towards more <strong>for</strong>mal types of tenurethrough well-defined and transparent processes,if and when, in the judgment of thoseconcerned, the benefits from more individualownership exceed the cost. 109<strong>The</strong> status of in<strong>for</strong>mal rights has come strongly tothe <strong>for</strong>e. 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. <strong>The</strong>89

implications promise socio-economic changesnever quite achieved in previous re<strong>for</strong>ms 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 <strong>for</strong>mal legalinstitutions. If carelessly done, <strong>for</strong>mal recognitionmay have the effect of unduly privileging one ofseveral competing local visions of what constitutesa community, and what rules or authoritiesare legitimate.Balancing Respect <strong>for</strong> 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. <strong>The</strong>re is no inherent contradictionbetween giving increased legal recognition to customaryor indigenous tenure systems and promotingeconomic growth — indeed, in some contextsit is argued that the <strong>for</strong>mer is a pre-requisite <strong>for</strong>the 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. <strong>The</strong> question is whetheremphasis on protection reflects the needs and aspirationsof local people in rapidly changing economicenvironments. Some laws provide avenues<strong>for</strong> communities or individuals to attract outsideinvestment on their land, subject to an internalprocess of approval. <strong>The</strong>re are in some cases opportunities<strong>for</strong> individuals or groups to ‘opt out’ oflocal tenure systems in favour of acquiring individualisedtitles under a state-sponsored scheme.<strong>The</strong> Challenge of Capacity and Conflict. Devolvinggreater authority to local institutions — whethertraditional bodies or local governments — has itsjustifications. <strong>The</strong> question to be asked in eachcase, however, is whether specific re<strong>for</strong>ms 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 allow<strong>for</strong> community based land and natural resourcemanagement and require tighter central control.<strong>The</strong> challenge of capacity and conflict extends90

Box 4 Focus AfricaCustomary rights may now be registered without conversioninto introduced <strong>for</strong>ms 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 <strong>for</strong>ms on final registration.Described incidents of customary rights reflect‘customary freehold’ and/or as customarily agreed bythe modern community. Most laws allow <strong>for</strong> customaryrights to be held in perpetuity, raising their statusabove that of leasehold or similar statutory <strong>for</strong>mscommon to most of Africa. Freehold is available mainlyin Southern Africa. Only Tanzania and Mozambiqueendow customary interests with unequivocal equivalencywith imported tenure <strong>for</strong>ms. Uganda proclaimsthis but also provides <strong>for</strong> 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.<strong>The</strong> 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. <strong>The</strong> 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 provided<strong>for</strong>, 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. Ef<strong>for</strong>ts 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 GenderEquitable<strong>The</strong> UN Research Institute <strong>for</strong> Social Developmentnotes that there has been ‘both considerableprogress throughout the 1990s in making<strong>for</strong>mal 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 en<strong>for</strong>cement.In some environments, police services andcourt systems fail to en<strong>for</strong>ce women’s propertyrights. When property rights exist de jure but notde facto, policymakers face difficult choices:expend resources to better ensure en<strong>for</strong>cementor work to shift social norms. In countries withlimited capacity the <strong>for</strong>mer route is difficult. Inany country the latter is a major educational challenge.<strong>The</strong>re is need <strong>for</strong> 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 Ef<strong>for</strong>ts 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. <strong>The</strong> primary way the poor acquireland is through the family and by inheritance. 112Many <strong>for</strong>mal or in<strong>for</strong>mal 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. <strong>The</strong>se 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, <strong>for</strong> women, theexistence of inheritance rules that call <strong>for</strong> maleand female heirs to receive equal consideration intestamentary distributions are an important stepon the path towards empowerment. <strong>The</strong>re is someevidence that changing <strong>for</strong>mal inheritance lawsmay have the unintended consequence of promptingmen to specifically disinherit female heirs toavoid passing property to them. 115Education and In<strong>for</strong>mation. 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: <strong>The</strong> 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 <strong>for</strong>ms 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 <strong>for</strong>msof tenure, rather than indigenous people as such,this section of the report pays attention to these<strong>for</strong>ms of intellectual property rights rather than tothe identification of their bearers. <strong>The</strong> 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 <strong>for</strong> the conservation of TK, GRand TCEs and as a tool <strong>for</strong> 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 <strong>for</strong> someindigenous people, the concept of public domainassociated with traditional intellectual propertylaws has allowed <strong>for</strong> the appropriation of GR andTK <strong>for</strong> the development of inventions that aresubsequently patented.Intellectual Property Rights in Context. <strong>The</strong> 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, <strong>for</strong> 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 in<strong>for</strong>mationfrom 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. <strong>The</strong> overall purpose of intellectual propertyrights <strong>for</strong> 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, <strong>for</strong>m of protection to be granted,ways <strong>for</strong> ensuring nationals of one country toenjoy rights in <strong>for</strong>eign 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 <strong>for</strong> enhanced international cooperation inareas such as mutual in<strong>for</strong>mation, registration andmanagement of rights, among others.93

<strong>The</strong> Intergovernmental Committee on IntellectualProperty and Genetic Resources, Traditionalknowledge and folklore (IGC), established byWIPO Member States in 2000 has adopted an inclusiveapproach. <strong>The</strong> 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. <strong>The</strong>IGC process has resulted in draft objectives andprinciples <strong>for</strong> the legal protection of TK and TCEsagainst misappropriation and misuse. 120Re<strong>for</strong>ming Property Governancein view of the Least AdvantagedCustomer<strong>The</strong> 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 en<strong>for</strong>cement. Since a propertysystem with general deficits will not produce beneficialresults targeted to the poor, this sectionpresents broader re<strong>for</strong>m combined with measuresthat particularly promote the inclusion of the poorin effective property rights protection. 121Changing LegislationRe<strong>for</strong>ming the property system to produce tangiblebenefits <strong>for</strong> 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 <strong>for</strong> the poor, andthen to assess if the legal basis <strong>for</strong> 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, especially<strong>for</strong> customary owners and women, requires legal(statutory or customary) or even constitutionalre<strong>for</strong>m. 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 re<strong>for</strong>m as well. Re<strong>for</strong>m 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 <strong>for</strong> the lawfrom different stakeholders and agents, are asimportant as the content of the law itself. Politicalconstellations might make sweeping andcomprehensive re<strong>for</strong>ms possible and hence advisablein some contexts. If not, it is also possibleto approach the re<strong>for</strong>m of property law in a moreprocess-oriented manner. <strong>The</strong> following guidingprinciples have been useful in endeavours in differentnational contexts, where a one-time sweepingre<strong>for</strong>m was politically impossible:94

• Where consensus is hard to obtain and/ormedium-term effects hard to anticipate, apragmatic and incremental approach to legalre<strong>for</strong>m is often the best approach.• Legal and regulatory re<strong>for</strong>ms 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 <strong>for</strong> theprogress of the re<strong>for</strong>m project. 126In ef<strong>for</strong>ts 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 re<strong>for</strong>m is critical, especiallyas such support can falter during changes in thepolitical administration, <strong>for</strong> example. <strong>The</strong>re<strong>for</strong>e, aconsensus-building and communication strategymust be designed and implemented to sustainbroad support.Re<strong>for</strong>m 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 there<strong>for</strong>e advisable to make thesystem as a whole more efficient and friendly tothe least advantaged customer. <strong>The</strong> 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 institutions<strong>for</strong> en<strong>for</strong>cement. 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. <strong>The</strong> 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 <strong>for</strong> the implementationof property rights. 128Accessibility. Local Presence. <strong>The</strong> locations ofthe agency should be as decentralised as possibleand easily accessible <strong>for</strong> the poor who are unableto bear the costs of travelling long distances inorder to register or transfer property.Reduced Transaction Costs. Ef<strong>for</strong>ts to reduce thenumber of days it takes to <strong>for</strong>mally register propertycan have a positive effect in terms of reducingtransaction costs. So too can reducing the numberof steps buyers and sellers must follow be<strong>for</strong>e <strong>for</strong>maltransfers 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 <strong>for</strong> land sales to be driven into in<strong>for</strong>mality,which can over time threaten the integrityof the registry in<strong>for</strong>mation, is the desire to avoidhigh levels of taxation, mainly in the <strong>for</strong>m of stampduties, or the need to make in<strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong> 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 In<strong>for</strong>mation 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 in<strong>for</strong>mation available publicly on the Internetand promoting Internet access can reducetransaction cost and by allowing independentcross-checks, greatly increase public confidencein them. <strong>The</strong> transition to an all-digital, internetenabledland registration system is not withoutpitfalls. Corruption can easily increase in theearly phase, because the opportunity <strong>for</strong> alteringthe records be<strong>for</strong>e digitisation is high. <strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong> granting, selling,and leasing of state lands.Strictly Circumscribe Conditions <strong>for</strong> 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 <strong>for</strong>mer land owners — is thegovernment’s far-reaching ability to expropriateland with real compensation often far below marketrates. <strong>The</strong> threat of expropriation has servedto undermine tenure security and investment andhas also led to in<strong>for</strong>mal 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 <strong>for</strong> this is that,in many countries, even land <strong>for</strong> 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 <strong>for</strong>mal cityand peri-urban development processes. On theother hand, the right use of zoning and spatialplanning can become a <strong>for</strong>midable 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 <strong>for</strong> abuse. Peri-urban areas needto be better planned if they are to be more effectivein promoting sustainable pro-poor urbandevelopment. <strong>The</strong> ambit of interventions hasto expand beyond slum upgrading and tenureregularisation to defining the urban developmentframework within which access to land and landdevelopment rights <strong>for</strong> the poor becomes possible.137 Spatial and urban planning can be a majordriving <strong>for</strong>ce behind higher living standards andwealth generation. 138 <strong>The</strong> relevance <strong>for</strong> 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 <strong>for</strong>ms,be environmentally and socially harmful. Whileit will be dangerous to generalise, in practice theonly reason <strong>for</strong> 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 <strong>for</strong>the reality of the poor. Focusing central ef<strong>for</strong>ts ondefining clear per<strong>for</strong>mance criteria <strong>for</strong> land useand ways of en<strong>for</strong>cement 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-<strong>for</strong>mation by Mixed Neighbourhoods.New and ‘good old urbanism’ definesalternatives <strong>for</strong> urban growth and communitiesbased on concepts of mixed neighbourhoods,mixed land use, diversity and public identity.<strong>The</strong>se 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 <strong>for</strong> additionalzoning and planning measures that canwork to improve existing slums. Here, specialinterest zones can create protective and empoweringenvironments of residence and businessactivity <strong>for</strong> the urban and peri-urban poor.In Brazil several planning measures have beentaken to provide secure conditions of livingand livelihood <strong>for</strong> the poor. For instance, urbanzones which have favelas, corticos (collectivehousing, popular subdivisions), and other <strong>for</strong>msof 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 <strong>for</strong> each ZEIS by a localcommittee <strong>for</strong> regularisation of land occupationand use of land by the poor. ZEIS havenow been adopted relatively successfully by anumber of Brazilian cities. 141Conditionality <strong>for</strong> Private Developers. One importantprovision, <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> without shelter households or paymentof a sum equivalent to the officially determinedprice of the land to be reserved. <strong>The</strong> policyhas made land available <strong>for</strong> housing more than6,000 poor households in central city locations inthe city of Bhopal alone and substantial funds <strong>for</strong>land procurement and development. 143Density Mixed Use Zones legitimise densely built,small plots and home based businesses. <strong>The</strong>draft Nation Slum Policy of India 144 proposes tointegrate in<strong>for</strong>mal 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 <strong>for</strong> essential services and facilitiesshould be relocated. All others should beregularised and their land use zoning should bechanged to high-density mixed-use. <strong>The</strong> NationalHousing and Habitat Policy propose that landshould be zoned <strong>for</strong> housing the poor in city masterplans. 145Reversing the Development Sequence in SlumUpgrading. <strong>The</strong> strategy of reversing the developmentsequence by first allotting secured plotswith only bare minimum services, with provision<strong>for</strong> incremental improvement gives the poor sustainableownership and participation in the valueincrease of property. Such measures match theaf<strong>for</strong>dability 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 <strong>for</strong> the in<strong>for</strong>malbut widespread activity of hawking and vendingin cities and to provide basic facilities such asspace, water and sanitation and access to credit.147 <strong>The</strong> 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. <strong>The</strong>strategy 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 <strong>The</strong> Society <strong>for</strong>the Promotion of Area Resource Centres (SPARC).This was followed by women pavement dwellersidentifying potential vacant lands in the city<strong>for</strong> their relocation, and <strong>for</strong>cing the city governmentto act. This strategy paved the way <strong>for</strong> civicauthorities to recognise the role of civil societyorganisations in developing responsive housingsolutions <strong>for</strong> the poor, and later participating inframing the relocation and rehabilitation policy<strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>ms 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 <strong>for</strong> the poor and <strong>for</strong>women who otherwise are often unable to en<strong>for</strong>cetheir legal rights. 150 In many contexts, Third PartyArbitration Courts (TPACs) can be considered aneconomic and social success. <strong>The</strong>se mechanismsoffer effective protection of property rights and/oreffective resolutions of disputes over contestedproperty arrangements, especially <strong>for</strong> 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 <strong>for</strong> dispute resolution. Butit is equally imperative that the alternative disputeresolution mechanism be linked to <strong>for</strong>malen<strong>for</strong>cement and not operate totally outside therealm of the legal system. Rules have to be craftedin accordance with the <strong>for</strong>mal legal and in<strong>for</strong>malsocial context. If supported by aid, financialsustainability should be guaranteed <strong>for</strong> 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 <strong>for</strong> 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. 152Re<strong>for</strong>ming the Property System asa Market of Assets <strong>for</strong> the PoorA functional property system allows <strong>for</strong> the trans<strong>for</strong>mationof assets into fungible property rightsand <strong>for</strong> 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, re<strong>for</strong>msshould 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 <strong>for</strong> 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 <strong>for</strong> rentals. Land salesmarkets helped purchasers, many of whom were<strong>for</strong>merly landless, to accumulate non-land assetsand significantly enhance their welfare. 155 Ef<strong>for</strong>tsat redistributive land re<strong>for</strong>m will need to aim atcomplementing what market <strong>for</strong>ces are achieving.Market development with the poor in mind oughtto be pursued by:• Granting freedom of contract, definition ofobligations, remedies <strong>for</strong> failing to fulfil obligationsand <strong>for</strong> terminating obligations orderly,guidance on how to conclude a contract, definitionof <strong>for</strong>ms of contract (oral or written);identification of invalid transactions.• <strong>Making</strong> land purchase and sale easier <strong>for</strong> thepoor by minimising conditions such as <strong>for</strong>maleducation or experience in agriculture. Providemodel sales contracts the poor can rely on.• Keeping leasing rules simple and clear.• Reducing transaction costs <strong>for</strong> the poor byavoiding overly precise mapping, avoiding repetitionof platting parcels, not covering initialplatting fees <strong>for</strong> the poor.• Avoiding notary fees <strong>for</strong> small transactions;keeping registration fees and transaction taxesvery low <strong>for</strong> 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 <strong>for</strong>mal credit. Underthe Comprehensive Agrarian Re<strong>for</strong>m Program of thesame country, there was a prohibition on any <strong>for</strong>mof 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 <strong>for</strong>the 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.<strong>The</strong> 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 <strong>for</strong>eclosure by setting moratoria onmortgages; <strong>for</strong> example, a 1997 Russian law prohibitedmortgages on agricultural land (Russian <strong>Law</strong>On Mortgage 1997).Ceilings of ownership work in some contexts <strong>for</strong>some time but have adverse consequences <strong>for</strong>the poor in the long run. 156 Sales moratoria areconsidered a successful practice, provided thetime is used <strong>for</strong> 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 <strong>for</strong> the next decade. Designing businessmodels to address this challenge opens newopportunities <strong>for</strong> company growth as well as <strong>for</strong>broadening the assets base <strong>for</strong> 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. 158<strong>The</strong> focus on business implies focus on profitability.If the projects realise the goal of profitability,this means that they have no limited, fixed budget.<strong>The</strong> new business can thus become replicable andlead to a remarkable empowering impact. Providingbusiness solutions <strong>for</strong> the poor and with thepoor can cover a multitude of activities. <strong>The</strong> guidingprinciple is that companies should engage thepoor in a business relationship that relates directlyto their core commercial operations.<strong>The</strong> poor may be customers and can profit frommore af<strong>for</strong>dable products. 159 <strong>The</strong> poor may also bebusiness partners, suppliers, and/or distributors.<strong>The</strong> 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. <strong>The</strong>y 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 in<strong>for</strong>mational 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 <strong>The</strong>reis 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 <strong>for</strong>ces 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 re<strong>for</strong>mmakes 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 re<strong>for</strong>ms thatmake it easier to use moveable and intangibleproperty as collateral, will expand access to credit<strong>for</strong> 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 re<strong>for</strong>ms that would serve toallow the poor to leverage movable and intangibleproperty. <strong>The</strong>se are:• Allowing <strong>for</strong> 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 <strong>for</strong> 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 en<strong>for</strong>ce 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. 169<strong>The</strong> poor may be understandably hesitant to usethe title to their home as collateral <strong>for</strong> 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 re<strong>for</strong>m aimed atimproving the security and usefulness of moveableand intangible property would not, by itself,create economic growth.Equity Based Asset-Building <strong>for</strong> the PoorCreating Property Value <strong>for</strong> the Poor by ShareholderSystemsInnovative <strong>for</strong>ms 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 <strong>for</strong>equity 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 <strong>for</strong>m 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. <strong>The</strong> 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. <strong>The</strong> 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 <strong>The</strong> 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. <strong>The</strong> government owns the remaining 6 percent.<strong>The</strong> 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, <strong>for</strong> these fast moving members.<strong>The</strong>re 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 per<strong>for</strong>mingchildren 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 <strong>for</strong> 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 ef<strong>for</strong>t to begin toaddress the problem associated with low levelsof banking activity among low-income earnersare Mzansi accounts, low-fee bank accounts designed<strong>for</strong> people working in the in<strong>for</strong>mal sector.<strong>The</strong>se accounts are offered by a group of SouthAfrican commercial banks in conjunction with theSouth African Post Office, and they have beenquite successful. <strong>The</strong>y allow people to become‘banked’, providing a means to establish a credithistory while risking less than the title to realproperty.Re<strong>for</strong>ming the Property System as anInstrument of Social PolicyProperty re<strong>for</strong>m with the poor in mind can be anefficient instrument of social policy with benefits <strong>for</strong>society at large. <strong>The</strong> 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 re<strong>for</strong>m 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 <strong>for</strong> thosewho do not have any real assets at all. Whileland rental markets can, in rural areas, providean important avenue <strong>for</strong> 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 <strong>for</strong> 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 In<strong>for</strong>mal 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. 178<strong>Making</strong> Land Re<strong>for</strong>m Effective <strong>for</strong> IncreasingProductive Assets by the Poor. Land markets,or <strong>for</strong>malisation of existing land rights, are nota panacea <strong>for</strong> 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. <strong>The</strong> annualised rate chargedby these pawnshops ranges from 48 percentcharged by a non-profit pawnshop to 160 percent bya <strong>for</strong>-profit pawnshop. Some pawnshops will accepthouses as collateral (whether the underlying landis legally owned or not) in exchange <strong>for</strong> 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 re<strong>for</strong>m will be needed. While the post-warexperiences of China, Japan, Korea and Taiwanshow that land re<strong>for</strong>m can improve equity andeconomic per<strong>for</strong>mance, many other cases whereland re<strong>for</strong>m could not be fully implemented oreven had negative consequences illustrate the difficultiesinvolved. Where redistributive land re<strong>for</strong>mis found to be more cost-effective in overcomingstructural inequalities than alternatives, it needs tobe complemented by access to managerial ability,technology, credit, and markets <strong>for</strong> 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 Re<strong>for</strong>m. As an alterna-105

tive to authoritative reallocation of land, community-basedland re<strong>for</strong>m 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. <strong>The</strong> provision of funds is made availableunder the condition of a productive purposeand when land markets are sufficiently developed.<strong>The</strong> procedure is legally less complicatedand politically less sensitive than in compulsoryacquisition programmes. Legal re<strong>for</strong>m might berequired in the determination of legal personalityof associations or incorporations <strong>for</strong> the groupseligible <strong>for</strong> funding, but it is probably best to letbeneficiaries experiment with a number of possibleassociational <strong>for</strong>ms. Legal conditionality regardingthe groups of beneficiaries does, however,leave room <strong>for</strong> the pursuit of other social purposes.In Andhra Pradesh, <strong>for</strong> instance, purchasedland is given in the name of women only. 180Limit Administrative Controls on Sales. Oftenthere is little justification <strong>for</strong> policy measures torestrict land sales which drive land sales undergroundand undermine access to <strong>for</strong>mal credit.If there is an issue of asymmetries in power, accessto insurance, and in<strong>for</strong>mation 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 <strong>for</strong> local governments. 181Make benefits from past land re<strong>for</strong>m permanent:<strong>The</strong>re 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.<strong>The</strong> Benefi cial Effects of Property RelatedEducation and Relevant In<strong>for</strong>mation.Households’ awareness and in<strong>for</strong>mation ofrights has a significant and large impacton the positive outcomes of property regimes. 182<strong>The</strong>re is evidence of a strong and positive relationshipbetween households’ objective knowledgeof the law and land-related investmentsand, through such investments, on productivityand land values. <strong>The</strong> 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 toef<strong>for</strong>ts to demarcate lands, programmes to disseminatethe law and make households awareof their rights could thus have very high returnsand should accompany any property rights re<strong>for</strong>mpolicy. Scientific evidence as well as grass-rootsconsultations by the <strong>Commission</strong> 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 rein<strong>for</strong>cing. 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. <strong>The</strong> ratio of construction to the country’sGDP has increased both absolutely and relativelyover the past three decades, about 40 percent ofGDP. <strong>The</strong> construction industry has a labour absorptioncapacity <strong>for</strong> 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 <strong>for</strong>a person <strong>for</strong> 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 <strong>for</strong> industrial development public housinginvestment has generated a significant numberof new jobs near the homes of new town residents,especially <strong>for</strong> women who otherwise might not haveentered the labour <strong>for</strong>ce. 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 per<strong>for</strong>mance 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 <strong>for</strong> family activities; it enables the storage,preservation, and preparation of food; it is a fixedlocation <strong>for</strong> delivery of services such as waterand collection of household refuse <strong>for</strong> 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 <strong>for</strong> women. In developing economiesthe home not only serves as shelter but alsois frequently a place <strong>for</strong> 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 in<strong>for</strong>mation. <strong>The</strong>re are manymodels of specialized programs that provide incentivesto financial institutions to lend to the poor aswell as to those who serve them. <strong>The</strong> 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 <strong>for</strong> public housing constructionand national capital <strong>for</strong>mation. <strong>The</strong>y 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 <strong>for</strong> 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.<strong>The</strong>re 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. <strong>The</strong> country is still in the process ofexperimentation and evaluation, but the commitmentto its housing sector is clear. 193Public Private PartnershipsSeveral <strong>for</strong>ms of public private partnerships(PPPs) were developed in the last two decadeswith built-in provisions of housing <strong>for</strong> 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 <strong>for</strong> space <strong>for</strong> businesses and housing, inturn creating business opportunities <strong>for</strong> the realestate sector, <strong>for</strong> which it needed land in primelocations and land with trunk services in peripheralareas, both of which were scarce. <strong>The</strong> sameeconomic opportunities meant a growing populationof the poor who could af<strong>for</strong>d only in<strong>for</strong>malaccess to space in the city, with all its legal andenvironmental insecurities. Pressures placedupon city development institutions, there<strong>for</strong>e,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 <strong>for</strong> trunk infrastructure that would ensureadequate timing of project development, and <strong>for</strong>en<strong>for</strong>cement of new regulations and laws. <strong>The</strong>reare several examples where a combination of theseinstruments has been used to ensure legal/<strong>for</strong>malaccess to land and housing <strong>for</strong> the poor. GuidedLand Development has been implemented in the108

Box 10 Slum upgradinginitiative in Dali<strong>for</strong>t,SenegalUpgrading of slums in Dali<strong>for</strong>t has provided dwellersthere with new opportunities and better livingenvironment. A <strong>for</strong>mal 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 af<strong>for</strong>d. 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 <strong>for</strong> existing in<strong>for</strong>maldwellers, are given the right to build more thanthe permissible floor space index or floor arearatio specified in zoning regulations <strong>for</strong> 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 <strong>for</strong>rebuilding housing in the portion of land they areto occupy under the shared arrangement. <strong>The</strong> fee<strong>for</strong> registering the new ownership and transfer ofproperty is exempted by the government. 196 <strong>The</strong>arrangement 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, In<strong>for</strong>mation andParticipatory Property Re<strong>for</strong>mOffering public education and legal aid regardingmarket structures to the poor is of critical importance,otherwise the effectiveness <strong>for</strong> the poor ofthe above mentioned measures of legal re<strong>for</strong>m,governance re<strong>for</strong>m 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 re<strong>for</strong>m.In particular, active communication toward andparticipation by civil society are important to ensurethe quality of systemic change in the propertyrights regime.<strong>The</strong>se mechanisms allow beneficiaries to havein<strong>for</strong>mation about the re<strong>for</strong>m’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 in<strong>for</strong>mational 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.<strong>The</strong>se problems generally arose when there wasevidence of lack of representation or when those havingdeveloped clientelistic links with municipal authoritiesassumed questionable leadership. <strong>The</strong> strategyemployed by Peru’s <strong>Commission</strong> <strong>for</strong> the Formalisationof In<strong>for</strong>mal Property (COFOPRI) in breaking this patternwas to establish a direct link with the settler assembliesthemselves. <strong>The</strong> assembly made it possible <strong>for</strong>the 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, 3,500in<strong>for</strong>mative 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. <strong>The</strong> 6,000 in<strong>for</strong>mative and preparatoryassemblies held in this period are the clearest proofof the high level of citizen participation in the process.<strong>The</strong> meetings in<strong>for</strong>med settlers of the kind of documentationneeded by officials charged with creating the listof legal occupants. <strong>The</strong> 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 <strong>for</strong> deliveringservices to each settlement were clearly identified, soresidents knew which officials were in charge. Unlikethe previous titling process, when only certain directorshad access to in<strong>for</strong>mation such as changes in titlingprocedures and the identity of the officials responsible,COFOPRI guaranteed the right of any person to receivein<strong>for</strong>mation about the titling process and to know theofficials in charge. Studies developed in 2000 to evaluatethe per<strong>for</strong>mance 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 re<strong>for</strong>m. <strong>The</strong>y expand thebeneficiaries’ capacity to participate, negotiate,influence, control and hold accountable thepublic institutions in charge of property rightsre<strong>for</strong>m 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 <strong>for</strong> 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. <strong>The</strong> long-term sustainabilityof property re<strong>for</strong>ms must be addressed early,alongside with potential <strong>for</strong> conflicts causedby re<strong>for</strong>m processes.110

2. Pay Attention to Sequencing. <strong>The</strong> contentand sequence of a set of re<strong>for</strong>m 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 re<strong>for</strong>ms 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 re<strong>for</strong>m 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 re<strong>for</strong>mmeasures are carried out diligently they maybe perceived as interventionist and top-downoriented by the poor. Property rights re<strong>for</strong>mprogrammes 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 (in<strong>for</strong>mal 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 re<strong>for</strong>m 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 <strong>for</strong> more legal and regulatory re<strong>for</strong>ms.5. <strong>The</strong> Art of the Long Breath. A full scale re<strong>for</strong>m,including legal re<strong>for</strong>m 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 re<strong>for</strong>m benefits might be visiblerapidly, but sustained beneficial effects onlytake hold if property rights re<strong>for</strong>m is sustainedand carried out over a long period of time. Onthe macro level, beneficial effects of propertyrights re<strong>for</strong>m will take hold over 10-15 years.Given this need <strong>for</strong> long breath, enlightenedauthoritarian regimes seem to have an easiertask in property re<strong>for</strong>m than emerging ordeficient democracies. However, there areseveral ways in which property rights re<strong>for</strong>mcan be sustained over the normal life cycle ofa democratic government. One possibility isto promote re<strong>for</strong>ms with broad support fromseveral parties and to make property re<strong>for</strong>m ageneral interest grounded in the constitution.In order to overcome <strong>for</strong>midable oppositionfrom powerful social actors against propertyre<strong>for</strong>m, broad popular demand <strong>for</strong> re<strong>for</strong>m fromcivil society and the private sector and strongcoalitions of change are needed. Need assessment,awareness and in<strong>for</strong>mation 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 ef<strong>for</strong>t including media,business groups and associations of the poor,academia, and government agencies favourableto change.111

What can Donor Countries andMultilateralism do <strong>for</strong> the Promotionof Property Rights of the Global Poor?<strong>The</strong> establishment of fully functional propertysystems and pro-poor re<strong>for</strong>m is first and <strong>for</strong>emosta 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 ef<strong>for</strong>ts of donor countries are required todesign their own laws so that they do not aggravatethe problems of the world’s poorest. Donorcountries, <strong>for</strong> 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 <strong>for</strong> anactive role of international organisations in domesticgovernance, circumventing domestic elitesand institutionalising the necessary governancere<strong>for</strong>ms. 201 To date, there is little evidence tosuggest that it can make a noticeable difference.A better option is to make re<strong>for</strong>ms more sustainableby coordinating and supporting broad re<strong>for</strong>mmeasures multilaterally. Concern <strong>for</strong> longer-termendurance of re<strong>for</strong>ms 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 re<strong>for</strong>ms 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. <strong>The</strong> charters would set minimumstandards <strong>for</strong> natural resource revenues to states,<strong>for</strong> checks and balances in governance, budgettransparency, post conflict management, and <strong>for</strong>investment. 202 Property rights are present anddeserve central attention in all these charters,since they could be decisive in making systemicproperty re<strong>for</strong>m sustainable.<strong>The</strong> charter <strong>for</strong> natural resource revenue, <strong>for</strong>example, would set minimum standards oftransparency and fair competition <strong>for</strong> the auctioningof extraction rights, diminish the price risk<strong>for</strong> government of poor countries, honestly brokerin<strong>for</strong>mation about money flows to government byextraction companies, and set standards <strong>for</strong> publicexpenditure of natural resource revenue — channellingit to domestic market development andcitizen-owned equity funds. <strong>The</strong> charter <strong>for</strong> 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. <strong>The</strong> charter <strong>for</strong>budget transparency would commit governmentsto the monthly publication of allocation of assetsto government institutions in order to allow scrutinyfrom below and install intergovernmental peerreview mechanisms. <strong>The</strong> charter <strong>for</strong> post-conflictsituations would commit external security andlegal en<strong>for</strong>cement <strong>for</strong>ces <strong>for</strong> the long haul, set uptransparent budgetary processes and participatorygovernment, regulate property restitution and thework reconciliation commissions. <strong>The</strong> investmentcharter would establish credibility by precludinggovernments from strategies of confiscation andlimit extreme manipulation of exchange rates, prices,and public utility charges. Instead of pushingre<strong>for</strong>m processes individually, like minded countriesmight also agree on some essential points ofa property systems re<strong>for</strong>m listed in this report andcommit to such re<strong>for</strong>m 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 <strong>for</strong> property rights re<strong>for</strong>ms 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 transnationalin<strong>for</strong>mation 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 <strong>for</strong> intergovernmental peer review.Although there is now considerable awarenessof the importance of property rights <strong>for</strong> 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 <strong>for</strong>building 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 re<strong>for</strong>m programmes.Seed-financing of Property Re<strong>for</strong>m. 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 re<strong>for</strong>ms 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 Af<strong>for</strong>ded toWomen. In the multilateral sphere, one possibleapproach to addressing the problem of discriminationof women in property matters would be to<strong>for</strong>mulate a rigorous ranking system of propertyrights protection af<strong>for</strong>ded to women. Such anindex/ranking may focus attention on how differentcountries score in terms of en<strong>for</strong>cement,protection, scope and depth of rights. Ranking113

ef<strong>for</strong>ts 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 <strong>for</strong> women.6. Concluding Message<strong>The</strong> 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. <strong>The</strong>y 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 ef<strong>for</strong>ts.114

Chapter 2 EndnotesUniversal Declaration of Human Rights, Article 17, Provisions (1) and(2). Securing agreement on this <strong>for</strong>mulation required omitting the wordprivate be<strong>for</strong>e 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. <strong>The</strong> working group <strong>for</strong> 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 <strong>The</strong>se 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 opportunity<strong>for</strong> public purpose to turn into private purpose as recent cases in the USSupreme Court illustrate. This is even more important <strong>for</strong> the global poorwho often live where there is limited residual faith in governments keepingto the spirit of the law.20 Hart 1961.21 European <strong>Commission</strong> 2007: 4.22 Mosqueira 2007: 7.23 IFAD 2001: 88.24 IFAD 2001: 88.25 UN-HABITAT 2005a: 107.26 CLEP In<strong>for</strong>mal 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 <strong>for</strong> the thirty or so wars of the lastseveral decades from Cambodia to Chile, Bosnia to Zimbabwe, Afghanistanto Peru. It has been uni<strong>for</strong>mly 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 <strong>The</strong> land and product values of <strong>for</strong>est 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 <strong>for</strong>estproducts in 2002 (from brazil nuts to gum arabica) and the already millionsof dollars being expended that year in trading carbon credits from<strong>for</strong>est stocks. FAO 2005.44 <strong>The</strong>ir share of income capture from commercial logging and paperproduction <strong>for</strong> 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 <strong>for</strong> 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, <strong>for</strong> 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 <strong>Work</strong>ing Group on Indigenous Populations accepteda defi nition, amended in 1983 and 1986. <strong>The</strong> ILO Convention No. 169 in1989 accepted a broader defi nition, embodied in the UN Declaration onthe Rights of Indigenous Peoples.56 <strong>The</strong>re are people in other regions regulating their land relationsthrough indigenous norms. <strong>The</strong>y 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. <strong>The</strong>y 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 <strong>for</strong> Refugees andDisplaced Persons 2007.61 Acemoglu et al. 2004; Acemoglu and Johnson 2005; de Soto 1989,2000; Roll and Talbott 2001.62 <strong>The</strong> 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 <strong>for</strong>mal fi nancial markets already existand where there are incentives <strong>for</strong> 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). <strong>The</strong> 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. <strong>The</strong> 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 there<strong>for</strong>eunwilling 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 <strong>for</strong>med 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. <strong>The</strong>land use right is inheritable but this right cannot be rented, leased,transferred to non-family members, mortgaged, or sold. <strong>The</strong> 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 <strong>for</strong>merprivatisation 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 <strong>for</strong>and 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 in<strong>for</strong>malfees <strong>for</strong> 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 <strong>for</strong> humansettlements to evade paying the land tax, which obviously promotes in<strong>for</strong>malityin land markets’ (UN-Habitat 2005a: 107). A similar outcomeis reported from Pakistan, rein<strong>for</strong>cing the need <strong>for</strong> taxes to be set ataf<strong>for</strong>dable levels and <strong>for</strong> the revenue to fi nance services people wantand are willing to pay <strong>for</strong> (Payne 1997: 8).103 In Indonesia, property tax re<strong>for</strong>m 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. <strong>The</strong>se 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 re<strong>for</strong>m 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 <strong>for</strong>m of housing tenure. It is the legalterm used in the United States and in most provinces of Canada <strong>for</strong> 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 <strong>for</strong>this is ‘strata title’. In Quebec, it is known as syndicates of co-ownership.In the United Kingdom, the equivalent is commonhold, but this<strong>for</strong>m 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. <strong>The</strong> authors study a naturalexperiment whereby land titling was ex post granted to a large group ofindividual squatters. <strong>The</strong> analysis reveals marked changes in economicresponses of this group relatively to the controlled group of squatters.<strong>The</strong> study shows only modest positive effect of land titling on accessto mortgage credit, and no impact on access to other <strong>for</strong>ms 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. <strong>The</strong>se 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 trans<strong>for</strong>med into fully alienablefreehold land based on a qualifi ed vote by the assembly, is a goodexample. <strong>The</strong> 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 Re<strong>for</strong>m 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. <strong>The</strong>re 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 <strong>for</strong> the poor see Chapter1, Section 3.122 Ibid.123 CLEP Indonesia; CLEP Sri Lanka: 27; CLEP Philippines.124 In Peru, re<strong>for</strong>ms, particularly those that required congressionalapproval of laws, were promoted with the active participation of beneficiaries.<strong>The</strong> 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 re<strong>for</strong>m proposalamong the leaders of the settlements who would benefit from it and facilitatedthe organisation of the leadership to defend the re<strong>for</strong>m proposalsbe<strong>for</strong>e Congress. A group of leaders lobbied members of Congress ofdiverse political sectors in order to demonstrate that the re<strong>for</strong>ms 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 in<strong>for</strong>mation 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. <strong>The</strong> 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 <strong>for</strong> re<strong>for</strong>ms and complementaryactions.126 In Peru, COFOPRI developed the capacity to continuously improvere<strong>for</strong>ms through a series of incremental changes based on a learningby-doingapproach. <strong>The</strong> drafting of new laws was linked to <strong>for</strong>malisationprocesses (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 <strong>for</strong>malisation process advanced, COFOPRI,through inputs from fi eld staff and community representatives, uncoverednew <strong>for</strong>ms of in<strong>for</strong>mality that were not identifi ed in the pilot project,like ‘pueblos tradicionales’ (ancient in<strong>for</strong>mal 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 re<strong>for</strong>msee 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 <strong>The</strong> Singapore urban planning experience demonstrates that giventhe will and effi ciency of implementation, it is possible to plan aheadand promote organised growth. <strong>The</strong> unauthorized settlements of Delhi,India, that are regularised in the late 1970s offer another example.<strong>The</strong>se 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 <strong>for</strong> lowcost housing, at RM25,000 per unit <strong>for</strong> 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.<strong>The</strong>se urban planning ef<strong>for</strong>ts 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 <strong>for</strong> 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 solutions<strong>for</strong> 1000 families within the existing city fabric through differenttechniques such as land sharing, re-blocking, in-situ upgrading andrelocation. <strong>The</strong>ir city-wide housing plan became the basis <strong>for</strong> 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 <strong>for</strong> 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. <strong>The</strong> benefi ts tothe local communities included a facilitated access to building materialsat af<strong>for</strong>dable 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 <strong>for</strong>producing a socially responsible product. Delta Café is part of the NabeiroGroup of food companies, and is the market leader <strong>for</strong> coffee inPortugal, with a market share of 38 percent. <strong>The</strong> 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 <strong>for</strong>mer 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 <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong> the fi rst time, not merely asexporters of gas, but exporters of intellectual capital. This could becomereality as a result of local learning institutions, work<strong>for</strong>ce and companiesbecoming global experts in the industry. Source: WBCSD 2005: 53.164 CLEP In<strong>for</strong>mal Businesses India: 10.165 See also CLEP Uganda: 22; Guyers 2005; Chanell 2006.166 USAID 2006. In Nigeria, <strong>for</strong> 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 in<strong>for</strong>mal 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. <strong>The</strong>bank has also been criticised <strong>for</strong> the level of interest rates that climb ashigh as 20 percent <strong>for</strong> 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 <strong>for</strong>2007 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 <strong>The</strong>se 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.<strong>The</strong>se 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 <strong>for</strong> suboptimalper<strong>for</strong>mance of rental markets in Ethiopia (Deininger, Ayalew and Alemu2006).177 <strong>The</strong> 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 markets<strong>for</strong> 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-in<strong>for</strong>med, ef<strong>for</strong>tsto disseminate in<strong>for</strong>mation 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. <strong>The</strong> main lessonsfrom this programme are that Government programmes <strong>for</strong> housing canbecome a mechanism <strong>for</strong> property rights creation or regularization, raisingstrong incentives <strong>for</strong> 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 <strong>for</strong> 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. <strong>The</strong> fi rst priority of the agency was to build as manylow-cost housing units as quickly as possible. <strong>The</strong> housing that wasinitially built was largely <strong>for</strong> rental by low-income groups. Forty yearson, approximately 85 percent of Singapore’s 3.4m resident population iscurrently living in HDB housing. <strong>The</strong> majority of these people own theirhomes. In 1964 the government introduced the Home Ownership <strong>for</strong> thePeople scheme to help all citizens to buy homes up to their capabilityas consumers. <strong>The</strong> aim is to give citizens including the poor an assetin the country. <strong>The</strong> lowest income citizens are not excluded from thehousing system. This has encouraged the <strong>for</strong>mulation of policies aimedat reducing the cost of housing and easing access to owner occupationin public housing <strong>for</strong> all including the lower income residents. <strong>The</strong>consequence of <strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>Work</strong>ing 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 <strong>for</strong> Women.’ In: Kasturi Rangan et al.:15-24Alden Wily, Liz and Mbaya, S. 2001. Land, people and <strong>for</strong>ests in easternand southern Africa at the beginning of the 21st Century.<strong>The</strong> impact of land relations of the role of communities in<strong>for</strong>est 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 <strong>for</strong>Land 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 <strong>for</strong> Environment and Development [IIED] London._______. 2004a. Putting Rural Land Registration in Perspective:<strong>The</strong> Afghanistan Case in Proceedings Land Administrationin Post Confl ict Areas; 71-93. International Federation ofSurveyors <strong>Commission</strong> 7 Cadastre and Land Management,2004. http://www.fi g.net/commission7/geneva_2004/index.htm (<strong>for</strong> 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: <strong>The</strong> Evolutionof Community Forestry Chapter 19 in <strong>The</strong> EarthscanReader in Forestry and Development (ed. Jeffrey Sayer)2005; 388-394. Earthscan UK (originally a Keynote Addressto the World Forestry Congress Quebec 2003)_______. 2006. <strong>The</strong> Commons and Customary <strong>Law</strong> in Modern Times:Rethinking the Orthodoxies. In From Knowledge to Action. EMwangi (ed.). CaPri, Washington._______. 2006b. Formalizing the In<strong>for</strong>mal: Is <strong>The</strong>re a Way to SecureHuman Potential through Land Entitlement? A Review ofChanging Administration in Africa, in: Linking the Formaland In<strong>for</strong>mal Economy Concepts and Policies. Edited by B.Guha-khasnobis, R. Kunbur and E. Ostrom. Ox<strong>for</strong>d UniversityPress._______. 2006c. Land Rights Re<strong>for</strong>m and Governance in Africa: Howto Make it <strong>Work</strong> in the 21st Century? UNDP October 2006.______. 2007. An Interim Note on Customary Land Tenure in Post-Confl ict Liberia.121

Alexander, E. 2001. ‘A Transaction Costs <strong>The</strong>ory of Land Use Planningand Development Control,’ Town Planning Review 72/1:45-76.Allanic, Benoît. 2003. «La nouvelle coutume urbaine: Évolutioncomparée des fi lières coutumières de la gestion foncièreurbaine dans les pays d’Afrique subSaharienne. Le cas deMandela Village, South Africa. » ISTED, DFID.Alston, Lee, Gary Libecap and Robert Schneider. 1996. ‘<strong>The</strong> Determinantsand Impact of Property Rights: Land Titles on theBrazilian Frontier.’ Journal of <strong>Law</strong>, Economics, and Organisation12:1 (1996): 1569-1614.Aristazabal, Nora and Andres Gomes.2004. ‘Improving Security withoutTitles in Bogotá.’ Habitat International 28/2.Asian Development Bank. 2004. Technical Assistance to the IslamicRepublic of Afghanistan <strong>for</strong> Capacity Building in LandPolicy and Administration Re<strong>for</strong>m. Manila: ADB.Augustinus, Clarissa and Barry, Michael. 2006. ‘Land ManagementStrategy Formulation in Post Confl ict Societies.’ SurveyReview 38: 668-681.Augustinus, Clarissa. 2003. ‘Handbook on Best Practices: Securityof Tenure and Access to Land — Implementation of theHabitat Agenda.’ UN-Habitat, Nairobi.Baechtold, Philippe. 2006. ‘Public Policy Objectives and IntellectualProperty Rights.’ In: de Soto/Cheneval 2006: 266-277.Banerjee, Abhijit and Lakshmi. Iyer. 2005. ‘History, Institutions andEconomic Per<strong>for</strong>mance: <strong>The</strong> Legacy of Colonial Land TenureSystems in India.’ Available at: http://econ-www.mit.edu/fi les/511Banerjee, Banashree. 2002. ‘Security of Tenure in Indian Cities.’ In:Durand-Lasserve, A. and Royston L. (eds.). Holding theirGround: Secure Land Tenure <strong>for</strong> the Urban in DevelopingCountries, London: Earthscan Publications, 37-58._______. 2004. ‘Maximising the impact of tenure and infrastructureprogrammes on housing conditions: the case of slums inIndian Cities’ paper presented at International Conferenceon Adequate and Af<strong>for</strong>dable Housing <strong>for</strong> All - Research,Policy, Practice, June 24-27, Toronto_______. 2005. ‘Recognition, Regularization and Relocation of Slumsin Madhya Pradesh.’ Background Note <strong>for</strong> the design ofDFID supported Madhya Pradesh Urban Services <strong>for</strong> thePoor (Mimeo)_______. 2006. ‘Land Titling in Urban and Peri-urban Areas in India:Experiences and Issues.’ Paper presented at the Research<strong>Work</strong>shop on Social and Economic Impacts of Land titlingin Urban and Peri-urban Areas, Charney Manor, CharneyBassett, UK, 12-15 December 2006._______. 1995. ‘Urban Land: Is there hope <strong>for</strong> the Poor?’ In: Singh,K. and Steinberg, F. (eds.), Urban India in Crisis, Ox<strong>for</strong>d,New Delhi.Barry, Michael. 2002. Periurban Agriculture and Tenure in South Africa:Strategies <strong>for</strong> Tenure Regularization. United Nations Foodand Agricultural Organisation (FAO) publication series,Rome.Barzel, Y. 1997. Economic Analysis of Property Rights, Cambridge, MA:Cambridge University Press.Benjaminsen, T. A. 2006. ‘<strong>The</strong> emerging <strong>for</strong>malisation agenda andsome empirical evidence from Africa.’A paper presented atthe Colloque international: At the Frontier of Land Issues.Social Embeddedness of rights and public policy. MontpellierCampus ENSAM-INRA, France, May 17, 18 and19 2006.Bertaud A. and Malpezzi S. 2001. ‘Measuring the Costs and Benefi ts ofUrban Land Use Regulation: A Simple Model with an Applicationto Malaysia,’ Journal of Housing Economics 10/3:393-418.Besley, Timothy. 1995. ‘Property Rights and Investment Incentives:<strong>The</strong>ory and Evidence from Ghana,’ Journal of PoliticalEconomy 103(5), 903-937.Binswanger, Hans, Klaus Deininger and Gershon Feder. 1995. ‘Power,Distortions, Revolt, and Re<strong>for</strong>m in Agrarian Relations.’ InJ. Berman and T.N. Srinivasan (eds.). Handbook of DevelopmentEconomics. Amsterdam: Elsevier Science, NorthHolland.Bird, M. and E. Slack. 2002. ‘Land and Property Taxation around theWorld: A Review 2002.’ Paper presented in Hungary andMexico at World Bank Policy SeminarsBlesoe, David. 2006. ‘Can Land Titling and Registration Reduce Poverty?’In Bruce et al. 2006: 143-174.Boonyabancha, Somsook. 2005. ‘Mainstreaming community led processes<strong>for</strong> housing and poverty alleviation: the developmentof CODI and the Baan Mankong Programme.’ Case Study21 — Thailand, available at http://www.community-planning.netBoudreaux, Karol. 2007. ‘State Power, Entrepreneurship, and Coffee:<strong>The</strong> Rwandan Experience.’ Mercatus Centre. EnterpriseAfrica! <strong>Work</strong>ing Paper_______. 2006. ‘<strong>The</strong> Effects of Property Titling in Langa Township,South Africa.’ Mercatus Policy Series, Policy Comment No.4, available at: http://www.enterprise-africa.org/repository/docLib/20060524_Langa.pdf_______. 2007. ‘Community-Based Natural Resource Managementand Poverty Alleviation in Namibia: A Case Study.’ MercatusPolicy Series, Policy Comment Nr. 10.Bruce, John W. and Migot-Adholla, S. (eds.). 1994. Searching <strong>for</strong> Securityof Land Tenure in Africa. Dubuque, IA: Kendall/Hunt.Bruce, John W. 2006. ‘Re<strong>for</strong>m of Land <strong>Law</strong> in the Context of World BankLending.’ in Bruce et al. 2006, pp. 11-65.Bruce, John W., Giovarelli, R. Giovarelli, L. Rolfes, D. Bledsoe and R.Mitchell. 2006. Land <strong>Law</strong> Re<strong>for</strong>m. Achieving DevelopmentPolicy Objectives. World Bank <strong>Law</strong>, Justice, and DevelopmentSeries. Washington: WB.Brustinow, Angelika. 2006. ‘Out of Court Dispute Resolution as aPractical Tool <strong>for</strong> Legal Empowerment”, in: NorwegianMinistry of Foreign Affairs, Legal Empowerment, issue 2,Oslo: 91-113.Buckley, Robert M. and Jerry Kalarickal. 2006. ‘Land Market Issues:<strong>The</strong> Mystery of Capital Revisited. Urban Land Policy — IsTitling the Answer?’ in Buckley and Kalarickal (eds.). Thirtyyears of World Bank Shelter Lending: Directions in DevelopmentInfrastructure. World Bank, Washington, DC.Burns, Tony. 2006. ‘International Experience with Land AdministrationProjects: a Framework <strong>for</strong> Monitoring of Pilots’. Paper122

presented at the National <strong>Work</strong>shop on Land Policies andAdministration <strong>for</strong> Accelerated Growth and Poverty Reductionin the 21st Century (Jan 5-6) New Delhi.Burra, Sundar. 2005. Towards a Pro-Poor Framework <strong>for</strong> Slum-Upgradingin Mumbai, India,’ Environment and Urbanisation,17/1.Calder n Cockburn, Julio. 2004. ‘<strong>The</strong> <strong>for</strong>malisation of property in Peru2001-2002: <strong>The</strong> case of Lima,’ Habitat International 28:289-300Cantuarias, Fernando and Delgado, Miguel. 2004. ‘Peru’s urban landtitling program’ Case study from ‘Reducing poverty, sustaininggrowth — what works, what doesn’t and why? Aglobal exchange <strong>for</strong> scaling up success.’ Shanghai, May25-27, World BankCarter, Michael and Pedro Olinto. 2003. ‘Getting Institutions ‘Right’<strong>for</strong> Whom? Credit Constraints and the Impact of PropertyRights on the Quantity and Composition of Investment,’American Journal of Agricultural Economics 85/1: 173-186.Cavallar, Georg. 2002. <strong>The</strong> Rights of Strangers. <strong>The</strong>ories of InternationalHospitality, the Global Community, and Political Justicesince Vitoria. Aldershot.Ceara, Brasil: Urban Development and Water Resources ManagementProject).Center <strong>for</strong> Advanced Study, in collaboration with the Ministry of LandManagement, Urban Planning and Construction — NationalCadastral <strong>Commission</strong> Secretariat, <strong>The</strong> World Bank— Justice <strong>for</strong> the Poor Program, and <strong>The</strong> German DevelopmentCooperation (GTZ). 2007. ‘Towards InstitutionalJustice? A Review of the <strong>Work</strong> of Cambodia’s Cadastral<strong>Commission</strong> in Relation to Land Dispute Resolution’ (<strong>for</strong>thcoming)Chanell, Wade. 2006. ‘Bringing More Dead Capital to Life’. RAFiNotes (Washington, DC: US AID).Cheneval, Francis. 2006. ‘Property Rights as Human Rights’, in: deSoto and Cheneval 2006: 11-17.Chiong-Javier, M. E. 1989. ‘Ownership and Property Rights Issues inWatershed Resource Management.’ Journal of PhilippineDevelopment 26/1: 101-113.Chong, A. and M. Gradstein. 2007a. ‘Inequality and In<strong>for</strong>mality’, availableat: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=910215Chong, A. and M. Gradstein. 2007b. ‘Inequality and Institutions.’Review of Economics and Statistics, <strong>for</strong>thcoming.COHRE. 2000. ‘Women and Housing Rights,’ Geneva, Switzerland:COHRE.Colchester, Marcus/Mackay, Fergus/Griffi ths, Tom and Nelson, Jon.2001. ‘A Survey of Indigenous Land Tenure’. Forest PeoplesProgramme, REF: RA 42/1, PE ç/173.Collier, Paul and J.W. Gunning. 1999. ‘<strong>The</strong> Microeconomics of AfricanGrowth, 1950-2000.’ <strong>The</strong>matic Paper <strong>for</strong> the AERC CollaborativeResearch Project on ‘Explaining African EconomicGrowth, 1950-2000.’Collier, Paul. 2007. <strong>The</strong> Bottom Billion. Why the Poorest Countries AreFailing and What Can be Done about it. Ox<strong>for</strong>d: Ox<strong>for</strong>dUniversity Press.<strong>Commission</strong> on Legal Empowerment of the Poor (CLEP), NationalConsultation Report, Property Rights, IndonesiaCLEP, National Consultation Report, In<strong>for</strong>mal Businesses, India______. Property Rights, Kenya______. Property Rights, Pakistan______. Property Rights, Philippines: Mendoza, Amado M. 2006.‘Property Rights and the Empowerment of the Poor in thePhilippines’.______. South America Report______. In<strong>for</strong>mal Land Market, Sri Lanka______. Property Rights, Tanzania: Kironde, Lusugga. 2006. ‘<strong>Making</strong>Property Rights <strong>Work</strong> <strong>for</strong> the Poor in Tanzania’.______. Property Rights, Uganda.______. Grassroots Academy, Property Section.Congress <strong>for</strong> the NewUrbanism. 1999. Charter of the New Urbanism, New York,McGraw Hill.Convention on Biological Diversity (CBD) of June 5, 1992, , at: http://www.wipo.int/freepublications/en/tk/920/wipo_pub_920.pdfCotula, Lorenzo (ed). 2007. Changes in ‘Customary’ Land Tenure Systemsin Africa. London/Rome: iied/FAO.Coudouel, Aline/Dani, Anis A./Paternostro, Stefano. 2007. SocialImpact Analysis of Re<strong>for</strong>ms. Lessons and Examples fromImplementation. Washington: IBRD/WB.Currey, James. 2004. International Federation of Surveyors, 2004, LandAdministration in Post Confl ict Areas. Proceedings of aSymposium held by FIG <strong>Commission</strong> 7, Geneva, April 2004.Dabla-Norris, E., Gradstein, M., and G. Inchauste. 2007. Journal ofDevelopment Economics, <strong>for</strong>thcoming.David, Cristina, et al. 2003. ‘Land re<strong>for</strong>m and land market transactionsin the Philippines.’ Terminal Report. Philippine Institute<strong>for</strong> Development Studies.De Soto, Hernando. 2006. ‘<strong>The</strong> Challenge of Connecting In<strong>for</strong>mal andFormal Property Systems’, in: De Soto/Cheneval 2006, pp.18-67._______. 2000. <strong>The</strong> Mystery of Capital: Why Capitalism Triumphs inthe West and Fails Everywhere Else. New York: Basic Books._______. 1989. <strong>The</strong> Other Path. New York: Basic BooksDe Soto, Hernando and Cheneval, Francis (eds.). 2006. RealisingProperty Rights, Zurich: RüfferandRub.Deere, Carmen Diana and Magdalena Leon. 2003. ‘<strong>The</strong> Gender AssetGap: Land in Latin America,’ World Development 31(6:925-947.Deininger K. 2003. ‘Land Policies <strong>for</strong> Growth and Poverty Reduction’, AWorld Bank Policy Research Report, Washington DCDeininger, K. and Jin, S. 2003. ‘Land Sales and Rental Markets inTransition — Evidence from Rural Vietnam,’ WPS 3013,available at: http://econ.worldbank.orgDeininger, K., Alayew, D. and Yamano T. 2006. Legal Knowledge andEconomic Development: <strong>The</strong> Case of Land Rights in Uganda.Washington, DC: <strong>The</strong> World Bank.Deininger, K. and J. Chamorro. 2004. ‘Investment and Equity Effects ofLand Regularization: <strong>The</strong> Case of Nicaragua,’ AgriculturalEconomics 30/2: 101-116.123

Deininger, Klaus and Squire, Lyn. 1998. ‘New Ways of Looking at OldIssues: Inequality and Growth,’ Journal of DevelopmentEconomics 57: 259-287.Deininger, Klaus, Ayalew, Daniel and Alemu, Tekie. 2006. ‘Land Rentalin Ethiopia. Marshallian Ineffi ciency or Factor Market Imperfectionsand Tenure Insecurity as Binding Constraints?’available at: http://siteresources.worldbank.org/RPDL-PROGRAM/Resources/459596-1161903702549/S4_Ali.ppt#311,27,Folie 27Deininger, Klaus/ Ayalew, Daniel/ Holden, Stein/Zeevenbergen, Jaap.2007. ‘Rural Land Certifi cation in Ethiopia. Process, InitialImpact, and Implications <strong>for</strong> Other African Countries,’World Bank Policy Research <strong>Work</strong>ing Paper WPS 4218.Deininger, Klaus/Jin, Songquing/Nagarajan, Hari K. 2007b. ‘Determinantsand Consequences of Land Sales Market Participation:Panel Evidence from India,’ World Bank PolicyResearch <strong>Work</strong>ing Paper WPS 4323.Deng, Yongheng, Della Zheng and Changfeng Ling. 2005. ‘An Early Assessmentof Residential Mortgage Per<strong>for</strong>mance in China,’<strong>The</strong> Journal of Real Estate Finance and Economics 31/2.Di Gregorio, M., K. Hagedorn, M. Kirk, B. Korf, N. McCarty, and R. Meinzin-Dick.2005. ‘A Framework on Instutional Change <strong>for</strong>Resource Management and Poverty Reduction: <strong>The</strong> Role ofProperty Rights and Collective Action.’ Paper presented atthe 99th seminar of the European Association of AgriculturalEconomists, Copenhagen, August 24-27, 2005.Diop, Maleye. 2007. ‘An example of an innovative participatory slumupgrading and land regularization initiative <strong>for</strong> the poor inSenegal,’ Contribution to CLEP working group <strong>for</strong> Chapter2, on Property Rights.Du Plessis, Jean. 2005. ‘<strong>The</strong> Growing Problem of Forced Evictionsand the Crucial Importance of Community-Based, LocallyAppropriate Alternatives,’ Environment and Urbanization17/1: 123-134.Durand-Lasserve A. 2003. Land Issues and Security of Tenure. BackgroundReport prepared <strong>for</strong> the UN Millenium Project TaskForce on Improving the Lives of Slum Dwellers. NationalCentre <strong>for</strong> Scientifi c Research, France.______. 2006. ‘Market-driven evictions and displacements: Implications<strong>for</strong> the perpetuation of in<strong>for</strong>mal settlements in developingcities.’ In: Huchzermeyer, M., and Karam, A. (Editors).In<strong>for</strong>mal settlements. A perpetual challenge? University ofCape Town Press.Durand-Lasserve, A. and G. Payne. 2006. ‘Evaluating Impacts of UrbanLand Titling: Results and Implications: Preliminary Findings.’(Ms.)Economist . 2006. ‘Property and Poverty’, August 24.European <strong>Commission</strong>. 2007. Joint Report on Social Protection andSocial InclusionFood and Agricultural Organisation (FAO). 2002. Land administrationand rural development. Rome______. 2005. State of the World’s Forests, Rome______. 2006. ‘Reclaiming our lives: HIV and AIDS, women’s landand property rights, and livelihoods in southern and EastAfrica,’ Cape Town, South Africa: HSRC Press.______. 2007. Good governance in land tenure and administration.Rome.Feder, G. and A. Nishio. 1996. ‘<strong>The</strong> Benefi ts of Land Registration andTitling: Economic and Social Perspectives,’ Land Use Policy15(1): 25-43.Feder, G./Onchan, T./Raparla, T. 1988. Collateral, guarantees and ruralcredit in developing countries: Evidence from Asia. AgriculturalEconomics 2: 231-245.Fernandes E. 2002. ‘Combining Tenure Policies, Urban Planning andCity Management in Brazil.’ In: Payne, Geoffrey (ed.). Land,Rights and Innovation - Improving Tenure Security <strong>for</strong> theUrban Poor, London: ITDG.______. 2006. ‘Principles, Bases and Challenges of the NationalProgramme to Support Sustainable Urban Land Regularizationin Brazil.’ In: Huchzermeyer, M. and Karam, A. (eds.)In<strong>for</strong>mal settlements. A perpetual challenge? University ofCape Town Press, p. 62-83.Field, Erica. 2004. ‘Property rights, community public goods, andhousehold time allocation in urban squatter communities:Evidence from Peru.’ William and Mary <strong>Law</strong> Review 45(3):838—887.______.2005. ‘Property rights and investment in urban slums.’ Journalof European Economic Association, April-May 3 (2-3):279-290.Firmin-Sellers, K. and Sellers, P. 1999. ‘Expected failures and unexpectedsuccesses of land titling in Africa,’ World Development27/7: 1115-1999.Food and Agricultural Organisation (FAO). 1999. Women’s right to landand natural resources: some implications <strong>for</strong> a humanrightsbased approach. SD Dimensions, at: http://www.fao.org/sd/LTdirect/LTan0025.htm).Galiani, S. and E. Schargrodsky. 2004. ‘Property Rights <strong>for</strong> thePoor: <strong>The</strong> Effect of Land Titling,’ At: http://200.32.4.58/~eschargr/______. 2004a. ‘Effects of land titling on child health,’ Economicsand Human Biology 2: 353-372.Garcia-Bolivar, Omar. 2007. ‘A Broader Defi nition of Legal Empowermentof the Poor’. Paper presented to the ANLEP workshop,Oslo Oct. 25-26, 2007 (mimeo).Giovarelli, Renée, Susana Lastarria-Cornhiel, Elizabeth Katz, and SueNichols. 2005. Gender Issues and Best Practices in LandAdministration Projects: A Synthesis Report. Agricultureand Rural Development Department. <strong>The</strong> World Bank.Report No. 32571-GLB. Washington, DC: <strong>The</strong> World Bank.Glendon, Mary Ann. 2001. A World Made New. Eleanor Roosevelt andthe Universal Declaration of Human Rights. New York:Randam House.Golub, S. 2003. ‘Beyond the Rule of <strong>Law</strong> Orthodoxy: <strong>The</strong> Legal EmpowermentAlternative.’ Carnegie Endowment <strong>for</strong> InternationalPeace (CEIP) <strong>Work</strong>ing Paper No. 41.Government of India. 1998. National Housing and Habitat Policy, NewDelhi, Ministry of Urban Development._______. 2004. National Policy on Urban Street Vendors, New Delhi,Ministry of Urban Employment and Poverty Alleviation.Gradstein, Mark. 2006. ‘Inequality, Democracy, and the Protection of124

Property Rights.’ At: http://www.iew.unizh.ch/study/courses/downloads/markgradstein.pdfGROOTS Kenya. 2006. A Final Report on Grassroots Community InputTo the <strong>Commission</strong> on Legal Empowerment of the Poor— Hearing in Kenya, at: http://www.undp.org/legalempowerment/pdf/Microsoft%20Word%20-%20GROOTS%20Kenya%20Final%20Report%20_2_.pdfGuyers, Steven. 2005. ‘You’d be surprised what can be used <strong>for</strong>collateral,’ Denver Business Journal. Available at: http://www.bizjournals.com/denver/stories/2005/06/06/smallb6.htmlHaldrup, K. 2003. ‘From elitist standards to basic needs — diversifi edstrategies to land registration serving poverty alleviationobjectives’. Presented at 2nd FIG Regional Conference,Marrakech, Morocco December 2-5, 2003.Handbook on Housing and Property Restitution <strong>for</strong> Refugees andDisplaced Persons. Implementing the ‘Pinheiro Principles’(OCHA/IDD, UN HABITAT, UNHCR, FAO, OHCHR, NRC, IDMC2007).Hardin, Garret. 1968. ‘<strong>The</strong> Tragedy of the Commons,’ Science,162/3859: 1243-1248Hart, H.L.A. 1961. <strong>The</strong> Concept of <strong>Law</strong>. Ox<strong>for</strong>d: Clarendon Press.Heller, Michael A. 1998. ‘<strong>The</strong> Tragedy of the Anticommons: Property inthe Transition from Marx to Markets’, Harvard <strong>Law</strong> Review111: 621-688.Hodgson, Stephen. 2004. ‘Land and Water — <strong>The</strong> Rights Interface.’FAO, LSP <strong>Work</strong>ing Paper 10. Access to Natural ResourcesSub-Programme.Hunt, Diana. 2004. ‘Unintended Consequences of Land Rights Re<strong>for</strong>m:<strong>The</strong> Case of the 1998 Uganda Land Act’ Development PolicyReview 22/2: 173-191.Hurwitz, A./Studdard, K./Williams, R. 2005. ‘Housing, Land, Propertyand Confl ict Management: Identifying Policy Options <strong>for</strong>Rule of <strong>Law</strong> Programming,’ Policy Paper. InternationalPeace Academy. FAO 2005. Access to rural land and landadministration after violent confl icts, FAO Land TenureStudies 8, Rome.Instituto Libertad y Democracia (ILD). 1994. ILD Estimates. Annex 1:Some of the ILD’s Practical Achievements and Annex 3:Business Formalization. Available at: http://www.ild.org.pe/pdf/annex/Annex_01.pdf and http://www.ild.org.pe/pdf/annex/Annex_03.pdf______. 2002. Supporting workers in the In<strong>for</strong>mal Economy: A PolicyFramework.______. 2004. ‘Dead Capital in Egypt.’ Available at: http://www.ild.org.pe/pdf/posters/egypt_en.pdf.______. 2005. Program to Formalize the Assets of the Poor in Tanzaniaand Strengthen the Rule of <strong>Law</strong>. Six Volumes. Dar esSalaam: ILD.Inter-American Development Bank (IADB). 2005. Unlocking Credit.Available at: http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=617000______. ‘Access to Financing <strong>for</strong> Small and Medium Enterprises’ In:Unlocking Credit, 2005 Report, available at: http://www.iadb.org/res/ipes/2005/docs/Chapter14Eng.pdfInter-Ministerial <strong>Work</strong>ing Group. 2004. Afghanistan: Land Policy and itsImplementation. www.icarrd.org/en/icard_doc_down/national_Afghanistan.doc.International Center <strong>for</strong> Research on Women (ICRW). 2005. ‘PropertyOwnership <strong>for</strong> Women Enriches, Empowers and Protects:Toward Achieving the Third Millennium Development Goalto Promote Gender Equality and Empower Women,’ Washington,DCInternational Fund <strong>for</strong> Agricultural Development (IFAD). 2001. RuralPoverty Report, 2001. Available at: http://www.ifad.org/poverty/index.htmInternational Institute <strong>for</strong> Environment and Development (IIED). 2006.‘Local Innovation in Securing Land Rights in Africa: Lessonsfrom experience,’ Briefi ng Paper, IIED, LondonInter-Summit Property System Initiative. 2006. ‘<strong>The</strong> Inter-SummitProperty Systems Initiative (IPSI)’ Summary Presentation.Broad-based Economic Growth Team Regional SustainableDevelopment Bureau <strong>for</strong> Latin America and the CaribbeanUSAID Washington.Izumi, Kaori. 2007. ‘Gender-Based Violence and Property Grabbing inAfrica: A denial of Women’s Liberty and Security,’ Genderand Development 15(1): 11-23.Jacobs, J. 1961. <strong>The</strong> Death and Life of Great American Cities, NewYork: Vintage.Jacoby, Hanan and Minten, Bart. 2005. ‘Is Land Titling In Sub-Saharan Africa Cost-Effective. Evidence from Madagascar’,available at: http://siteresources.worldbank.org/INTISPMA/Resources/Training-Events-and-Materials/Land_Titles_MG.pdfKaelin, Walter. 2006. ‘Internal Displacement and the Protection ofProperty,’ in: de Soto/Cheneval 2006: 175-185.Kasturi Rangan, V./Quelch, J.A./Herrero, G./Barton, B. 2007. BusinessSolutions <strong>for</strong> the Global Poor. San Francisco: Wiley andSons.Keefer, Philip and Knack, Stephen. 2002. ‘Polarization, Politics andProperty Rights: Links between inequality and Growth,’Public Choice 111: 127-154.Kranton, Rachel E. and Anand V. Swamy. 1999. ‘<strong>The</strong> Hazards of PiecemealRe<strong>for</strong>m: British Courts and the Credit Market in ColonialIndia,’ Journal of Development Economics 58: 1-24.Krieger, James and Higgins, Donna L. 2002. ‘Housing and Health: TimeAgain <strong>for</strong> Public Health Action,’ American Journal of PublicHealth 92/5: 758-768.Land Administration and Management Project (LAMP) 2, Departmentof Environment and Natural Resources. ‘Frequently askedquestions.’ Available at: www.phil-lamp.org/faq.htmlLand Tenure Lexicon. 2000. A glossary of terms from English andFrench speaking West Africa. Compiled by Rebeca Leonardand Judy Longbottom. London, available at: http://www.landcoalition.org/pdf/07_lexicon_FS_ied.pdfLobo, A. and Balakrishnan, S. 2002. Report on Service of BhoomiKiosks: An Assessment of Benefi ts by Users of the ComputerisedLand Records System in Karnataka. Bangalore:Public Affairs Centre.Locke, John. 1988 [1689]. Second Treatise of Government. New York:125

Cambridge University Press. -- An argument <strong>for</strong> the right toproperty, based on our property in ourselves.LTC/Land Tenure Center. 2002. ‘Assessment of USAID investmentsin land markets and property rights: Synthesis based onUSAID documentation’ Land Tenure Center, University ofWisconsin, September______. 2002. ‘Guidelines <strong>for</strong> Analysis of USAID’s Land MarketProjects’ Documents Annex 3 Assessment Guidelines,University of Wisconsin______. 2002a. ‘An assessment of USAID’s investments in land marketsand property rights in Albania: documentary evidence’,Land Tenure Center, University of Wisconsin, SeptemberMacours, Karen/de Janvry, Alain/Sadoulet, Elisabeth.2004. ‘Insecurityof Property Rights and Matching in the Tenancy Market,’Department of Agricultural and Resource Economics, UCB.CUDARE <strong>Work</strong>ing Paper 992. http://repositories.cdlib.org/are_ucb/992Martinez, Sylvia C. 2003. ‘Housing and Finance in Spain: A ComparativeStudy on Housing and Finance Principles.’ Unpublishedlecture delivered to Women in Housing and Finance, Jan.22, 2003. Washington, D.C.______. 2004. ‘Property Rights <strong>for</strong> the Poor a Global Perspective: ACase Study of Sites and Services in Mexicali, Baja Cali<strong>for</strong>nia.’Presentation be<strong>for</strong>e the United Nations Economic<strong>Commission</strong> <strong>for</strong> Europe Land Development Forum in Rome,Italy. December 13-14.______. 2007. ‘In<strong>for</strong>mal Settlements in Developing Countries: ARights-Based Approach to Land Policies <strong>for</strong> the Poor’,Background Paper To <strong>The</strong> Presentation Be<strong>for</strong>e <strong>The</strong> UnitedNations Economic <strong>Commission</strong> <strong>for</strong> Europe <strong>Work</strong>ing Party onLand Administration, And Committee on Housing and LandManagement, And <strong>The</strong> International Federation of Surveyors,28-31 March, Athens, Greece.______. 2007a.’Toward a Pro-poor Global Housing Partnership’.Research Study <strong>for</strong> the Harvard Joint Center <strong>for</strong> HousingStudies In Support of the <strong>Work</strong> of the <strong>Commission</strong> on LegalEmpowerment of the Poor.McKeown, Thomas. R.G. Record. 1962. ‘Reasons <strong>for</strong> the Decline of Mortalityin England and Wales during the Nineteenth Century,’Population Studies 16/2: 94-122.Merriam, Dwight. 2005. <strong>The</strong> Complete Guide to Zoning. McGraw-Hill.Migot-Adholla, Shem E., George Benneh, Frank Place and Steven Atsu.1994. ‘Security of Tenure and Land Productivity in Kenya.’in Bruce and Migot-Adholla: 97-118.Mosqueira, Edgardo. 2007. ‘Urban Property Rights. Lessons and Impactsfrom WB Projects in LAC’ [draft].Nagarajan, G., C. David, and R. Meyer. 1992. ‘In<strong>for</strong>mal FinanceThrough Land Pawning Contracts: Evidence from the Philippines.’Journal of Development Studies 29(1): 93-107.Nagarajan, G., M. Quisumbing, and K. Otsuka. 1991. ‘Land pawningin the Philippines: an exploration into the consequences ofland re<strong>for</strong>m regulations.’ <strong>The</strong> Developing Economies 29/2:124-144.National Consultation Paper, <strong>Commission</strong> on Legal Empowerment ofthe Poor (NCLEP), Ethiopia:Newman, Oscar. 1972. Defensible Space, New York: MacmillanNielsen, Robin. 2006. ‘If he asks me to leave this place, I will go’.<strong>The</strong> Challenge to Secure Equitable Land Rights <strong>for</strong> RuralWomen’, in: de Soto and Cheneval 2006: 204-219.Nugent, Jeffrey B. and Robinson, James A. 2002. ‘Are EndowmentsFate?’ Centre <strong>for</strong> Economic Policy Research DiscussionPaper No. 3206.Okoth-Ogendo H. W. O. .1999. Land policy development in East Africa:a survey of recent trends, a regional overview paper <strong>for</strong> theDFID workshop on „land rights and sustainable developmentin Sub-Saharan Africa’, Sunningdale Park ConferenceCentre, Berkshire, England, Great Britain, 16th-19 th February1999, at: http://www.oxfam.org.uk/what_we_do/issues/livelihoods/landrights/downloads/eafover.rtfOrganisation <strong>for</strong> Economic Co-operation and Development (OECD).2003. Land, Violent Confl ict and Development. Paris: OCED.Padilla, S. 2007. ‘Indigenous Peoples, Settlers and the PhilippineAncestral Domain Land Titling program.’ (Forthcoming inFrontier Encounters. University of Zurich Press).Palacin, José and Shelbourne, Robert C. 2005. ‘<strong>The</strong> Private HousingMarket in Eastern Europe and the CIS,’ UNECE DiscussionPaper Series 6, DecemberPalmer, David. 1998. ‘Security, Risk and Registration,’ Land Use Policy15/1: 83-94Panaritis, Elena. 2007. Prosperity Unbound. Building Property Marketswith Trust. Forword by Francis Fukuyama. New York: PalgraveMacmillan.Payne, Geoffrey (ed.). 2002, ‘Land, Rights and Innovation: Improvingtenure security <strong>for</strong> the urban poor’ ITDG Publishing London______. 1997. ‘Urban Land Tenure and Property Rights in DevelopingCountries. A Review’, IT Publications/ODA______. 2000. ‘Urban land tenure policy options: titles or rights?’Paper presented at the World Bank Urban Forum, Westfi eldsMarriott, Virginia, USA 03-05 April, 2000______. 2005. ‘Getting ahead of the game: A twin-track approach toimproving existing slums and reducing the need <strong>for</strong> futureslums.’ Environment and Urbanization Vol 17 No 1, April,pp. 135-145.Pottier, Johan. 2005. ‘Land Re<strong>for</strong>m <strong>for</strong> Peace? Rwanda’s 2005 Land<strong>Law</strong> in Context,’ Journal of Agrarian Change 6 (October2005).Prahalad, C.K. 2005. <strong>The</strong> Fortune at the Bottom of the Pyramid. EradicatingPoverty through Profi ts. Upper Saddle River: WhartonSchool Publishing.Prosterman, Roy. 2006. ‘Rural Property Right in China,’ in: de Soto/Cheneval 2006: 107-128.Quisumbing, A. and John Maluccio. 2000. ‘Intrahousehold Allocationsand Gender Relations: New Empirical Evidence from FourDeveloping Countries,’ Washington, DC: IFRPR.Rajan, R.G. 2005. ‘Failed states, vicious cycles, and a proposal,’mimeo, http://faculty.chicagogsb.edu/raghuram.rajan/research/.Ravna, Øyvind. 2006. ‘Recognition of Indigenous People’s Land Rightsthrough Modern Legislation. <strong>The</strong> Case of the Sami Peoplein Norway’, in: Norwegian Ministry of Foreign Affairs, Legal126

Empowerment, issue 2, Oslo: 65-90.Richards, Paul. (ed.). 2005. No Peace, No War. An Anthropology ofContemporary Armed Confl icts. Ohio University Press.Rolfes, Leonard. ‘A Framework <strong>for</strong> Land Market <strong>Law</strong> with the Poor inMind,’ in: Bruce et al. 2006: 107-142.Roll, Richard and Talbott, John. 2001. ‘Why Many Developing CountriesJust Aren’t,’ <strong>The</strong> Anderson School at UCLA, Finance <strong>Work</strong>ingPaper No. 19-01, at:Sachs, Jeffrey. 2006. <strong>The</strong> End of Poverty: Economic Possibilities of ourTime. Penguin.Santiago, Astea. 2004. ‘<strong>Law</strong> and urban change in developing countries:the case of the Philippines.’ In: Fernandes, E. andVarley, A. (eds.) Illegal Cities: <strong>Law</strong> and Urban Change inDeveloping Countries, Zed Books, London.Sattar, Sarosh and Shabih Mohib. 2007. ‘Tajikistan Cotton FarmlandPrivatization’, in: Coudouel et al. 2007: 453-488.Satterthwaite, David and D. Mitlin. 2004. Empowering Squatter Citizen.London: International Institute <strong>for</strong> Environment and Development.Safavian, Mehnaz, Heywood Fleisig, and Jevgenijs Steinbuks. 2006.Unlocking Dead Capital. Viewpoint, Note No. 307 (Washington,DC: World Bank).Siddiqui, Tasneem and M. Azhar Khan. 1994. ‘<strong>The</strong> Incremental DevelopmentScheme,’ Third World Planning Review 16/3:277-291.Singapore Housing and Development Board. Accessed at http://www.hdb.gov.sgSokoloff, K.L. and S.L. Engerman. 2000. ‘Institutions, factor endowments,and paths of development in the New World,’ Journalof Economic Perspectives, 14, 217-232.South African Institute of International Affairs. 2005. Special Feature:Unleashing Investment By Encouraging African Savings, at:www.saiia.org.za/modules.php?op=modloadandname=Newsandfi le=articleandsid=648 [seen 13.6.07].SPARC. 1995. ‘We the invisible revisited.’ Available at: http://www.sparcindia.orgStanfi eld, David and Peter Bloch. 2002. ‘USAID investments in landmarkets and property rights: Interim assessment basedon secondary sources’ Land Tenure Canter, University ofWisconsin.Steuteville, Robert. 2005. <strong>The</strong> New Urbanism: an alternative to modernautomobile-oriented planning and development, availableat: http://www.newurbanism.comStrickland, Richard S. 2004. ‘To Have and To Hold: Women’s Propertyand Inheritance Rights in the Context of HIV/AIDS in Sub-Saharan Africa,’ Washington, DC: ICRW.Tibaijuka, Anna Kajumulo. 2005. Report of the Fact-Finding Missionto Zimbabwe to assess the Scope and Impact of OperationMurambatsvina by the UN Special Envoy on Human SettlementsIssues in Zimbabwe. July 18.Tomlinson, Mary R. 2007. ‘<strong>The</strong> Development of a Low-Income HousingFinance Sector in South Africa: Have We Finally Found aWay Forward,’ Habitat International 31.Tongson, E. and McShane, T. 2004. ‘Securing Land Tenure <strong>for</strong> Biodiversity:Conservation in Sibuyan Island, Romblon, Philippines.”Paper presented at the UNU-WIDER and EGDIConference on Unlocking Human Potential: Linking theIn<strong>for</strong>mal and Formal Sectors, Helsinki, Finland.UN-ESCAP. 1994. Municipal Land Management in Asia: A comparativestudy, Bankok, UN-ESCAP.United Nations Human Settlements Programme (UN-Habitat). 2004.‘Guidelines on How to Undertake a National Campaign <strong>for</strong>Secure Tenure,” UN-HABITAT website at: http://www.unhabitat.org/pmss/getPage.asp?page=bookViewandbook=1186.New York: UN-HABITAT.UN-Habitat. 2006. ‘Progress Report on Removing DiscriminationAgainst Women in Respect of Property and InheritanceRights,” Nairobi.______. 2007. Enhancing Urban Safety and Security. Global Report onHuman Settlements.______. 2005. ‘Land tenure, housing rights and gender - nationaland urban framework’ <strong>Law</strong>, Land Tenure and Gender ReviewSeries: Latin America, Nairobi.______. 2005b. Financing Urban Shelter: Global Report on HumanSettlements. Nairobi.______. 2006. Analytical Perspective of Pro-Poor Slum UpgradingFrameworks. Nairobi: United Nations Human SettlementsProgramme.______. 1991. <strong>The</strong> incremental development scheme: A case studyof Khuda ki Basti in Hyderabad, Pakistan, Nairobi, UN-HABITAT.United Nations. 1980. Report of the World Conference of the United NationsDecade <strong>for</strong> Women : Equality, Development and Peace,Doc A/Cof.94/35.United Nations Research Institute <strong>for</strong> Social Development (UNRISD).2006. ‘Land Tenure Re<strong>for</strong>m and Gender Equality,” Geneva,Switzerland.United States Agency <strong>for</strong> International Development (USAID). 2006.Land and Business Formalization <strong>for</strong> Legal Empowermentof the Poor. A Strategic Overview Paper.______. 2007. Legal Empowerment of the Poor. From Concepts toAssessments.Von Hoffman, Alexander. 1998. <strong>The</strong> Origins of American Housing Re<strong>for</strong>m.<strong>Work</strong>ing Paper 98-2. Joint Canter <strong>for</strong> Housing Studiesof Harvard University.Wallace, Jude and Williamson, 2006. ‘Building land markets,” LandUse Policy 23: 123-135.Wheeler, Samuel C. 1980. ‘Natural Property Rights as Body Rights,”Nous 14.Whitehead, Ann and Dzodzi Tsikata. 2003. ‘Policy Discourse on Women’sLand Rights in Sub-Saharan Africa: <strong>The</strong> Implicationsof the Return to the Customary,” Journal of AgrarianChange 3.Williams, Rhodri. 2005. ‘Post-Confl ict Property Restitution and RefugeeReturn in Bosnia and Herzegovina: Implications <strong>for</strong> InternationalStandard-Setting and Practice,’ New York UniversityJournal of International <strong>Law</strong> and Politics 37: 441-553.Woodruff, Christopher. 2001. ‘Review of de Soto’s <strong>The</strong> Mystery of Capital,’Journal of Economic Literature 39: 1215-1223.Woolf, Virginia. 1938. Three Guineas.127

World Bank. 1993. ‘Housing: Enabling Markets to <strong>Work</strong>,’ Housing policypaper, Washington, DC.______. 2001. ‘Land, Security, Property Rights and the Urban Poor:Twenty Five Years of World Bank Experience’. World BankBriefi ng Note 8, Washington, DC.______. 2002. World Development Report.______. 2003. ‘Land Policy <strong>for</strong> Pro-Poor Development’ World Bank,Washington, DC.______. 2003a. Housing: Enabling Markets to <strong>Work</strong>. <strong>The</strong> World Bank.Washington, D.C.______. 2004. ‘Regional Study on Land Administration, Land Markets,and Collateralized Lending. East Asia and Pacifi c Region’World Bank, Washington, DC.______. 2004a. Water Resources Sector Strategy. Washington.______. 2006. ‘Afghanistan,’ Urban Policy Notes, Series 5.2,Washington, DC.World Business Council <strong>for</strong> Sustainable Development (WBCSD). 2005.Doing Business with the Poor. A Field Guide.World Health Organisation. 2000. <strong>The</strong> Urban Environment and Healthin a World of Increasing Globalization: Issues <strong>for</strong> DevelopingCountries. Bulletin Vol. 78. No.9. Geneva.Yu, S. and A. M. Karaos. 2004. ‘Establishing the role of communities ingovernance: the experience of the Homeless People’s FederationPhilippines.’ Environment and Urbanization 16(1):107-119.Yuen, Belinda. 2002. ‘Singapore,’ In: Agus, M.R./J Doling, J./Lee, D.S. (eds.), Housing Policy Systems in South and East Asia,Palgrave Macmillan______. 2004. Planning Singapore Growth <strong>for</strong> Better Living.’ In: MFreire and B Yuen (ed.) Enhancing Urban Management inEast Asia, Ashgate______. 2005. Squatters no more: Singapore Social Housing, WorldBank 3 rd Urban Research Symposium, Brasilia, Brazil.128

ChapterTHREETowards a GlobalSocial Contract:Labour Rights <strong>for</strong>Legal Empowermentof <strong>The</strong> Poor129

EXECUTIVE SUMMARYPurpose of this chapterChapter 3 is about labour rights <strong>for</strong> the fight against poverty. Based on our review of employment andworking conditions in the in<strong>for</strong>mal economy, we present two essential messages.<strong>The</strong> first is that governments and internationalorganisations must address the decentwork deficits of those who work in<strong>for</strong>mally, sincethe in<strong>for</strong>mal economy, characterised by low productivity,low earnings and high risks, has beengrowing worldwide, emerging in many new guisesand in unexpected places. <strong>The</strong> second messageis one of hope. It is about the new departure ininternational development strategies, in which wefind broad coalitions being <strong>for</strong>med among governments,international organisations, trade unions,employers and non-governmental organisationsthat are willing to take on the challenge of creatingand implementing policies <strong>for</strong> decent workand empowerment of the poor.We describe this new departure in internationaldevelopment strategies as an emerging ‘GlobalSocial Contract’ and propose that the <strong>Commission</strong>on 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, in<strong>for</strong>mal 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 <strong>for</strong>a. Thisconcept also takes into account and supportscommitments and policies <strong>for</strong> the creation of full,productive and freely-chosen employment andtraining. In<strong>for</strong>mal economy refers to economicactivities by workers and economic units that are— in law or in practice — not covered or insufficientlycovered by <strong>for</strong>mal 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 <strong>for</strong>mally (legally)and in<strong>for</strong>mally (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.In<strong>for</strong>mal work<strong>for</strong>ce: who are wetalking about?<strong>The</strong> vast majority of the poor earn their living inthe in<strong>for</strong>mal economy where average earnings arelow, productivity poor, working conditions hazardous,and risks high. Section 3 provides a globalpicture of the in<strong>for</strong>mal economy, highlighting itssize, segmentation, and vulnerabilities. Womendominate the most-disadvantaged categories ofin<strong>for</strong>mal work, notably industrial outwork andhome-based production. It is also in the in<strong>for</strong>maleconomy 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 in<strong>for</strong>mal economy continues to grow.Poverty and labour rights: Towards aGlobal Social ContractSection 4 describes a new departure in theinternational community regarding labour rightsand the in<strong>for</strong>mal economy; it features threenoteworthy elements: the Fundamental Principlesand Rights at <strong>Work</strong> from 1998; the Decent<strong>Work</strong> Agenda, first introduced in 1999, and the2002 Strategy <strong>for</strong> Labour Rights in the in<strong>for</strong>maleconomy. <strong>The</strong>se 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 ef<strong>for</strong>ts to achieve the MillenniumDevelopment Goals (MDGs), the 2005 WorldSummit of Heads of States agreed to make fulland productive employment and decent work<strong>for</strong> 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 <strong>for</strong> all as an end in itself and a means toachieve the MDGs. <strong>The</strong> Decent <strong>Work</strong> Agenda hasthere<strong>for</strong>e been accepted as a global aim; it nolonger remains an ILO agenda alone. Decent workhas been declared a goal not only <strong>for</strong> the <strong>for</strong>malwage sector, but also <strong>for</strong> the in<strong>for</strong>mal economy.Growing recognition of the need <strong>for</strong> labour rightsto catalyse employment creation in the in<strong>for</strong>maleconomy, while protecting its workers, has ledto an emerging global social contract, creating abroad agenda <strong>for</strong> re<strong>for</strong>m and <strong>for</strong> empowerment.<strong>The</strong> economics of in<strong>for</strong>mality 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.<strong>The</strong> 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 be<strong>for</strong>e 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 <strong>for</strong> theworking poor. <strong>The</strong> debate, we suggest, shouldfocus on the quality of regulation, and determiningthe right balance between security, supportivestructures, and flexibility in both the <strong>for</strong>mal andin<strong>for</strong>mal economy.Principles and practices of labourrights and legal empowermentOur proposed strategy <strong>for</strong> 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 re<strong>for</strong>m 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). <strong>The</strong>y 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 <strong>for</strong> other countries.Our recommendationsWe propose that the <strong>Commission</strong> 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 <strong>for</strong>emost,the State must recognise their legal identity asworkers — the initial condition through whichthey can engage in legal re<strong>for</strong>ms. Rights tofreedom of association and collective bargainingare also essential to strengthen the voice of theworking poor and to facilitate their dialogue with<strong>for</strong>mal economy operators and public authorities.Improve the quality of labour regulation and thefunction of institutions: <strong>The</strong>re is also need to improvethe quality of labour regulation and to en<strong>for</strong>cefundamental principles and rights at work.<strong>The</strong> 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 <strong>for</strong> the in<strong>for</strong>mal economy: Rightsshould be established in the in<strong>for</strong>mal economy thatupholds the Declaration on Fundamental Principlesand Rights at <strong>Work</strong> and the three crucial aspectsrelated to working conditions: health and safetyat work, hours of work, and minimum income.Such a minimum floor <strong>for</strong> empowerment should berealistic and en<strong>for</strong>ceable. 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 by<strong>for</strong>ging links between private initiative and publicpolicy to encourage expansion of employment ina growing and inclusive economy. Opportunities<strong>for</strong> decent work are also advanced by provision<strong>for</strong> education, training and retraining, as well asby ef<strong>for</strong>ts 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 <strong>for</strong> all.<strong>Law</strong>s, 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 <strong>for</strong>mal 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 <strong>for</strong> 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 in<strong>for</strong>maleconomy. This requires knowledge of whereworking poor women are concentrated in thelabour <strong>for</strong>ce, how they are inserted into the globalproduction and with what consequences. <strong>The</strong>reis a growing international movement, inspired bythe Self-Employed Women’s Association (SEWA)of India, to increase the visibility and voice offemale in<strong>for</strong>mal workers and to address their particulardisadvantages, in terms of opportunities,rights, protection and voice.Support legal empowerment <strong>for</strong> indigenouspeoples: Although indigenous peoples are disproportionatelyrepresented among the poor, theirneeds and priorities are generally not reflected inef<strong>for</strong>ts to combat poverty. ILO’s Indigenous andTribal Peoples Convention provides guidance andstrategies <strong>for</strong> legal empowerment with respect tolabour rights and protection of employment.Process recommendationsPromote national development frameworks <strong>for</strong>legal empowerment and decent work: <strong>The</strong> 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 in<strong>for</strong>mality. Decent <strong>Work</strong> Country Programmes(DWCPs) are major tools <strong>for</strong> driving this re<strong>for</strong>mprocess <strong>for</strong>ward in partnership with relevant nationaland international institutions.Mobilise the regional levels to support nationalre<strong>for</strong>m programmes: Re<strong>for</strong>m 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 <strong>for</strong> an integrated re<strong>for</strong>magenda on legal empowerment <strong>for</strong> the poor.Mobilise the principal actors of the global system,particularly the World Bank and the ILO, to workbetter together <strong>for</strong> decent work: <strong>The</strong> World Bank’sPoverty Reduction Strategies and ILO’s DWCPsare crucial instruments <strong>for</strong> re<strong>for</strong>m. 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 thein<strong>for</strong>mal economy. A key to a successful re<strong>for</strong>mprocess at national level is better policy coherenceat global level.Support voluntary initiatives <strong>for</strong> legal empowermentthrough labour rights: <strong>The</strong> ILO’s FundamentalPrinciples and Rights at <strong>Work</strong> inspires many133

voluntary code-of-conduct initiatives. <strong>The</strong>y arepursuing important strategies <strong>for</strong> motivating improvementsin the per<strong>for</strong>mance 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 <strong>for</strong> 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 re<strong>for</strong>m from legal empowermentthrough decent work require further study,particularly their effects on productivity andprosperity. <strong>The</strong> costs of policy initiatives to startand sustain re<strong>for</strong>m processes also need to be betterunderstood.Strengthen the statistical base <strong>for</strong> legal empowerment:Better national statistics and indicators onsize, composition, and contribution of the in<strong>for</strong>maleconomy would improve visibility and facilitateplanning, particularly <strong>for</strong> <strong>for</strong>mulating policiespromoting Legal Empowerment of the Poor.Recommendations to further developthe Global Social Contract<strong>The</strong>re is a tripartite consensus from employer,worker and government representatives on theneed <strong>for</strong> a <strong>for</strong>mal 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 <strong>for</strong> attractinginvestment, but also <strong>for</strong> generating certaintyand nurturing trust and fairness in society. 1 <strong>The</strong>growing recognition of the need <strong>for</strong> labour rightsto catalyse employment creation in the in<strong>for</strong>maleconomy, while protecting its workers, has led toan emerging global social contract; effectively,it is a broad agenda <strong>for</strong> re<strong>for</strong>m and <strong>for</strong> empowerment.Labour rights, business rights, propertyrights and business rights, taken together, can<strong>for</strong>m 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 effectiveen<strong>for</strong>cement of fundamental principles and rightsat work; (3) Support application of a minimumpackage of labour rights <strong>for</strong> the in<strong>for</strong>mal economy;(4) Strengthen access to opportunities <strong>for</strong>decent 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 Decent<strong>Work</strong> Agenda, as a Global Social Contract andpropose that the <strong>Commission</strong> (or CLEP) furtherdevelop the concept by integrating access tojustice, property rights, labour rights and businessrights into a framework <strong>for</strong> 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 <strong>for</strong>m the conceptGlobal Social Contract. ‘Contract’ suggestsan emphasis on mutual responsibility. <strong>The</strong> state,<strong>for</strong> 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’ be<strong>for</strong>e ‘a global social contract’ in thetitle of our chapter to emphasise development,process and time horizons.1. Introduction: Purpose ofour focus on Labour Rights<strong>The</strong> <strong>Commission</strong> 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. <strong>The</strong> World Bank estimatesthat <strong>for</strong> 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.In<strong>for</strong>mality in the work<strong>for</strong>ce has always beenpredominant in developing countries — but itis also growing in developed economies. For thepoor, in<strong>for</strong>mal employment is the predominant<strong>for</strong>m 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 <strong>for</strong>mal incorporatedfirms and <strong>for</strong>mal organised workers. Often,the poor are shut out of the legally recognisedsystems that would allow them to benefit fromtheir hard work. <strong>The</strong>y are mostly excluded fromthe legal mechanisms that protect their assetsrelated to property or labour. <strong>The</strong>y lack access toa fully-functioning justice system that protectstheir rights regardless of status in life.135<strong>The</strong> ILO notes that in<strong>for</strong>mality 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. <strong>The</strong> boundaries oflaws and institutional frameworks remain unyieldingto the growing number of poor who are found

outside their protective reach. <strong>The</strong> World Bankhas shown that, while in<strong>for</strong>mality is strongly correlatedwith low productivity and a high degree ofpoverty, 4 governance and quality of regulation canplay an important role in engendering prosperityand protection <strong>for</strong> the in<strong>for</strong>mal work<strong>for</strong>ce.Our aim is to suggest how to address the viciouscircle of in<strong>for</strong>mality, 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, <strong>for</strong> example,attempts have been made to obtain global consensuson the Fundamental Principles and Rightsof <strong>Work</strong>, and to gain widespread endorsement ofthe Decent <strong>Work</strong> Agenda. Furthermore, there isevidence of growing recognition of the need to extendlabour rights to the work<strong>for</strong>ce in the in<strong>for</strong>maleconomy.<strong>The</strong>se 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, in<strong>for</strong>mal economy,empowerment and decent work, while Section 3explains who we are talking about — the size andcomposition of the in<strong>for</strong>mal work<strong>for</strong>ce and themany segments found therein. Next, Section 4highlights new initiatives <strong>for</strong> 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 <strong>for</strong> legal empowermentthrough labour rights, and summarizesthe economic debates surrounding labourregulations. In Section 6 we provide recommendationson the principles and practices of re<strong>for</strong>m,as well as case materials on selected countryexperiences reflecting appropriate responses tothe extension of labour rights and standards toall <strong>for</strong>ms 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 <strong>for</strong>ward in a manner coordinated withthe other working groups of the <strong>Commission</strong> 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, In<strong>for</strong>malEconomy, Empowermentand Decent <strong>Work</strong>: What dowe mean?In this section we define the key terms andconcepts that underpin our discussions; namely,labour rights, in<strong>for</strong>mal economy, legal empowermentand decent work.Labour Rights<strong>The</strong> concept of labour rights includes the internationallyagreed-upon Fundamental Principles andRights at <strong>Work</strong> 5 as well as rights to social protectionand income protection, workplace safety,decent working conditions and the participationthrough representative organisations in nationalpolicy <strong>for</strong>ums. This concept also takes into accountand supports commitments and policies <strong>for</strong>the creation of full, productive and freely chosenemployment as well as work<strong>for</strong>ce development.<strong>The</strong>se 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.In<strong>for</strong>mal Economy<strong>The</strong> in<strong>for</strong>mal 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 <strong>for</strong>malarrangements’ regulating both enterprise and employmentrelationships. 6 In<strong>for</strong>mal employment 7consists of two broad categories, the self-employedin in<strong>for</strong>mal (small unregistered) enterprisesand wageworkers in in<strong>for</strong>mal (unprotected)jobs, including disguised wageworkers. Underthis expanded international statistical framework,the specific criteria used <strong>for</strong> determining whatis (or is not) an in<strong>for</strong>mal enterprise and what is(or is not) an in<strong>for</strong>mal job are set by countries,including: what size of enterprise and what typeof registration should be used <strong>for</strong> determiningwhat is an in<strong>for</strong>mal enterprise; and what type ofcontract or social protection coverage should beused <strong>for</strong> determining what is an in<strong>for</strong>mal 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 <strong>for</strong>mally (legally) and in<strong>for</strong>mally(legitimately). Thus, legal empowerment requiresthat in<strong>for</strong>mation 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. <strong>The</strong> absence of in<strong>for</strong>mation 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 ef<strong>for</strong>t 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 toin<strong>for</strong>mation, systems of accountability, venues <strong>for</strong>inclusion/participation and local organisationalcapacity. 9In the domain of labour rights, empowerment issecured when the fundamental principles andrights at work are respected. <strong>The</strong>se so-called‘enabling rights’ can be considered avenues toempowerment. 10 <strong>The</strong>y constitute the basic rightto participation and freedom of choice in thearena of work that everyone should enjoy.Decent <strong>Work</strong><strong>The</strong> International Labour Organisation introducedthe notion of decent work in 1999. 11 Its premise:opportunities <strong>for</strong> 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. In<strong>for</strong>mality and Poverty:Whom are we talkingabout? What is theiridentity?This section presents an overview of the in<strong>for</strong>maleconomy, including its size and structure as wellas the workers in it. <strong>The</strong> <strong>Commission</strong> (CLEP) haschosen to focus on the in<strong>for</strong>mal economy becauseof the strong link between in<strong>for</strong>mality and poverty.Also, as the World Bank has found in a studyof 75 countries, in<strong>for</strong>mality 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. <strong>The</strong> vastmajority of these ‘working poor’ earn their livingin the in<strong>for</strong>mal economy. <strong>The</strong> in<strong>for</strong>mal 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 in<strong>for</strong>mal economy and being poor,or working in the <strong>for</strong>mal economy and escapingpoverty, the link between in<strong>for</strong>mality and povertyis quite significant and stark.What follows is a summary of recent estimates ofthe size of the in<strong>for</strong>mal economy in 25 developingcountries 13 and recent analyses of changesin in<strong>for</strong>mal employment over time in 20 of thesecountries. 14 Official national data were used toestimate in<strong>for</strong>mal employment in each of thecountries. 15Size and significance in developingcountriesIn<strong>for</strong>mal 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 in<strong>for</strong>mal employment innon-agricultural employment rises to 78 percentin sub-Saharan Africa; and if comparable datawere available <strong>for</strong> countries (other than India), inSouth Asia, the regional average <strong>for</strong> Asia wouldlikely be much higher.Some countries include in<strong>for</strong>mal employmentin agriculture in their estimates. Thissignificantly increases the proportion of in<strong>for</strong>malemployment: 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. 16<strong>The</strong> two main segments of in<strong>for</strong>mal employment,classified by employment status, are the self-employedand the wageworkers. <strong>The</strong> self-employedinclude employers, or owner-operators of in<strong>for</strong>malenterprises 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.<strong>The</strong> wageworker segment consists largely ofin<strong>for</strong>mal employees — those who are unprotectedin their work with a known employer that couldbe an in<strong>for</strong>mal or <strong>for</strong>mal 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 <strong>for</strong> a piece-rate from their homes orsmall workshops.Composition of the In<strong>for</strong>mal EconomyIn all developing regions, self-employment comprisesa greater share of in<strong>for</strong>mal employment(outside of agriculture) than wage employment:specifically, self-employment represents 70percent of in<strong>for</strong>mal 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 in<strong>for</strong>mal 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 in<strong>for</strong>mal 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.In<strong>for</strong>mal wage employment, including disguisedwage employment, is also significant in thedeveloping world: comprising 30 to 40 percent ofin<strong>for</strong>mal employment (outside of agriculture). 18Home-based workers and street vendors are twoof the largest sub-groups of the in<strong>for</strong>mal work<strong>for</strong>ce:with home-based workers being the morenumerous but street vendors the more visible ofthe two. Together they represent 10-25 percentof the non-agricultural work<strong>for</strong>ce in developingcountries and over five percent of the total work<strong>for</strong>cein developed countries.139

Segmentation in the In<strong>for</strong>mal LabourMarket 19Available evidence suggests that there is markedsegmentation within in<strong>for</strong>mal labour marketsin terms of average earnings across the differentemployment statuses. Specifically, in<strong>for</strong>malemployers have the highest earnings on average;followed by their employees and in<strong>for</strong>mal employeesof <strong>for</strong>mal firms; then own account operatorsfollowed by casual wage workers, and industrialoutworkers: see Figure 1. An inverse hierarchy isobserved <strong>for</strong> 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, <strong>for</strong> example, in<strong>for</strong>mal employers earnfour times the minimum wage and over two times(2.2) the <strong>for</strong>mal wage. <strong>The</strong>ir 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, in<strong>for</strong>mal 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 In<strong>for</strong>mal Economy: By Sex, Average Earnings and Poverty RiskPoverty RiskAverage EarningsSegmentation by SexLOWHIGHEmployersPredominantly MenIn<strong>for</strong>mal EmployeesOwn Account OperatorsMen and WomenCasual Day LabourersUnpaid Family <strong>Work</strong>ersPredominantlyWomenNote: <strong>The</strong> in<strong>for</strong>mal economy may also be segmented by race, ethnicity, caste or religion.Source: Chen et al 2004, 2005.140

Box 1 Different Categories of In<strong>for</strong>mal <strong>Work</strong>ersand Corresponding ChallengesCategories of <strong>Work</strong>ersEmployees of in<strong>for</strong>mal enterprisesCasual day labourersHomeworkers or Home-based producersDomestic workersContract labour <strong>for</strong> <strong>for</strong>mal 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 <strong>for</strong>mal firm?Intersection of immigration status/regime and labour status/regimeSource: Martha Chen, ‘Labour standards and in<strong>for</strong>mal workers: <strong>The</strong> nature of the challenge.’ Paper prepared <strong>for</strong> the <strong>Commission</strong> on Legal Empowerment of thePoor, November 2006.Another type of segmentation is based on differencesbetween women and men within thein<strong>for</strong>mal economy reflecting gender norms whichinfluence both the supply of and the demand <strong>for</strong>labour. As a general rule in developing countries,men tend to be over-represented in the top segmentsof the in<strong>for</strong>mal economy; women tend tobe over-represented in the bottom segment.More specifically, relatively high shares of in<strong>for</strong>malemployers are men and relatively high sharesof industrial outworkers are women. In India, <strong>for</strong>example, 6 percent of in<strong>for</strong>mal employers, 19percent of own account operators, 16 percent ofin<strong>for</strong>mal wage workers, and 59 percent of industrialoutworkers are women. 21 <strong>The</strong>se stylised factsare depicted graphically in Figure 1.A legal empowerment agenda <strong>for</strong> workers in thein<strong>for</strong>mal economy must take into account the differentcategories of in<strong>for</strong>mal workers and the specificrealities of their work arrangements. In Box1, below, there are illustrations of the conceptualand practical challenges in considering labourrights and protections <strong>for</strong> the different categoriesof in<strong>for</strong>mal 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

In<strong>for</strong>malisation of Labour Markets<strong>The</strong>re is a widespread assumption that thein<strong>for</strong>mal 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 in<strong>for</strong>mal employment, taking self-employmentas a proxy indicator, decreases when GDPper capita goes up and vice versa. 23 However, asshown above, the in<strong>for</strong>mal 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 in<strong>for</strong>mal employmentand growth is not straight<strong>for</strong>ward. Recent analysesof data over time from different developingcountries suggest a more complex and dynamicrelationship between in<strong>for</strong>mality and economicgrowth. While economic downturns are almost invariablyassociated with an expansion of employmentin the in<strong>for</strong>mal 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 in<strong>for</strong>mal economy. This is because duringeconomic upswings, certain <strong>for</strong>ms of in<strong>for</strong>malemployment 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 <strong>for</strong>mal economy is enteringinto a symbiotic relationship with the in<strong>for</strong>mal,where the <strong>for</strong>mer 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 in<strong>for</strong>malisation declined. 25 This importantfinding is further elaborated in Box 2.Box 2 Relationship betweenin<strong>for</strong>mality 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 in<strong>for</strong>malisationis compared to the average per capitaGDP growth (Heintz and Pollin 2003). Most of thecountries (14 out of 20) experienced growth in in<strong>for</strong>malisation,while four experienced a decline and twoexperienced little, if any, change. What is interestingto note is that in<strong>for</strong>malisation 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.<strong>The</strong> 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.)<strong>The</strong> common categories of non-standard wagework are temporary, fixed-term and part-time.Increasingly, inter-firm sub-contracted work inthe service sector (<strong>for</strong> 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 <strong>Work</strong>: Since the early 1970s, therehas been a marked growth in the proportion ofpart-time workers in total employment. By 1998,part-time workers accounted <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>ms of non-standardwork in OECD countries, there are other<strong>for</strong>ms of non-standard work — notably, casualday labour, industrial outwork, and other <strong>for</strong>ms ofsub-contracted work — <strong>for</strong> which data are not soreadily available.In sum, the purely counter-cyclical model of in<strong>for</strong>malitydoes not hold. At least in the short term,countries demonstrate significant variation in theirpatterns of in<strong>for</strong>malisation even under conditionsof steady economic growth. Also, different segmentsof the in<strong>for</strong>mal economy demonstrate substantialvariation in their cyclical patterns. Certainsegments of the in<strong>for</strong>mal economy expand duringdownturns in the economy: particularly survivalactivities and sub-contracted activities <strong>for</strong> firmstrying to cope with the downturn. Certain othersegments of the in<strong>for</strong>mal economy expand duringupturns in the economy: notably, dynamic independententerprises and sub-contracted activitieslinked to global value chains.Gendered patternsIn<strong>for</strong>malisation of Labour Markets by Sex<strong>The</strong> last two decades have seen a marked increasein women’s labour <strong>for</strong>ce 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 <strong>for</strong>ce participation rate actually fallen. <strong>The</strong>marked increase in women’s labour <strong>for</strong>ce partici-143

pation worldwide has given rise to the notion ofthe ‘feminisation of the labour <strong>for</strong>ce’. But thisnotion has been defined and used in two distinctways. First, to refer to the situation in which theratio of women’s labour <strong>for</strong>ce participation rate tomen’s labour <strong>for</strong>ce participation rate increases overtime. Second, to refer to a situation in which thestructure of the labour <strong>for</strong>ce 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 <strong>for</strong>ce participationand the growing precariousness or in<strong>for</strong>mality ofwork is not clear — and has been hotly debated.<strong>The</strong> pervasive segmentation of labour marketsby gender, which we discussed above, suggeststhat women’s labour did not simply substitute <strong>for</strong>men’s labour. Rather, that there has been someparallel process at work creating low-paid andpoor quality in<strong>for</strong>mal employment opportunities<strong>for</strong> (primarily) women. 29Estimates of changes over time in the degree ofin<strong>for</strong>malisation within the female and male labour<strong>for</strong>ce are not available. However, we have seenabove that growth in certain <strong>for</strong>ms of in<strong>for</strong>malemployment — 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. 30In<strong>for</strong>mal Employment in Developing CountriesIn<strong>for</strong>mal employment is generally a larger sourceof employment <strong>for</strong> women than <strong>for</strong> men in thedeveloping world. Other than in the Middle Eastand North Africa, where 42 percent of womenworkers (and 48 percent of male workers) arein in<strong>for</strong>mal employment, 60 percent or more ofwomen non-agricultural workers in the developingworld are in<strong>for</strong>mally employed. Among non-agriculturalworkers, in sub-Saharan Africa, 84 percentof women workers are in<strong>for</strong>mally 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 <strong>for</strong> 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 <strong>for</strong> the majority of agency temps incountries where such employment concentratesin services, while men account <strong>for</strong> 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 <strong>for</strong> men (11 percent) than <strong>for</strong> 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 account<strong>for</strong> 15 percent of the world’s poor. Poverty,inequality, and various types of injustices haveplagued ethnic societies around the world. 33<strong>The</strong> 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 be<strong>for</strong>e others occupied or came to their area. 34<strong>The</strong> 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 <strong>for</strong>higher standards in countries that can go further.Convention No. 169 adopts a general attitude of respect<strong>for</strong> 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 <strong>for</strong> 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.<strong>The</strong>y have ranged from outright exclusion toinclusion at very inferior conditions.<strong>The</strong> 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 <strong>for</strong>ms of exploitation. Discriminationin wage is common practice and there ishigh incidence of <strong>for</strong>ced labour. Unemployment,especially youth unemployment, is higher amongITPs compared to the national average. 36<strong>The</strong> 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 ef<strong>for</strong>ts <strong>for</strong> legal empowermentof indigenous people have to be made. <strong>The</strong> ILO’sIndigenous and Tribal Peoples Convention (seeBox 3) provides guidance and strategies <strong>for</strong> legalempowerment with respect not only to labourrights and protection of employment, but also toland and property rights.Special ef<strong>for</strong>ts <strong>for</strong> 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. <strong>The</strong>research 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 <strong>for</strong> participation and political change. 37Conclusions<strong>The</strong> vast majority of the working poor earn theirliving in the in<strong>for</strong>mal economy where averageearnings are low, productivity is poor, workingconditions are hazardous, and risks are high. Anyattempt to <strong>for</strong>mulate policies and approaches<strong>for</strong> the in<strong>for</strong>mal economy must understand itscharacteristics, including the deep segmentationfound in it. This section provided a global pictureof the in<strong>for</strong>mal economy, highlighting its size,segmentation, and the vulnerabilities of its particularsegments. Women dominate the most-disadvantagedcategories of in<strong>for</strong>mal work, 38 notablyindustrial outwork and home-based production. Itis also in the in<strong>for</strong>mal economy that child labourand bonded labour are most prevalent and mostdifficult to address. Indigenous and tribal peoplesare marginalized largely due to discrimination.<strong>The</strong>ir cultural identity is suppressed and they areexcluded from social services that should preparethem <strong>for</strong> the labour market; furthermore, when atwork, they face many <strong>for</strong>ms of discrimination.Despite early predictions of its eventual demise,the in<strong>for</strong>mal economy has not only grownworldwide but also emerged in new guises andunexpected places. Though understood to becounter-cyclical, different segments of thein<strong>for</strong>mal economy are seen to have differentcyclical patterns leading to different patternsof in<strong>for</strong>malisation across countries. In virtually146

all cases, the in<strong>for</strong>mal economy expands duringeconomic slumps or downturns, as expected.In some cases, the in<strong>for</strong>mal economy expandsduring periods of economic growth. Economicgrowth has been accompanied by an increase inthe more dynamic micro-enterprise activities andsubcontracted work <strong>for</strong> larger supply chains especiallythose linked to the global economy. Thus,the growing significance of the in<strong>for</strong>mal 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 in<strong>for</strong>malwork<strong>for</strong>ce can play in breaking the vicious cycleof low productivity and poverty.4. Poverty and LabourRights: a new departurePoverty: A market failure and a publicpolicy failure<strong>The</strong>re is a broad consensus around the notionthat labour is not a commodity 39 and, there<strong>for</strong>e,that labour markets are different from other markets.<strong>The</strong> labour market has a double function:it is a mechanism <strong>for</strong> both the creation of newresources and <strong>for</strong> 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 <strong>for</strong> workers and theirfamilies have to be focused on inclusion, on newopportunities <strong>for</strong> decent work and on shared prosperity(See Box 4 <strong>for</strong> an elaboration of the socialcase <strong>for</strong> labour regulation).147In addition to their intrinsic value <strong>for</strong> 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 this<strong>Commission</strong>, labour rights and regulations arealso fundamental to achieving legal employmentof the poor.Labour rights and labour standards have beenan issue <strong>for</strong> international promotion and regulation<strong>for</strong> almost a hundred years. All countries,including the poorest countries, in principleprovide their work<strong>for</strong>ce with labour rights. Labourlaws and labour protection models are traditionallydesigned with the presumption of a <strong>for</strong>malemployer-employee relationship. This relation-

Box 4 Social case <strong>for</strong> labourregulation<strong>The</strong> social case <strong>for</strong> labour market regulationsemanates, fi rst and <strong>for</strong>emost, from the principlethat labour is not a commodity. <strong>The</strong> 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. <strong>The</strong>yare contracted to per<strong>for</strong>m a certain job and are paidwhen they complete the job. <strong>The</strong> completion of thecontract is not as straight<strong>for</strong>ward as it would be <strong>for</strong>non-human means of production as this requiresa complex range of in<strong>for</strong>mation 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 <strong>for</strong>remuneration.’ 40Despite the long-standing and wide-spreadcommitment to labour rights, a large majorityof workers are excluded from labour rights andsocial protection. Thus, in<strong>for</strong>mality and povertyis not only a market failure, it is also a failure ofpublic policies. Several factors, in the <strong>for</strong>m ofhistoric traditions, structural failures and conflictingpolitical interests, help explain the persistenceand growth of in<strong>for</strong>mality.• One explanation is the history of labour lawand regulation. Labour rights were historicallydesigned with the presumption of a <strong>for</strong>malemployment relationship thus excluding thosewithout a <strong>for</strong>mal employment relationship.• Another explanation is a lack of confidencein laws and law en<strong>for</strong>cement. Some politicalregimes have further undermined publicconfidence due to poor governance, causingmany enterprises to operate in the in<strong>for</strong>maleconomy.• 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 <strong>for</strong>mal economy and the <strong>for</strong>mal organisedlabour <strong>for</strong>ce. <strong>The</strong> in<strong>for</strong>mal sector and in<strong>for</strong>malemployment have been studied and discussedsince the 1970s. A first discussion of thein<strong>for</strong>mal sector took place at the InternationalLabour Conference in 1991 and subsequentlythe International Labour Conference reachedpolicy conclusions regarding in<strong>for</strong>mal employmentin 2002. 41• Another factor is weak and poorly-designeden<strong>for</strong>cement mechanisms. Countries that haveimproved the design and reach of their en<strong>for</strong>cementmechanisms to match the circumstancesof workers and units in the in<strong>for</strong>maleconomy have been able to reduce in<strong>for</strong>mality.<strong>The</strong> relationship between in<strong>for</strong>mal employmentand poverty had not, until recently, received theattention they deserve, much less reached the topof the development policy agenda. <strong>The</strong> interestto bring about re<strong>for</strong>m is quite new and the re<strong>for</strong>mstrategies, discussed by the ILO, World Bank, theinternational trade union movement and others,and the ef<strong>for</strong>ts to develop feasible solutions bycountries with large in<strong>for</strong>mal economies, are stillin their early stages of development.148

A New Departure: Fundamental Principles andRights at <strong>Work</strong>, the Decent <strong>Work</strong> Agenda, andLegal Empowerment of the <strong>Work</strong>ing Poor<strong>The</strong> recognition that productive employmentand decent work are key pathways to povertyreduction, and that in<strong>for</strong>mality 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 thein<strong>for</strong>mal economy.<strong>The</strong> First Step: Fundamental Principles andRights at <strong>Work</strong>: 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:• <strong>The</strong> right to freedom of association and collectivebargaining.• <strong>The</strong> elimination of all <strong>for</strong>ms of <strong>for</strong>ced or compulsorylabour.• <strong>The</strong> abolition of child labour.• <strong>The</strong> elimination of discrimination in employmentand occupation.Endorsed by the international community, thesecore labour standards constitute a ‘minimumfloor’, necessary both <strong>for</strong> the respect of fundamentalhuman rights and <strong>for</strong> the effective functioningof labour markets. <strong>The</strong>y are applicable toall workers and economic units.<strong>The</strong> Second Step: <strong>The</strong> Decent <strong>Work</strong> Agenda: Asecond step in the rethinking of traditional approacheswas the introduction at the InternationalLabour Conference in 1999 of the Decent <strong>Work</strong>Agenda. Decent work is central to ef<strong>for</strong>ts 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.<strong>The</strong>se objectives hold <strong>for</strong> all workers, women andmen, in both <strong>for</strong>mal and in<strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong> enterprisesin the in<strong>for</strong>mal economy to increase their productivityand incomes and to <strong>for</strong>mal 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. <strong>The</strong>y also include promotionalmeasures, such as access to skillsupgrading, life long learning and productiveemployment.149

Box 5 ILO Conventions and Recommendations Pertinent tothe In<strong>for</strong>mal 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)(<strong>The</strong> 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 frameworks<strong>for</strong> 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 <strong>Work</strong>ingEnvironment (Air, Pollution, Noise and Vibration;C 148)• Safety and Health in Agriculture(C 184)• Rural <strong>Work</strong>ers’ Organisation(C 141)• Various safety and health conventions inspecific sectors such as mining,construction, work involving asbestos andbenzene.<strong>The</strong> Third Step: Empower People in the In<strong>for</strong>malEconomy: This step was taken in 2002 when theInternational Labour Conference discussed andadopted a resolution on Decent <strong>Work</strong> and theIn<strong>for</strong>mal Economy, representing a new departurein addressing the topic. <strong>The</strong> new conceptualframework depicts a continuum of productionand employment relations. It does away with theidea that there are distinct <strong>for</strong>mal and in<strong>for</strong>mal’sectors’ without direct links and instead stressesthat there are ‘linkages, grey areas and interdependenciesbetween <strong>for</strong>mal and in<strong>for</strong>mal activities.’<strong>The</strong> framework views <strong>for</strong>mal and in<strong>for</strong>malenterprises and workers as co-existing along acontinuum, with decent work deficits most seriousat the bottom, unprotected, unregulated, survivalistend, but also existing in some <strong>for</strong>mal jobsas well, and with increasingly decent conditionsmoving up towards the <strong>for</strong>mal protected end. Byhighlighting the dynamic linkages between <strong>for</strong>maland in<strong>for</strong>mal activities, the policy issue can morerealistically be framed: the issue is not whetherin<strong>for</strong>mal workers or in<strong>for</strong>mal units have direct tieswith the in<strong>for</strong>mal economy but whether those tiesare benign, exploitative or mutually beneficial.<strong>The</strong> policy concern must enhance the positivelinkages and ensure that there is decent work allalong the continuum. 43150

<strong>The</strong> conclusions stressed the need to ‘eliminatethe negative aspects of in<strong>for</strong>mality while at thesame time ensuring that opportunities <strong>for</strong> livelihoodand entrepreneurship are not destroyed,and promoting the protection and incorporationof workers and economic units in the in<strong>for</strong>maleconomy into the mainstream economy.’ With aspecial focus on countries struggling with abjectpoverty and with a rapidly growing labour <strong>for</strong>ce,the ILO resolution urged that measures taken‘should not restrict opportunities <strong>for</strong> those whohave no other means of livelihood. However, itshould not be a job at any price or under any circumstances.’A clear challenge <strong>for</strong> follow-up is todemonstrate how job quantity and quality can gotogether and how respect <strong>for</strong> basic labour rightsmight promote productivity growth. A relatedchallenge is to ensure that activities targetingthe in<strong>for</strong>mal economy do not lead to the growthof poor quality employment, but rather to theupgrading of working conditions. <strong>The</strong> conclusionsalso call <strong>for</strong> 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. <strong>The</strong>se are determined nationallyand their application varies with the level ofdevelopment of the country and its capacity toen<strong>for</strong>ce these standards. 44 One convention of directrelevance to the in<strong>for</strong>mal economy is the ILOHome <strong>Work</strong> 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 <strong>for</strong>mal shades into thein<strong>for</strong>mal’ and people move between work opportunitieswith different degrees of protection. 45 <strong>The</strong>goal is to progressively achieve compliance with abroader range of standards throughout the wholeeconomy, leading to gradual <strong>for</strong>malisation of thein<strong>for</strong>mal economy.It is instructive to highlight provisions in ILOConventions and Recommendations that maybe applicable to the in<strong>for</strong>mal economy. <strong>The</strong>seinternational labour standards provide guidanceto national economic and social policies, includinghow such policies can be applied to decentwork and the in<strong>for</strong>mal economy. <strong>The</strong>se Conventionsand Recommendations may be understoodunder the following broad objectives: (a) humancapabilities and empowerment, which relateto the core labour standards, (b) labour marketpolicy frameworks <strong>for</strong> better governance, and(c) protection of people. 46 <strong>The</strong>se standards <strong>for</strong>mthe backbone of ILO’s Decent <strong>Work</strong> agenda, andcover not only the <strong>for</strong>mal sector but also, mostimportantly, the in<strong>for</strong>mal economy. For it is in thein<strong>for</strong>mal 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 <strong>for</strong> advancing the realisation of labourrights, reducing poverty, and expanding equityworldwide. <strong>The</strong> 1998 Declaration of FundamentalPrinciples and Rights at <strong>Work</strong>, the 1999Decent <strong>Work</strong> Agenda, and the 2002 Resolutionon the In<strong>for</strong>mal 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 in<strong>for</strong>mal work<strong>for</strong>ce providesa comprehensive framework <strong>for</strong> inclusion of thoseamong the poorer segments of the populationwho are employed but register significant deficitsin regard to decent work.<strong>The</strong> 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 <strong>for</strong> all,including <strong>for</strong> 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 ef<strong>for</strong>ts 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 <strong>for</strong> 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. 49<strong>The</strong> Decent <strong>Work</strong> agenda has there<strong>for</strong>e been acceptedas a global goal and is no longer an ILOagenda alone. Decent work has been declaredas a goal not only <strong>for</strong> the <strong>for</strong>mal wage sector,but also <strong>for</strong> the in<strong>for</strong>mal economy. A decadelongprocess of rethinking international labourstandards has now led to an emerging globalsocial contract, a broad agenda <strong>for</strong> re<strong>for</strong>m and <strong>for</strong>empowerment.<strong>The</strong> <strong>Work</strong>ing 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 in<strong>for</strong>maleconomy.Labour rights <strong>for</strong> in<strong>for</strong>mal workers: what is anachievable minimum fl oor?All workers in the in<strong>for</strong>mal economy should becovered at least by a ‘minimum floor’ as containedin the 1998 Declaration of Principles and Rightsat <strong>Work</strong>. This Declaration established the applicationof core human rights to the arena of labour orwork; included in its provisions are calls <strong>for</strong> no useof <strong>for</strong>ced or child labour, no discrimination, andthe freedom of voice, organisation and bargaining.<strong>The</strong> Declaration also constitutes the foundations<strong>for</strong> 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 <strong>for</strong> 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. <strong>The</strong> 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. En<strong>for</strong>cementof such rights and provisions should berequired <strong>for</strong> all workers in the in<strong>for</strong>mal economy,independently of the size or <strong>for</strong>m of the economicunit in which they work. This would justify rein-152

<strong>for</strong>cement and, eventually, a redesign of labourinspection institutions.For in<strong>for</strong>mal workers outside <strong>for</strong>mal enterprises,full compliance of labour rights as establishedby national legislation needs to be en<strong>for</strong>ced. Thisshould go beyond the minimum floor, requiringeventually re<strong>for</strong>ms to the labour legislation <strong>for</strong> thefacilitation of compliance. Advances in this directionwould lead to full achievement of the Decent<strong>Work</strong> objectives.Un<strong>for</strong>tunately, 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. <strong>The</strong>re is need <strong>for</strong> additional policies todetermine if an employment relation exists and toclarify the responsibilities <strong>for</strong> compliance amongthose enterprises involving multi-parties. 52 <strong>The</strong>latter kinds of arrangements are continuing toexpand and are serving to decentralise the laboursystem in ef<strong>for</strong>ts, 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 <strong>for</strong> obligationsto workers. This essential first step in movingtowards compliance should be followed by appropriatelyadapting labour laws and the labourinspection system. 53<strong>The</strong> situation of workers in in<strong>for</strong>mal enterprisesposes additional challenges, since the capacity ofmany in<strong>for</strong>mal 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 <strong>for</strong>increasing compliance and promoting progressiveen<strong>for</strong>cement without legally adopting a dualsystem. An expanded minimum floor should, however,be en<strong>for</strong>ced even in these enterprises, sincecost concern cannot be accepted as an argument<strong>for</strong> 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 <strong>for</strong> others). Included in thiscategory are significant numbers of workers. <strong>Work</strong>might involve producing <strong>for</strong> intermediaries insubcontracting arrangements as well as selling orproducing directly <strong>for</strong> employers. <strong>The</strong>re 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 in<strong>for</strong>maleconomy. <strong>The</strong> convention (177) and a recommendation(184) adopted by the International153

Labour Conference in 1996, in recognition andsupport of home workers, calls <strong>for</strong> their equaltreatment with other workers: in particular, itcalls <strong>for</strong> freedom of association in organisationsof their own choosing and protection againstdiscrimination, minimum age <strong>for</strong> work, remunerationand protection in safety and health at work,social security and maternity. This minimum floor<strong>for</strong> home workers, mandated in the 1996 Conventionand Recommendation, coincides with whatis proposed above <strong>for</strong> all workers of the in<strong>for</strong>maleconomy, with the addition of social protectionand maternity.Business and labour rights at work<strong>The</strong>re are, in addition, a proportion of independenthome workers that per<strong>for</strong>m 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 in<strong>for</strong>mal economy. <strong>The</strong>ir identity is unclear,since they are both employers and workers, andtheir ways of organising should be open to theirpreferences. <strong>The</strong>ir 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.<strong>The</strong> International Labour Conference, in its 2007discussion on Sustainable Enterprises, 56 arguesthat ‘emphasis needs to be placed on the transitionof in<strong>for</strong>mal economy operators to the <strong>for</strong>maleconomy and ensuring that laws and regulationscover all enterprises and workers.’ <strong>The</strong> 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 in<strong>for</strong>mality, corruption and efficiency costs.’Well-designed transparent, accountable and wellcommunicatedregulations, including those thatuphold labour and environmental standards, aregood <strong>for</strong> markets and society. <strong>The</strong>y facilitate <strong>for</strong>malisationand boost systemic competitiveness.Regulatory re<strong>for</strong>m and the removal of businesscontracts should not undermine such standards.Social protection <strong>for</strong> in<strong>for</strong>mal workers<strong>The</strong> extension of social protection — health andpensions, as well as maternity — to in<strong>for</strong>malworkers 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 <strong>for</strong> the provisionof protection need to be evaluated. Indiarecently introduced a bill to regulate employmentand service conditions of unorganised workersand to provide <strong>for</strong> 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 in<strong>for</strong>mality in Latin America, 59the World Bank fully supports this change <strong>for</strong>both health and pension coverage. In the caseof health care, shocks that go uncovered imposesignificant costs to society. <strong>The</strong>re<strong>for</strong>e, there isa case <strong>for</strong> 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 <strong>for</strong> those who receive other pensions,thus reducing the need <strong>for</strong> public fundsand providing incentives to contribute to thesystem. In fact, the resulting model establishesa mid-way <strong>for</strong> non-contributory pensions, since itis universal <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> 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.<strong>The</strong> Role and Limitations of Voluntary Codes ofConductMultinational corporations and non-governmentorganisations have also taken <strong>for</strong>ward 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 <strong>for</strong>motivating improvements in the per<strong>for</strong>manceof 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 <strong>for</strong>ced labour, child labour, and discriminationin the workplace. <strong>The</strong>se organisations take155

different paths to en<strong>for</strong>cement, with some takinga centralised approach in overseeing and controllingpayments <strong>for</strong> monitoring, while others followa ‘consulting firm approach’ which allows companiesto choose and pay <strong>for</strong> their own monitors.<strong>The</strong>re 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?<strong>The</strong> 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. <strong>The</strong>re are tradeoffsinvolved, but there are also strong complementarities.<strong>The</strong> experience accumulated duringthe last decades could contribute to enhance thelatter effects, without ignoring the lessons learntto diminish unnecessary costs introduced by illdesignedpolicies. Security provides incentives<strong>for</strong> learning and innovation and both are requirements<strong>for</strong> growth and employment creation. <strong>The</strong>reis 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 prescription<strong>for</strong> flexibility, through the introduction of temporaryor atypical labour contracts, has serious drawbacks, affecting more than the lives of workersand their families. <strong>The</strong> 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. <strong>The</strong> erosion of the permanent contractcan be changed by going back to a modifiedversion; <strong>for</strong> example, by introducing longer trialperiods, reducing or increasing the severancepayments in case of termination of employment,etc. <strong>The</strong> availability of temporary and fixed-termcontracts will still be needed, particularly to openwider opportunities <strong>for</strong> those more affected byunemployment and <strong>for</strong> 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.<strong>The</strong> legal recognition of hidden employmentrelations or those without contracts will provideidentity to the affected workers and constituteenabling conditions <strong>for</strong> them to exercise theirlabour rights, particularly labour and socialprotection. At the same time, the <strong>for</strong>malisation ofemployment relations, even if gradually achieved,opens opportunities and provides incentives <strong>for</strong>improving 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. <strong>The</strong>right of association is also conducive to developingalliances between producers, thus rein<strong>for</strong>cingtheir voice and their ability to negotiate with localauthorities; it is also enabling <strong>for</strong> potential pricereduction of their inputs and <strong>for</strong> easier accessto concentrated markets. This also representsa major cultural change since it means shiftingfrom individualistic to collective behaviour. <strong>The</strong>rehas 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 in<strong>for</strong>mal economy, <strong>for</strong>example). 61ConclusionsThis review of development strategies and ofinternational labour standard setting showsthat there is a growing political understandingof the fundamental importance of employmentand work conditions <strong>for</strong> the fight against poverty.It also shows that there is a new departure inthe international community regarding labourrights and that work in the in<strong>for</strong>mal economynow is addressed. <strong>The</strong> three elements of this newdeparture — Fundamental Principles and Rightsat <strong>Work</strong>, the Decent <strong>Work</strong> Agenda and the rightsin the in<strong>for</strong>mal economy — are now supported bya broad coalition of governments, internationalorganisations, trade unions and employers andnon-governmental organisations.5. <strong>The</strong> economics ofin<strong>for</strong>mality and the debateon Labour Regulations<strong>The</strong>re 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. <strong>The</strong> 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 per<strong>for</strong>mance.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 <strong>for</strong> 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. <strong>The</strong>se 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.<strong>The</strong> 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 <strong>for</strong>m or another, obstacles to businessoperation, and hence, to productivity and prosperity.<strong>The</strong>se 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 <strong>for</strong>msof regulation in hindering the growth of firms. Thisquestion was addressed recently in an ICA survey.<strong>The</strong> 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. <strong>The</strong> 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 <strong>for</strong> 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. <strong>The</strong>re<strong>for</strong>e, and notwithstanding theiroverall limited relevance to business growth, theperception of the relevance of labour regulationsto business growth increases with the level ofdevelopment. <strong>The</strong>re<strong>for</strong>e, 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 centralin<strong>for</strong>mation base <strong>for</strong> policymakers and investorsalike. For this reason, our working group <strong>for</strong>Chapter 3 of this report has made review of themethodology of the DBS and the debate on theDBS the basis <strong>for</strong> policy recommendations.<strong>The</strong> 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.<strong>The</strong> ‘difficulty-of-hiring’ index measuresrestrictions on part-time and temporary contracts,together with the wages of trainees relative toworker value-added. <strong>The</strong> rigidity of hours measuresthe various restrictions around weekend, Sundaypublic holiday work, as well as limits on overtime,and so on. <strong>The</strong> ‘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 <strong>for</strong> 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.<strong>The</strong> Consequences of Labour Market Regulation<strong>The</strong>re are two important questions on policy issuesthat are of relevance to the debate aroundlabour regulation and worker protection. <strong>The</strong>first revolves around the consequences of labourregulation, in all its different manifestations, <strong>for</strong>economic growth: do we find evidence that labourmarket regulation hinders economic growth? <strong>The</strong>second issue is related, but more concerned withthe specific outcomes in the labour market, as aconsequence of this regulatory regime: does theevidence suggest <strong>for</strong> example, that higher levelsof labour regulation are correlated with higherrates of youth unemployment, larger in<strong>for</strong>malemployment 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 ‘<strong>The</strong>re 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.<strong>The</strong> 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 in<strong>for</strong>mal economy, higherin<strong>for</strong>mal 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 in<strong>for</strong>mal 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 in<strong>for</strong>mal 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 <strong>for</strong> 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, <strong>for</strong> 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 <strong>for</strong> every one standard deviation increasein an economy’s (composite) labour regulation index,this estimate <strong>for</strong> product market regulationsis over four times as large, at 1.86 percentagepoints. <strong>The</strong> 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 <strong>for</strong> 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.<strong>The</strong> ILO in fact argues that ‘the narrow andlimited methodological foundations <strong>for</strong> the EWI areinsufficient and possibly damaging as a guide topolicy <strong>for</strong>mulation.’ 66On the general aspect of regulation and in<strong>for</strong>malitysome studies focus on the voluntary aspectsof in<strong>for</strong>mality. 67 By avoiding taxes and regulatoryobligations, it is believed that in<strong>for</strong>mal companiesgain a substantial cost advantage that allowsthem to stay in business despite their small scaleand low productivity. More productive, <strong>for</strong>malcompanies are prevented from gaining marketshare. <strong>The</strong> result is slower economic growth andjob creation. 68<strong>The</strong> International Organisation of Employers(IOE) 69 describes the in<strong>for</strong>mal economy as‘largely negative,’ trapping individuals and enterprisesin a spiral of low productivity and poverty.For governments it entails the loss of revenue,‘and <strong>for</strong> workers it can mean inferior workingconditions, job insecurity, lack of access to statebenefits and social security.’<strong>The</strong> Impact of Labour Market Regulation: CountryStudiesA recent OECD 70 study found that making firingmore expensive <strong>for</strong> older workers will protectthem against dismissal while severance paymentsallow workers to smooth consumption duringunemployment periods. <strong>The</strong>y also increase theincentive <strong>for</strong> 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 in<strong>for</strong>mality. <strong>The</strong>y increase costsby <strong>for</strong>cing firms to keep non-productive workersin the firm, or to remain overstaffed <strong>for</strong> significantperiods of time. Thus it makes it more difficult<strong>for</strong> 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 <strong>for</strong>mal labourdemand and larger in<strong>for</strong>mality. 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 with<strong>for</strong>mal labour demand. 73• Kugler et al. 74 found that in Spain a reductionin payroll taxes and firing costs increased thedemand <strong>for</strong> 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 <strong>for</strong>disabled workers, precisely the opposite effectthat the law intended. 75<strong>The</strong> 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 ILO<strong>for</strong> India, must be part of any attempt at encouragingsecure employment creation and reducingpoverty levels.Towards a More NuancedUnderstanding of Labour Regulations<strong>The</strong> 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 re<strong>for</strong>ming thelabour legislative environment at the individualcountry level.Some caveats need to be introduced here if amore in<strong>for</strong>med debate around labour regulationand policy re<strong>for</strong>m in the developing world is toensue. <strong>The</strong>y may help to ensure progress in dealingappropriately and intelligibly with the labourmarket in the event that policy re<strong>for</strong>m packagesare tabled at country level. Perhaps economists,who are often at the <strong>for</strong>efront of such re<strong>for</strong>mprocesses, should understand the most importantof these cautionary notes. <strong>The</strong> caveat is thatlabour regulation as a re<strong>for</strong>m issue, is not to beviewed as a binary variable. <strong>The</strong> choice withinany policy re<strong>for</strong>m 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 re<strong>for</strong>mat all. <strong>The</strong> 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 In<strong>for</strong>mality, Loayza et al.bring a similar message. <strong>The</strong>y 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 be<strong>for</strong>e 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), <strong>for</strong> example, it is captured underthe collective rights index. However, <strong>for</strong> 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. <strong>The</strong> 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 Regulations<strong>The</strong> standard measures of regulation found in theDBS are, as noted above, numeric conversions ofcountry-level legislative provisions. <strong>The</strong> 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,<strong>for</strong> example, dispute resolution bodies). Legislativeprovisions are more often than not, subject tointerpretation by the relevant legal authority. Howjudges, <strong>for</strong> 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.<strong>The</strong> simultaneous impact of these variables wouldthere<strong>for</strong>e then lead to a specific interpretation ofthe law. <strong>The</strong> outcome, as a consequence of thesefactors, may be an over-regulation or indeedunder-regulation of specific labour market activitiessuch as reasons <strong>for</strong> 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.<strong>The</strong> 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.<strong>The</strong>re 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.<strong>The</strong> 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.<strong>The</strong> Institutional Environment<strong>The</strong> extent to which the institutional environmentrein<strong>for</strong>ces or hinders legislativeprovisions is often under-appreciated in debatesaround labour market regulation. In most economies,institutions govern and manage the labourmarket. <strong>The</strong>se 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. <strong>The</strong>se institutions will be differentiallyresourced in human and physical terms; will yieldcontrasting per<strong>for</strong>mances 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 en<strong>for</strong>cement 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. <strong>The</strong>rule 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 <strong>for</strong> 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 condition<strong>for</strong> an optimally functioning labour market.Heterogeneity in the Regulatory ArchitecturePerhaps one of the key elements of this debatearound labour regulation, growth and in<strong>for</strong>malityis 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 <strong>for</strong> 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. <strong>The</strong> 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 rein<strong>for</strong>ce 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 <strong>for</strong> the workingpoor. Thus, the debate on labour regulationsshould focus on what is the right balancebetween security, supportive structures, andflexibility <strong>for</strong> firms in both the <strong>for</strong>mal andin<strong>for</strong>mal economy.165

6. Principles and practicesof Labour Rights and LegalEmpowerment<strong>The</strong> task of the <strong>Commission</strong> <strong>for</strong> 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. <strong>The</strong>re is - in this arena as inother arenas of legal empowerment - no quick fix<strong>for</strong> shifting from in<strong>for</strong>mal and low productive employmentto decent and productive employment.<strong>The</strong>re is no single solution, which can be appliedin all countries. A strategy <strong>for</strong> 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 <strong>for</strong> any re<strong>for</strong>m strategyin this field and they are introduced in Section6.1. <strong>The</strong>re are many lessons to learn from recentnational and local initiatives <strong>for</strong> 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.<strong>The</strong> basic principles <strong>for</strong> inclusivere<strong>for</strong>mBoth promotion of change - and management ofchange<strong>The</strong> most successful countries, in terms of productiveemployment, are using a mix of economicand social policies, implemented with flexibilityand designed <strong>for</strong> 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.<strong>The</strong> 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 rights<strong>The</strong> report from World <strong>Commission</strong> on the SocialDimension of Globalisation argued that in<strong>for</strong>malactivities should be trans<strong>for</strong>med and integratedinto a growing <strong>for</strong>mal sector that provides decentjobs, incomes and protection. A balanced approachto upgrading the in<strong>for</strong>mal economy wouldrequire the systematic extension of propertyrights, accompanied by similar action on corelabour rights <strong>for</strong> all persons engaged in in<strong>for</strong>malactivities. <strong>The</strong> report argues that such a trans<strong>for</strong>mationis 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 exibility<strong>The</strong> World Development Report 2006, entitledEquity and Development, recognises the intrinsicvalue of equity and makes the case <strong>for</strong> investingin people, expanding access to justice, land, andinfrastructure, and promoting fairness in markets.<strong>The</strong> report asks whether labour market institutionscan be designed to be pro-growth and pro-166

equity. <strong>The</strong> key to success is to link employmentcreation with protection. This requires buildingbroad societal consensus <strong>for</strong> coordinated re<strong>for</strong>msacross a variety of labour market institutions andprovision <strong>for</strong> 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 re<strong>for</strong>m practice<strong>The</strong>re are lessons to be learned from countrieswhich recently have introduced policies aimedat empowering workers and entrepreneurs in thein<strong>for</strong>mal economy.Legal identityLegal identity, as worker or entrepreneur, isof fundamental importance <strong>for</strong> 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. <strong>The</strong> 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. <strong>The</strong>identity there<strong>for</strong>e comes from membership in atrade union (See Case 3).Voice and representation<strong>The</strong> right to voice and representation is as importantas legal identity. Throughout the world, tradeunions are launching and supporting campaigns<strong>for</strong> the representation and protection of in<strong>for</strong>malworkers. For example, the Inter-American RegionalOrganisation of <strong>Work</strong>ers has issued guidelinesand manuals to enhance organisation and representationof workers in the in<strong>for</strong>mal economy. <strong>The</strong>Alliance <strong>for</strong> Zambia In<strong>for</strong>mal Economy Associationswas launched in 2002 in partnership withthe Zambia Congress of Trade Unions. 77<strong>The</strong> Self-Employed Women’s Association (SEWA),India, is the well-known and very promising tradeunion of women in<strong>for</strong>mal 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 o<strong>for</strong>ganisations of in<strong>for</strong>mal workers which individuallyand collectively are gaining voice and representationin relevant policymaking <strong>for</strong>a.In Ghana, the ILO’s Decent <strong>Work</strong> programme hasworked with local government to promote socialdialogue by creating District Assembly Sub-Committeeson Productive and Gainful Employmentthat include representatives of in<strong>for</strong>mal enterprises,in<strong>for</strong>mal 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

<strong>The</strong> Homeless People’s Federation Philippines,HPFP, participates in various municipal and village-leveldevelopment councils, including a fewlocal housing councils (See Case 5).Social protection re<strong>for</strong>mRe<strong>for</strong>m of the social protection system is astrategic way to empower people. In India in2002, the National <strong>Commission</strong> on Labour proposeda national bill <strong>for</strong> workers in the unorganised(in<strong>for</strong>mal) sector with the objective of regulating‘the employment and conditions of serviceof unorganised sector workers and to provide <strong>for</strong>their safety, social security, health and welfare’.<strong>The</strong> bill provides <strong>for</strong> the establishment of <strong>Work</strong>ers’Facilitation Centres to support and assistunorganised workers, provides <strong>for</strong> the setting upin the states of an Unorganised Sector <strong>Work</strong>ers’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 <strong>Commission</strong>on Enterprises in the Unorganised Sector(NCEUS) has drafted and proposed two nationalbills on the conditions of work and social securityof workers in the unorganised (in<strong>for</strong>mal) sector:one <strong>for</strong> agricultural workers, the other <strong>for</strong> non-agriculturalworkers. Both bills incorporate provisions<strong>for</strong> regulating the conditions of work andsocial security of in<strong>for</strong>mal workers. <strong>The</strong> 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 in<strong>for</strong>mal workers are from Ghanaand the Philippines. In Ghana, with joint supportfrom the government and ILO’s Decent <strong>Work</strong> 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 ef<strong>for</strong>ts in Mexico to extend social securitycoverage to the in<strong>for</strong>mal 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 re<strong>for</strong>ms to improvethe quality of labour market institutions. In2006, Chile introduced a re<strong>for</strong>m in subcontractingprocedures to include more workers in <strong>for</strong>mallabour rights arrangements. <strong>The</strong> objective is topromote subcontracting, while at the same timeensuring compliance with all the labour obligations.<strong>The</strong> law introduced a <strong>for</strong>mal 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 re<strong>for</strong>ms 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 <strong>for</strong> an increase in theuse of fixed-term contracts, then by reintroducingconstraints in the use of temporary contractswhile easing employment protection legislation<strong>for</strong> 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 <strong>for</strong> this is straight<strong>for</strong>ward — they cannotaf<strong>for</strong>d to pay the legal fees. In Tajikistan, theUK has helped to solve this problem by supportingThird Party Arbitration Courts. <strong>The</strong>se 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 <strong>for</strong>mal 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. <strong>The</strong>approach has also been used successfully in Russia,Kyrgyzstan, Moldova, Ukraine and Georgia(See Case 10).Improved business environment<strong>The</strong> 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 the<strong>for</strong>mal economy (See Chapter 4 <strong>for</strong> examples).Simplifi cation of contracting procedures<strong>The</strong> 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 in<strong>for</strong>medabout 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).<strong>The</strong>re are also lessons to be learned from countriesthat have recently introduced policies aimedat empowering workers and entrepreneurs in thein<strong>for</strong>mal economy through business rights (SeeChapter 4).169

Conclusions <strong>for</strong> national strategies <strong>for</strong>legal empowerment<strong>The</strong> 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).<strong>The</strong>se 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).<strong>The</strong>se and many other illustrations show thatre<strong>for</strong>m is under way. Other countries can use theexamples and principles presented can be usedby other countries in their ef<strong>for</strong>t to design strategies<strong>for</strong> Legal Empowerment of the Poor. <strong>The</strong>reis a need <strong>for</strong> global action to convert these ‘goodnews’ approaches into a global movement.7. Towards a new socialcontract: Policiesand Processes <strong>for</strong> LegalEmpowermentPolicy recommendationsBuilding on an emerging global social contract— the broad support <strong>for</strong> the Fundamental Principlesand Rights at <strong>Work</strong> and the Decent <strong>Work</strong>agenda — we recommend that the <strong>Commission</strong>endorse the following priorities <strong>for</strong> legal empowermentof those living and working in poverty:• Strengthen identity, voice, representation anddialogue. <strong>The</strong> 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. <strong>The</strong>re is a particular need toensure that workers and entrepreneurs in thein<strong>for</strong>mal economy have the right to freedom ofassociation through organisations of their ownchoosing and to collective bargaining, particularlywomen and youth who are over-representedin the in<strong>for</strong>mal economy. Emphasis shouldbe placed on building up representativeorganisations of the working poor, particularlywage workers and self-employed operating inthe in<strong>for</strong>mal economy, to have voice, representationand dialogue with <strong>for</strong>mal economyoperators and with public authorities in orderto defend their rights.• Strengthen the quality of labour regulationand the effective en<strong>for</strong>cement of fundamentalprinciples and rights at work. <strong>The</strong> 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 <strong>for</strong> the in<strong>for</strong>mal economy. <strong>The</strong>aim should be that every country strives <strong>for</strong> aminimum floor <strong>for</strong> empowerment that is realisticand en<strong>for</strong>ceable, 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 <strong>for</strong> thein<strong>for</strong>mal economy that upholds the Declarationon Fundamental Principles and Rightsat <strong>Work</strong> 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 <strong>for</strong> empowerment beyond whichprogressive, rather than full, compliance isexpected. That is, we propose to build upprogressively from this basic floor throughinstitutional approaches that are feasible even<strong>for</strong> production units with limited capacity <strong>for</strong>compliance. 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 <strong>for</strong> decentwork and to opportunities <strong>for</strong> 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 <strong>for</strong> educationand capacity building as well as measures <strong>for</strong>combating discrimination help increase legalrecognition of the poor and bring them closerto such economic opportunities. <strong>The</strong> reorganisationof production and distribution throughsub-contracting and outsourcing is associatedwith the expansion of in<strong>for</strong>mal employment inthe supply chains. Private and public procurementrepresents, there<strong>for</strong>e, 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 there<strong>for</strong>e a key mechanism to legally empowerthe poor. Often solutions to poverty andin<strong>for</strong>mality can be found outside as well aswithin the in<strong>for</strong>mal economy. Policies to createand provide improved access of the poorto new opportunities <strong>for</strong> full, productive andfreely chosen employment, as promoted in ILOConvention 122, can provide a key mechanism<strong>for</strong> empowering the poor in the in<strong>for</strong>maleconomy and facilitating their transition to<strong>for</strong>mality.• Support inclusive social protection. <strong>The</strong>recognition 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. <strong>The</strong>se 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 <strong>for</strong> 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 in<strong>for</strong>mal sector workers.78 <strong>The</strong> starting point <strong>for</strong> 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 <strong>Work</strong> 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 <strong>Work</strong> in the PRSP work. Specificcapacity-building ef<strong>for</strong>ts have in particularbeen made in Bolivia, Brazil, Ecuador, Ethiopia,Honduras, Paraguay, Peru, Uruguay andYemen to influence Poverty Reduction Strategies(PRSs) at the <strong>for</strong>mulation 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 <strong>for</strong>mainstreaming 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 <strong>for</strong> indigenouspeople. <strong>The</strong> ILO Indigenous and Tribal PeoplesConvention provides guidance and strategies<strong>for</strong> legal empowerment with respect not onlyto labour rights and protection of employment,but also with respect to land and propertyrights. Special ef<strong>for</strong>ts <strong>for</strong> 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. <strong>The</strong>research 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 the<strong>Commission</strong> consider the following policyprocesses and institutional champions <strong>for</strong> theimplementation of its recommendations on legalempowerment through labour rights.• Promote national development framework <strong>for</strong>legal empowerment and decent work. Nationalgovernments and parliaments are responsible<strong>for</strong> labour rights and social conditions andbear a major responsibility <strong>for</strong> the re<strong>for</strong>m andeffectiveness of national labour market institutions.<strong>The</strong> Decent <strong>Work</strong> 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. <strong>The</strong>mix 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.<strong>The</strong> intrinsic value of the Decent <strong>Work</strong> 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 <strong>for</strong>moving people out of poverty. Decent <strong>Work</strong>Country Programmes (DWCPs) are the maintool <strong>for</strong> driving this re<strong>for</strong>m process <strong>for</strong>ward 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 re<strong>for</strong>m programmes. Re<strong>for</strong>m strategiesto include employment and labour rightswill need to be adapted to regional and localpriorities. <strong>The</strong>re<strong>for</strong>e the Regional DevelopmentBanks, Political Organisations and UN organisationscan be tapped as institutional champions<strong>for</strong> the re<strong>for</strong>m 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 strategy<strong>for</strong> good governance of markets, to supportnational re<strong>for</strong>m processes. <strong>The</strong>y 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 <strong>for</strong> decent work. Two ofthe main global actors in the field of work anddevelopment, the ILO and the World Bank,have both contributed by developing instruments<strong>for</strong> re<strong>for</strong>m, the World Bank’s PRSs andthe ILO DWCPs. A key to a successful re<strong>for</strong>mprocess at the national level is better policycoherence at the global level. Legal empowermentand re<strong>for</strong>m of labour rights require closeco-operation between governments, employersand workers, nationally and locally. <strong>The</strong>ywill need support in many <strong>for</strong>ms from theleading global institutions to build capacity.<strong>The</strong> common goal should be to make labourmarkets work better — more efficient andmore equitable — <strong>for</strong> both workers and smallbusinesses.• Support voluntary initiatives <strong>for</strong> legal empowermentthrough labour rights. Codes of conductconstitute a strategy <strong>for</strong> motivating improvementsof the per<strong>for</strong>mance 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 <strong>for</strong>ced labour, childlabour and discrimination in the work place.<strong>The</strong>se 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. <strong>The</strong> costs and benefits of undertakingre<strong>for</strong>ming legal empowerment throughlabour rights and decent work need to beaddressed. <strong>The</strong> first basic question is what arethe expected benefits of such re<strong>for</strong>m on productivityand thereby on prosperity. <strong>The</strong> mainpurpose of re<strong>for</strong>m is to improve the qualityof labour market institutions and thereby thefunctioning of labour markets. Such re<strong>for</strong>ms,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 <strong>for</strong> sustainablesocieties, an ambitious re<strong>for</strong>m programmeintegrating Legal Empowerment of the Poorshould be seen as a necessity, not a luxury.<strong>The</strong> second basic question is the cost of startingand sustaining the re<strong>for</strong>m process and theaf<strong>for</strong>dability of related policy initiatives. <strong>The</strong>reis no simple answer to that question. <strong>The</strong>rewill be initial costs that have to be fundedmainly through restructuring of public expenditureprogrammes. <strong>The</strong> amount of costs andthe pay-back in the <strong>for</strong>m of higher quality oflabour market institutions will probably varybetween states, depending on policy designand the success of the re<strong>for</strong>m process. A successfulstrategy <strong>for</strong> integrating workers in thein<strong>for</strong>mal economy — through, <strong>for</strong> 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 <strong>for</strong> legalempowerment. 80 Labour <strong>for</strong>ce and othereconomic statistics need to be improved tofully capture the size and contribution of thein<strong>for</strong>mal economy. Although estimates of thesize and (less so) contribution of the in<strong>for</strong>maleconomy are available in a growing number ofcountries, all <strong>for</strong>ms of in<strong>for</strong>mal employment- especially women’s home-based productionand disguised wage employment - are not yetfully visible in the official national statisticsused to in<strong>for</strong>mal national policies. <strong>The</strong> legalempowerment strategy must, there<strong>for</strong>e,include ef<strong>for</strong>ts to make visible all <strong>for</strong>ms of in<strong>for</strong>malemployment. 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 <strong>for</strong>ce and economic statisticsbe a priority goal <strong>for</strong> national statisticalservices and be incorporated into the MillenniumDevelopment Indicators.174

Towards a New Social Contract.<strong>The</strong>re is a tripartite consensus from employer,worker and government representatives on theneed <strong>for</strong> a <strong>for</strong>mal and effective legal systemwith guarantees <strong>for</strong> 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 <strong>for</strong> attracting investment, but also<strong>for</strong> generating certainty, and nurturing trust andfairness in society. 81 <strong>The</strong> growing recognition ofthe need <strong>for</strong> labour rights to catalyse employmentcreation in the in<strong>for</strong>mal economy, while protectingits workers, has now led to an emerging globalsocial contract, a broad agenda <strong>for</strong> re<strong>for</strong>m and<strong>for</strong> empowerment. Labour rights, business rights,property rights and business rights taken togethercan <strong>for</strong>m the basis of this new social contract.Our <strong>Work</strong>ing Group <strong>for</strong> 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 en<strong>for</strong>cement of fundamentalprinciples and rights at work.proposals are firmly based in the international humanrights tradition. Human rights are the basis<strong>for</strong> 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. <strong>The</strong> 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’ be<strong>for</strong>e a Global SocialContract in the title of this report to emphasisdevelopment, process and time horizons.- Support application of a minimum package oflabour rights <strong>for</strong> the in<strong>for</strong>mal economy.- Strengthen access to opportunities <strong>for</strong> decentwork and to opportunities <strong>for</strong> 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 Decent<strong>Work</strong> agenda as a Global Social Contract. Our175

Annex 1:Recent and current initiatives toimprove statistics on the in<strong>for</strong>maleconomyWhat is clear from the statistics presented inthis Report is that the in<strong>for</strong>mal economy isfar larger than most people recognise. However,the in<strong>for</strong>mal economy is still undercounted andundervalued in most countries. Few countries collectthe statistics needed to fully capture all <strong>for</strong>msof in<strong>for</strong>mal employment, both self-employmentand wage employment. Reflecting the assumptionsunderlying labour regulations and labour economics,- notably, the presumption of an explicit employer-employeerelationship — labour <strong>for</strong>ce andother economic statistics do not always reflect thefull range of work arrangements and employmentstatuses.To generate more accurate and comprehensive statisticson in<strong>for</strong>mal 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 <strong>for</strong>ests, 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 in<strong>for</strong>mal economy and the linkagesbetween in<strong>for</strong>mal employment and poverty. Morespecifically, improved labour-<strong>for</strong>ce statistics thatcapture all <strong>for</strong>ms of in<strong>for</strong>mal employment wouldserve to:• Increase the visibility of those who work in thein<strong>for</strong>mal economy, especially the least visibleand most vulnerable workers;• Advance understanding of the in<strong>for</strong>mal economy,including its contribution to economicgrowth and its links with poverty;• In<strong>for</strong>m the design of appropriate legal re<strong>for</strong>msand policies <strong>for</strong> the working poor in the in<strong>for</strong>maleconomy.Ideally, a unified framework <strong>for</strong> data collectionwould be developed — one that allows <strong>for</strong> 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 in<strong>for</strong>maleconomy. <strong>The</strong> 2002 International Labour Conferenceand the 2003 International Conference ofLabour Statisticians have endorsed an expandedstatistical definition of in<strong>for</strong>mal employment thatincludes self-employment in in<strong>for</strong>mal (small unregistered)enterprises and wage employment inin<strong>for</strong>mal (unprotected) jobs, <strong>The</strong> ILO Bureau ofStatistics, the International Expert Group on In<strong>for</strong>malSector Statistics (Delhi Group), and the globalnetwork Women in In<strong>for</strong>mal Employment: Globalisingand Organising (WIEGO) are jointly producinga manual on surveys of in<strong>for</strong>mal employmentso defined (<strong>for</strong>thcoming in 2008). <strong>The</strong> 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 <strong>for</strong>cedata. <strong>The</strong> System of National Accounts is currentlyrevising its chapter on measuring the in<strong>for</strong>mal sectorcontribution to GDP.<strong>The</strong> donor community should support these initiativesto improve labour <strong>for</strong>ce and economic statisticsand national governments should use theexpanded statistical definition and related statisticalmethods in their collection of labour <strong>for</strong>ce andother economic statistics.Annex 2:Country case experiencesCase 1:Extending Thailand’s labour lawthrough the Ministerial Regulation <strong>for</strong>home 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. <strong>The</strong>y receive contracts from an employer to produce,assemble, repair or process;2. <strong>The</strong>y work at a location that is not the establishmentof the employer;3. <strong>The</strong>y work to earn a wage;4. <strong>The</strong>y use all or part of raw materials or productioninstruments of the employer;5. <strong>The</strong>y 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 Philippines<strong>The</strong> Supreme Court in the Philippines, in landmarkdecisions, recognised an employer-employeerelationship in situations where this is ambiguous.<strong>The</strong> 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.’<strong>The</strong> Supreme Court insisted that, in the case oftransport operators, the owner of the public vehiclehas supervision and control over the driver.<strong>The</strong> management of the business is in the owner’shands. <strong>The</strong> 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. <strong>The</strong> 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 India<strong>The</strong>re are workers who would not be able to participatein a contributory, voluntary scheme, no matterhow well designed such schemes are. <strong>Work</strong>erswho 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. <strong>The</strong> funds raised from these levies, whichare Termed ‘welfare funds’, used on the welfare ofthe workers who produce the taxed products.India uses this system <strong>for</strong> the benefit of those whoproduce bidis (hand-rolled cigarettes), mine workers,cine workers and workers in the building industry.<strong>The</strong> Bidi <strong>Work</strong>ers Welfare Act (1976), <strong>for</strong> instance,provides the national labour legislation that taxesthe revenue generated by the sector (but not employers)to create a welfare fund administered bygovernment. <strong>The</strong>re 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 <strong>for</strong> 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. <strong>The</strong> welfare fund operates hospitals anddispensaries, awards scholarships and providesschool supplies and uni<strong>for</strong>ms. 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 <strong>for</strong> which the welfare fund pays half.<strong>The</strong> Life Insurance Corporation Insurance Schemesubsidises the other half. 85Welfare funds have also been set up also <strong>for</strong> 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 <strong>for</strong> registeringmanual workers and the supply of identity cards.It also provides <strong>for</strong> crèches to look after the babiesof women construction workers, a group accidentinsurance scheme, educational assistance <strong>for</strong> sonsor daughters of registered workers, assistance <strong>for</strong>marriage 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 <strong>for</strong> 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 — <strong>for</strong> 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 <strong>for</strong> garmentindustrial outworkers, many of whom are Muslim.<strong>The</strong>se organizing ef<strong>for</strong>ts have involved negotiationswith the Labour <strong>Commission</strong>er — as well asrallies in front of his office — to demand minimumwage, identity cards, and welfare schemes (childcare,health care, and school scholarships) <strong>for</strong> subcontractedgarment workers.In 1986, SEWA was able to get a minimum wage <strong>for</strong>garment 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 in<strong>for</strong>mation to try to compete inthe fast-changing local garment market. This hasincluded loans <strong>for</strong> 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 to<strong>for</strong>m 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 ef<strong>for</strong>ts 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 <strong>Work</strong> 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 <strong>for</strong> the growing global movement ofin<strong>for</strong>mal 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 <strong>for</strong> action by individual traders,traders’ associations, city governments, andinternational organisations including the United179

Nations, the ILO and the World Bank. <strong>The</strong> participantsalso called <strong>for</strong> 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. <strong>The</strong> aim of StreetNet isto promote the exchange of in<strong>for</strong>mation 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 in<strong>for</strong>malworkers; 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 in<strong>for</strong>mal economythat now includes local trade unions and othermembership-based organisations of in<strong>for</strong>mal workers,national and global trade union federations thathave begun organising in<strong>for</strong>mal workers, severalnational federations of workers’ education associations,the International Federation of <strong>Work</strong>ers’ 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 in<strong>for</strong>malworkers and to enlighten and influence policy debateson the in<strong>for</strong>mal economy.Case 5:Federation of urban poor participatingin governance<strong>The</strong> 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 <strong>for</strong> negotiations with the stateand, among other things, the realisation of new<strong>for</strong>ms 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, <strong>for</strong> 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. <strong>The</strong>y were created to encouragepeople’s participation in governance andthereby to promote transparency in all local governmenttransactions. <strong>The</strong> 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 <strong>for</strong> 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. <strong>The</strong> HPFP continues to receivesupport from career officials, some of whomendorse the officials.Show of numbers and a broad network: <strong>The</strong> 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. <strong>The</strong> federation hasused its international connections and its membershipin international groups (<strong>for</strong> example, theShack/Slum Dwellers International) to <strong>for</strong>ce 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 ef<strong>for</strong>ts: <strong>The</strong> HPFP has earned credibilitywith government and private organisationsthrough its self-help ef<strong>for</strong>ts 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 in<strong>for</strong>med 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 <strong>for</strong>mulae and unverifieddocuments. Building technical skills is there<strong>for</strong>ean important component of successful engagementwith the state. <strong>The</strong> HPFP makes it a point to sharein<strong>for</strong>mation and transfer their knowledge to a widerange of communities. 87Case 6:Legislative Initiatives <strong>for</strong> Unorganised<strong>Work</strong>ersTwo legal initiatives in India are described belowconcerning Unorganised <strong>Work</strong>ers. 88Unorganised Sector <strong>Work</strong>ers (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 <strong>Commission</strong>on Labour and submitted to Parliament in2002. This Bill has the objectives of regulating ‘theemployment and conditions of service of unorganisedsector workers and to provide <strong>for</strong> their safety,social security, health and welfare.’ 89 It defines aworker as ‘a person engaged in Scheduled Employmentwhether <strong>for</strong> any remuneration or otherwise.’(Some 122 occupations are listed as ScheduledEmployment.) <strong>The</strong> bill, furthermore, provides <strong>for</strong>the establishment of <strong>Work</strong>ers’ Facilitation Centresto support and assist unorganised workers, who:1) are responsible <strong>for</strong> registration of workers and<strong>for</strong> guidance on a range of issues, such as disputeresolution, self-help groups and schemes available<strong>for</strong> their benefit; 2) will maintain a register of workersand provide an identity card and social securitynumber and 3) will be responsible <strong>for</strong> <strong>for</strong>mulatingsafety and social security schemes, includinghealth and medical care, employment injury benefit,maternity benefit, old age pension and safetymeasures.Additionally, the bill provides <strong>for</strong> the setting up,at state level, of an Unorganised Sector <strong>Work</strong>ers’Welfare Fund, supported with funds from government,employers and registered workers. It alsosets out minimum conditions of service, includinghours of work and minimum wages.<strong>The</strong>re 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 compensation<strong>for</strong> injury on duty. (Source: Governmentof India, 2003)Unorganised Sector <strong>Work</strong>ers’ Social SecurityScheme, IndiaOver 90 percent of India’s workers are in the in<strong>for</strong>maleconomy (including agricultural workers),with little, if any, statutory social security. Most arecasual labourers, contract and piece-rate workersand self-employed own-account workers. <strong>The</strong> Governmentof India recently launched the UnorganisedSector <strong>Work</strong>ers’ Social Security Scheme on apilot basis in 50 districts. <strong>The</strong> scheme provides <strong>for</strong>three basic protections: old age pension, personalaccident insurance, and medical insurance. It iscompulsory <strong>for</strong> registered employees and voluntary<strong>for</strong> self-employed workers. <strong>Work</strong>ers contribute tothe scheme, as do employers. Where self-employedworkers join the scheme, they pay worker and employercontributions. Government also contributes.<strong>Work</strong>ers Facilitation Centres are being set up toassist workers (see above under Securing Rightsof In<strong>for</strong>mal <strong>Work</strong>ers). <strong>The</strong> scheme will be administeredthrough the already existing Employee ProvidentFund Organisation offices around the country(Source: Government of India, 2004).182

Case 7:Social security <strong>for</strong> 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.<strong>The</strong> Philippines Social Security System (SSS) offersa comprehensive range of cash benefits asinsurance <strong>for</strong> retirement, death, disability, maternity,sickness, old age, death and work-relatedinjuries. In 1995, it extended membership to thein<strong>for</strong>mal 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 in<strong>for</strong>mal economy. However,the scheme continues to have problems withcompliance, and workers often blame non-membershipon lack of time, lack of in<strong>for</strong>mation, lackof regular employment, cost of contributions, anddifficulties trying to contact SSS representatives.<strong>The</strong> 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 <strong>for</strong> householdsthat set their priorities <strong>for</strong> 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 in<strong>for</strong>mal economy through the‘Individually Paying Programme’ (IPP). In 2002,Phil-Health covered 54.6 million Filipinos, or 64percent of the country’s projected population <strong>for</strong>December 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 <strong>for</strong> 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 re<strong>for</strong>mthe 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 <strong>for</strong> maintaining the basiclivelihood, other connected social security standards,the materials <strong>for</strong> the basic needs of food,clothing and housing, and the expenditure on under-agechildren’s compulsory education.’ 91Funds <strong>for</strong> this purpose are included in the fiscalbudgets of the local people’s governments, whichdetermine the minimum living standard accordingto the cost necessary <strong>for</strong> maintaining the basiclivelihood of the local urbanites. Urban residentswith an average family income lower than the minimumliving standard can apply <strong>for</strong> the minimumliving allowance. Investigation of the family’s incomeshall be conducted be<strong>for</strong>e 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 <strong>for</strong> 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 <strong>for</strong> 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. <strong>The</strong> situation is such thatsome hiring firms are themselves creations of theprincipal firms.<strong>The</strong> 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 required<strong>for</strong> the providers of labour, and the deposit canbe used in cases of non-compliance and a timelimit of six months has been introduced <strong>for</strong> thecontracts.• In the case of subcontracting, provisions wereintroduced on responsibility <strong>for</strong> the labour obligations,which affect both subcontractors andthe main firms regarding responsibility <strong>for</strong> 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 <strong>for</strong> subcontractors in cases ofobligations still pending. In fact, the law trans<strong>for</strong>msthe 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 <strong>for</strong> new entrants and unemployedpersons (to encourage firms to hire them) and acontinued level of protection kept <strong>for</strong> permanentworkers (to avoid threatening the entire work<strong>for</strong>cewith 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 <strong>for</strong> permanentworkers untouched. <strong>The</strong>se contracts havelower dismissal costs and offer social securityrebates <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong> olderworkers, and measures to increase protectionof flexible fixed-term workers.<strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong> 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’per<strong>for</strong>mance. 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. 96<strong>The</strong> disadvantages of this measure must also benoted. <strong>The</strong>re is, <strong>for</strong> example, little incentive as aresult either <strong>for</strong> 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 re<strong>for</strong>m 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 ef<strong>for</strong>ts to changethe law were announced in March 2006 by PremierWen Jiabao in his annual speech at the NationalPeople’s Congress. <strong>The</strong> wide ranging economic re<strong>for</strong>mpackage 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. <strong>The</strong> State is now declared to haveobligations, good governance, better public institutions,protection clauses, contracts, regulationsand legal arbitrations. <strong>The</strong> re<strong>for</strong>m package indicatesthat the State will play a crucial role by rethinkingdevelopment strategies and having solidpolicies in place. <strong>The</strong> following features are themost important of the new labour initiatives:• Most industrial employees, including migrantworkers are covered;• Provisions are clarified <strong>for</strong> collective contractsthat apply to groups of workers and employersindustry-wide or within a given region;• <strong>The</strong> employer must account <strong>for</strong> any deviationfrom the labour standards imposed by law,which also includes a requirement <strong>for</strong> them toprovide written contracts;• <strong>The</strong> 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. <strong>The</strong>re are alsoprovisions within the law <strong>for</strong> damages and evencriminal liability in those cases where labourrights are grossly infringed. <strong>The</strong> 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’ be<strong>for</strong>e an employee is dismissed;• This proposed law regulates <strong>for</strong> 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 there<strong>for</strong>e are often unprotected;• If employers keep using a temporary employee<strong>for</strong> 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 <strong>for</strong> in the futureand severely hamper future job mobilitywith legal entanglements.To correct a predisposition in Chinese courts andamong labour arbitrators to exalt <strong>for</strong>m over substanceand facts, the proposed changes make thefacts and realities of the employment relationshipthe key. Employees would no longer be confrontedwith the dilemma of en<strong>for</strong>cing a contract wherethe employer has illegally withheld one.Case 12:Out-of-court dispute resolution as apractical tool <strong>for</strong> legal empowermentFor poor people around the world, getting accessto courts and legal support to protect their rightsis often impossible. In many cases, the reason <strong>for</strong>this is straight<strong>for</strong>ward — they cannot af<strong>for</strong>d to paythe legal fees. In Tajikistan, the UK has helped tosolve this problem by supporting Third Party ArbitrationCourts. <strong>The</strong>se 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 the<strong>for</strong>mal legal system, decisions are recognised byTajikistan’s official courts. This means that whereparties do not comply with a decision, the statecan step in to en<strong>for</strong>ce it.Third Party Arbitration Courts provide poor peoplewith a cheap, fair and accessible way of resolvingdisputes and protecting their rights. <strong>The</strong>y 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). <strong>The</strong> 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 <strong>for</strong> the in<strong>for</strong>mal 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 thein<strong>for</strong>mal sector. <strong>The</strong>re should also be improvedchannels of in<strong>for</strong>mation between government andthe in<strong>for</strong>mal sector so that the government wouldknow what products are available while those inthe in<strong>for</strong>mal 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 <strong>for</strong> 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 in<strong>for</strong>mal sector suppliers.• Establish effective control systems to ensurethat these affirmative actions do not compromisethe need <strong>for</strong> a reasonable price, goodquality and timeliness. 101<strong>The</strong> 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 in<strong>for</strong>medabout 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.<strong>The</strong> contract that the successful bidder has to signis basic and contains only essential elements, withsuperfluous or general content removed. <strong>The</strong> modelcontract used <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong> contractors’ managers, site supervisorsand <strong>for</strong>emen to improve technical management ofthe construction jobs to improve productivity; and3) ad hoc training <strong>for</strong> <strong>for</strong>emen 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 <strong>Work</strong>, ILO,1998.6 ‘Decent <strong>Work</strong> and the In<strong>for</strong>mal Economy,’ Report of the Director-General, International Labour Conference, ILO, Geneva, 2002.7 In 2003, the International Conference of Labour Statisticiansendorsed a statistical framework <strong>for</strong> measuring in<strong>for</strong>mal 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 in<strong>for</strong>mal employmentas the difference between total employment [estimated by labour <strong>for</strong>cesurveys or population censuses] and <strong>for</strong>mal employment [estimatedby enterprise surveys or economic censuses]) as well as earliersummaries of these analyses in Chen et al 2005. <strong>The</strong> 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 <strong>for</strong>ce data do not capture all <strong>for</strong>ms of in<strong>for</strong>malemployment <strong>for</strong> a variety of reasons. One reason is that some lawfulpaid activities are not declared to public authorities. <strong>The</strong> extent andcharacteristics of lawful but undeclared work differ widely betweencountries. A 2004 study <strong>for</strong> the European <strong>Commission</strong> found thatundeclared work represented as much as 20 percent of GDP in somesouthern and eastern European countries (‘Undeclared <strong>Work</strong> in anEnlarged Union’ 2004.) Of course, criminal activities are also notdeclared to public authorities. But the defi nition of the in<strong>for</strong>maleconomy used by the <strong>Commission</strong> and in this Report excludes criminalactivities.17 See, Hu, A., <strong>The</strong> Emergence of In<strong>for</strong>mal Sector and theDevelopment of In<strong>for</strong>mal 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 In<strong>for</strong>mal wage employment is comprised of employees ofin<strong>for</strong>mal enterprises as well as various types of in<strong>for</strong>mal wage workerswho work <strong>for</strong> <strong>for</strong>mal enterprises, households, or no fi xed employer.<strong>The</strong>se 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 <strong>The</strong>se 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, <strong>The</strong> Emergence of In<strong>for</strong>mal Sector and the Developmentof In<strong>for</strong>mal 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 <strong>for</strong>ce 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 <strong>for</strong>mal economy (e.g., indigenous and tribal peoples,rural workers, etc.) since the 1960s, these did not previously result ininternational policy conclusions on the in<strong>for</strong>malisation 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 <strong>for</strong>mer and to convert itsresponsibility into subsidiary. It also adapted the Labour Inspection tobe able to certify the degree of en<strong>for</strong>cement on line and up dated.54 See V. Tokman, “In<strong>for</strong>mality, 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 <strong>for</strong> improvingthe knowledge of micro-entrepreneurs on their obligations in Chile.Although ignorance cannot be claimed as an excuse <strong>for</strong> lack ofcompliance, there is need <strong>for</strong> support when levels of education are lowand access to costly professional services cannot be af<strong>for</strong>ded.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, ‘In<strong>for</strong>mality: Exit and Exclusion’, Washington , 2007.60 <strong>The</strong> public funds involved are the highest in Bolivia (1,2percentof GNP) and are estimated <strong>for</strong> 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 <strong>The</strong> current, dominant rubric <strong>for</strong> 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. <strong>The</strong>se 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 <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong> thisstandard questionnaire). <strong>The</strong> questionnaire covers senior manager’sperceptions of obstacles to growth and investment, as well asin<strong>for</strong>mation on fi rm per<strong>for</strong>mance. <strong>The</strong> 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). <strong>The</strong> Doing Business Survey (DBS) has beenongoing since 2004, and in the most recent round in 2007, coveredclose to 180 countries. <strong>The</strong> DBS deals with issues such as contracten<strong>for</strong>cement; property rights regulation; business licensing and ofparticular interest to us here — labour market regulation. <strong>The</strong> 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 (<strong>for</strong>thcoming).64 Botero et al (2004) undertook a seminal study on the impact oflabour regulation around the world. <strong>The</strong> data covers 85 countries andis very deliberate in its construction of indices of labour regulationranging from, <strong>for</strong> example, laws on overtime and part-time work tothose on dismissals, notice periods and the right to strike activity andcollective bargaining. <strong>The</strong> in<strong>for</strong>mation is representative of countrylevelin<strong>for</strong>mation <strong>for</strong> the late 1990s, and in most cases refl ects data<strong>for</strong> 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 ‘<strong>The</strong> United Nations and Re<strong>for</strong>m’ 300thSession Geneva, November 2007 GB.300/4/167 Maloney 2003.68 McKinesey Quarterly, ‘<strong>The</strong> hidden dangers of the in<strong>for</strong>maleconomy.’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,’<strong>The</strong> in<strong>for</strong>mal economy: enabling transition to<strong>for</strong>malisation,’ Tripartite Interregional Symposium on the In<strong>for</strong>malEconomy, Geneva, November 2007.78 See also Convention 156, <strong>Work</strong>ers with Family Responsibilities.79 No. 177, 1966.80 See Annex 1 <strong>for</strong> 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, <strong>for</strong> example, pays a fi xed amount to theowner <strong>for</strong> the use of the vehicle, retaining the fares above this amount<strong>for</strong> 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 Labour<strong>Commission</strong>er’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 en<strong>for</strong>ced 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 India<strong>for</strong> workers in in<strong>for</strong>mal 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 be<strong>for</strong>e 2010’ in People’sDaily at : http//english.peopledaily.com.cn/200309/27/eng20030927_125088.shtml98 Wen Jiabao, Report of the <strong>Work</strong> 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: <strong>The</strong> Case of the Americans with Disability Act’Journal of Political Economy, Vol. 109, October 2001.Ahmed, S and S.Devarajan (2007) Labour <strong>Law</strong>s: To Create Good Jobs,Re<strong>for</strong>m Labour Regulations.Oped. Special to <strong>The</strong> Economic Times, India.Ahsan, A. and C. Pagés (2007) Are all Labour Regulations Equal?Assessing the Effects of Job Security. Labour Dispute andContract Labour <strong>Law</strong>s 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 <strong>Work</strong>ing Paper No. 3510. Washington, DC,World Bank, Feb.Amuedo-Dorantes, C., 2000. ‘<strong>Work</strong> 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 <strong>for</strong> theConference ‘Social Protection <strong>for</strong> 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 Per<strong>for</strong>mance? Evidence from India.’ QuarterlyJournal of Economics. February. 91-134.Bhorat, Haroon. 2007. ‘Debates on Labour Regulations as a Cost ofDoing Business.’ Paper prepared <strong>for</strong> the UN <strong>Commission</strong>on Legal Empowerment of the Poor.Blunch, Niels-Hugo, Sudharshan Canagarajah, and Dhushyanth Raju.2001. ‘<strong>The</strong> In<strong>for</strong>mal Sector Revisited: A Synthesis AcrossSpace and Time.’ Social Protection Discussion Paper No.0119. Washington, D.C. <strong>The</strong> World Bank, July.Botero, J.C., S.Djankov, R. La Porta, F. Lopez-de-Silanes and A. Shleifer.2004. ‘<strong>The</strong> Regulation of Labour.’ Quarterly Journal ofEconomics. November. 1339-1382.Carré, Françoise and Joaquin Herranz, Jr. 2002. ‘In<strong>for</strong>mal Jobs inIndustrialized ‘North’ Countries.’ Background paper <strong>for</strong>Women and Men in In<strong>for</strong>mal Employment: A StatisticalPicture.Charmes, J. 2000. ‘<strong>The</strong> Contribution of In<strong>for</strong>mal Sector to GDP inDeveloping Countries: Assessment, Estimates, Methods,Orientations <strong>for</strong> the Future.’ Paper presented at the FourthMeeting of the Expert Group on In<strong>for</strong>mal Sector Statistics(Delhi Group), Geneva, 28-30 August 2000.Chen, M. 2007. ‘Institutional Mismatch: Formal Institutions andIn<strong>for</strong>mal Realities.’ Paper prepared <strong>for</strong> the United Nations<strong>Commission</strong> of Legal Empowerment of the Poor. May 19._______. 2006a. ‘In<strong>for</strong>malisation of Labour Markets : Is Formalizationthe Answer ?’ Paper prepared <strong>for</strong> the United Nations<strong>Commission</strong> of Legal Empowerment of the Poor, November._______. 2006b. ‘Rethinking the In<strong>for</strong>mal Economy: Linkages with191

the Formal Economy and In<strong>for</strong>mal Regulatory Environment.’In B. Guha-Khasnobis, R. Kanbur, E. Ostrom (ed.), Linkingthe Formal and In<strong>for</strong>mal Economy: Concepts and Measures.Ox<strong>for</strong>d: Ox<strong>for</strong>d University Press._______. 2006c. ‘Empowerment of In<strong>for</strong>mal <strong>Work</strong>ers: Legal andOther Interventions.’ Paper prepared <strong>for</strong> the United Nations<strong>Commission</strong> of Legal Empowerment of the Poor. 15December._______. 2006d. ‘Empowerment of In<strong>for</strong>mal <strong>Work</strong>ers: Legal andOther Interventions.’ Paper prepared <strong>for</strong> the United Nations<strong>Commission</strong> of Legal Empowerment of the Poor. 16December.Chen, M., J. Vanek, F. Lund, J. Heintz, R. Jhabvala and C. Bonner. 2005.Progress of the World’s Women 2005: Women, <strong>Work</strong>, andPoverty. New York: UNIFEM.Coase, R.H. 1937. ‘<strong>The</strong> nature of the fi rm.’ Economica (NS), 4: 386-405. As cited in Deakin 2004.Cooney, Sean, Tim Lindsey, Richard Mitchell and Zhu, Ying. 2002. <strong>Law</strong>and Labour Market Regulation in South East Asia. London:Routledge.Deakin, Simon. 2004. ‘Renewing labour market institutions.’ ILO SocialPolicy Lectures. Geneva: International Institute <strong>for</strong> LabourStudies.Department <strong>for</strong> International Development (DFID). 2006. ‘EliminatingWorld Poverty: <strong>Making</strong> governance work <strong>for</strong> the poor.’ Awhite paper on international development. Presented toParliament by the Secretary <strong>for</strong> International Development._______. 2004. ‘Labour Standards and Poverty Reduction.’Deyo, F.C.1989. Beneath the Miracle: Labour Subordination in the NewAsian Industrialism. Berkeley: University of Cali<strong>for</strong>niaPress.Dolado, J.J., et al. (1999), ‘Los problemas del mercado de trabajoen España: Empleo, <strong>for</strong>mación y salarios mínimos.’Ekonomiaz, Vol. 43.Dolado, J., F. Kramarz, S. Machin, A. Manning, D. Margolis, and C.Teulings. 1998. ‘<strong>The</strong> Economic Impact of Minimum Wagesin Europe.’ Economic Policy 23: 319-372.Dolado, J. J., C. García-Serrano, and J.F. Jimeno. 2002. ‘DrawingLessons from the Boom of Temporary Jobs in Spain.’ <strong>The</strong>Economic Journal, Vol. 112, F270-F295.Elliot, K.A., and R. Freeman. 2003. ‘Can labour standards improveunder globalization?’ Institute <strong>for</strong> International Economics,Washington DC.Estrada, A., P. Garcia-Perea and M. Izquierdo. 2002. ‘Los fl ujos detrabajadores en Espana: el impacto del empleo temporal.’Documento de Trabajo 02026, Banco de Espana.Forteza, Alvaro and Martín Rama. 2001, ‘Labour Market Rigidity andthe Success of Economic Re<strong>for</strong>ms across more than 100Countries.’ mimeo. <strong>The</strong> World Bank: Washington DC.Freeman, Richard. 1996. ‘International labour standards and worldtrade: Friends or foes?’ In: Schott, Jeffrey J. (ed.), <strong>The</strong> WorldTrading System: Challenges Ahead. Washington: Institute<strong>for</strong> International Economics.Galli, Rossana and David Kucera. 2004. ‘Labour Standards andIn<strong>for</strong>mal Employment in Latin America.’ World DevelopmentVol. 32. (5)Gregg, P., and A. Manning. 1997. ‘Labour Market Regulation andUnemployment.’ In Snower, D. and de la Dehesa, G. (eds.),Unemployment Policy: Government Options <strong>for</strong> the LabourMarket. Cambridge: Cambridge University Press.Grierson, John, and Donald Mead. 1995. ‘Business Linkages inZimbabwe: Concept, Practice and Strategies.’ GEMINI<strong>Work</strong>ing Paper No. 50. PACT Publications, USA.Guell-Rotllan, G., and B. Petrongolo. 2000. ‘<strong>Work</strong>ers’ transition fromtemporary to permanent employment: <strong>The</strong> Spanish case.’Centre <strong>for</strong> Economic Per<strong>for</strong>mance, London School ofEconomics and Political Science, Discussion paper 438.Heckman, J and C. Pagés. 2003. ‘<strong>Law</strong> and Employment: Lessons fromLatin America and the Caribbean.’ NBER <strong>Work</strong>ing Paper10129 . www.nber.org/papers/w10129Heintz, J. 2006. ‘Growth, Employment, and Poverty Reduction.’Discussion paper prepared <strong>for</strong> the workshop ‘Growth,Employment, and Poverty Reduction,’ held at theDepartment <strong>for</strong> International Development, 17 March 2006._______. 2005. ‘<strong>The</strong> Growing In<strong>for</strong>mality of Labour Markets.’ Paperpresented at the UNRISD/CGGS Conference on Gender andSocial Policy, Marstrand, Sweden, 28-29 May._______, and Robert Pollin. 2003. ‘In<strong>for</strong>malisation, economic growth,and the challenge of creating viable labour standards indeveloping countries.’ PERI <strong>Work</strong>ing Paper, No. 60, Amherst,MA: Political Economy Research Institute.Heintz, J. 2002. ‘Global Labour Standards: their impact andimplementation.’ PERI <strong>Work</strong>ing Paper 46. MA: University ofMassachusetts Amherst.McKinsey. 2004. ‘<strong>The</strong> Hidden Dangers of the In<strong>for</strong>mal Economy.’McKinsey Quarterly, (3).Hudson, Ken. 1999. ‘No shortage of ‘nonstandard’ jobs.’ EconomicPolicy Institute Briefi ng Paper. Washington, D.C.Hussmanns, Ralf. 2004. ‘Defi ning and measuring in<strong>for</strong>malemployment.’ Geneva, International Labour Offi ce.International Labour Organisation (ILO). 2007. ‘<strong>The</strong> United Nationsand Re<strong>for</strong>m’ ILO Governing Body, 300 th Session, GB.300/4/1Geneva, November 2007_______. 2007. ‘Global Employment Trends 2007: Brief January2007.’_______. 2006. ‘In<strong>for</strong>mal Economy, Poverty and Employment: GoodPractices and Lessons Learned.’ Bangkok: ILO SubregionalOffi ce <strong>for</strong> East Asia, 2006_______. 2005. ‘World Employment Report 2004-05: EmploymentProductivity and Poverty Reduction.’ Geneva: InternationalLabour Organisation._______. 2003a. ‘<strong>Work</strong>ing out of Poverty.’ Report of the Director-General. International Labour Conference 91 st Session2003. Geneva: International Labour Offi ce._______. 2003b. ‘ILO Convention on Indigenous and Tribal Peoples,1989.’ (No. 169): A Manual. Geneva: International LabourOffi ce._______. 2003c. ‘<strong>The</strong> Employment Relationship: An annotated guideto ILO Recommendation No. 198.’ Geneva: InternationalLabour Offi ce.192

_______. 2002a. ‘Decent <strong>Work</strong> and the In<strong>for</strong>mal Economy.’ Report ofthe Director-General, International Labour Conference, ILO,Geneva, 2002._______. 2002b. ‘Women and Men in the In<strong>for</strong>mal Economy : AStatistical Picture.’ Geneva: International Labour Offi ce._______. 1999. Decent <strong>Work</strong>. Report of the Director General to the87 th Session of the International Labour Conference.Geneva: International Labour Offi ce.Kucera, David. 2004. ‘Core Labour Standards and EconomicDevelopment,’ Labour History, Vol. 45 (4)_______. 2001. ‘<strong>The</strong> effects of core workers rights on labour costsand <strong>for</strong>eign direct investment: evaluating the ‘conventionalwisdom.’ ‘ Decent <strong>Work</strong> Research Program DiscussionPaper, No. 130, International Institute <strong>for</strong> Labour Studies,Geneva.International Organisation of Employers (IOE). 2006. ‘<strong>The</strong> In<strong>for</strong>malEconomy — <strong>The</strong> Employers’ Approach.’ November.Jonge, Alice de. 2004. ‘Global Economic Forces and Individual LabourRights: An Uneasy Coexistence.’ Human Rights and HumanWelfare. Volume 4 (1) University of Denver.Kugler, A., J. F. Jimeno, and V. Hernanz. 2003. ‘EmploymentConsequences of Restrictive Permanent Contracts:Evidence from Spanish Labour Market Re<strong>for</strong>ms.’ CEPRDiscussion Papers 3724.Kuruvilla 1995 in Cooney. (fi nd publication info)Lazear, E. 1990. ‘Job Security Provisions and Employment.’ QuarterlyJournal of Economics. August. 699-726.Larsson, Allan. 2006. ‘Flexibility at the margin: Re<strong>for</strong>m of the labourmarket in Spain .’ Paper prepared <strong>for</strong> the United Nations<strong>Commission</strong> of Legal Empowerment of the Poor.Lecuyer, Normand and Jean Courdouan, eds. 2002. ‘New <strong>for</strong>ms oflabour administration: Actors in development.’ Geneva:International Labour Offi ce.Levine, D.I.,. and L.D.A. Tyson. 1990. ‘Participation, Productivity andthe Firm’s Environment.’ In Blinder, A. (ed.). Paying <strong>for</strong>Productivity. Washington, DC: Brookings Institution.Lim, Lim. 2003. ‘Highlights of the ILC Conclusions.’ Presented at theTurin <strong>Work</strong>shop on the Follow-up to the ILC Conclusions onDecent <strong>Work</strong> and the In<strong>for</strong>mal Economy, ILO InternationalTraining Centre, Turin, 10-12 Feb.Loayza,N., A.M.Oviedo and L.Serven. (2005) ‘<strong>The</strong> impact of Regulationon Growth and the In<strong>for</strong>mal Sector: Cross CountryEvidence.’ Unpublished mimeo. World Bank: WashingtonDC.Loayza, N., A..M.Oviedo and L.Serven. 2007. <strong>The</strong> impact of regulationon growth and in<strong>for</strong>mality: cross-country evidence. Ox<strong>for</strong>dUniversity Press.Loayza, N. and J. Rigolini. 2006. ‘In<strong>for</strong>mality Trends and Cycles.’ WorldBank Policy Research <strong>Work</strong>ing Paper Series 4078, <strong>The</strong> WorldBank.Maloney, William. 2003. ‘In<strong>for</strong>mality revisited.’ World Bank PolicyResearch <strong>Work</strong>ing Paper Series 2965, <strong>The</strong> World Bank.Manning, Chris. 2004. ‘Legislating <strong>for</strong> Labour Protection : Bettingon the Weak or the Strong?’ <strong>Work</strong>ing Paper 2004/08. <strong>The</strong>Australian National University, Division of Economics,December.Marsden, D. 1999a. ‘Breaking the link. Has the employment contracthad its day?’ Centrepiece, 1999, winter, 20-23. As cited inDeakin 2004.Montenegro, C. and C. Pagés. 2003. ‘Who Benefi ts from Labour MarketRegulations? Chile 1960-1998.’ NBER <strong>Work</strong>ing Paper 9850.Morin, Marie-Laure. 2005. ‘Labour law and new <strong>for</strong>ms of corporateorganisation.’ International Labour Review, Volume 144, (1)Geneva: International Labour Offi ce.Murthi, Mamta, Michael J. Orszag, and Peter R. Orszag. 1999. ‘<strong>The</strong>charge ratio on individual accounts: Lessons from the U.K.experience.’ Birbeck College <strong>Work</strong>ing Paper 99-2. London,University of London, March.Narayan, D., R. Patel, K. Schaftt, A. Rademacher, and S. Koch-Schulte.1999. Can anyone hear us? Washington, DC, World Bank.National Statistics Offi ce. 1995. ‘1995 Urban In<strong>for</strong>mal Sector Survey inMetro Manila: Highlights of Findings.’ National StatisticsOffi ce.National Economic Development and Labour Council (NEDLAC) 2006.‘Impact of Labour Market Policy on the in<strong>for</strong>mal economy:Analysis and Recommendations.’ A NEDLAC CommunityConstituency Paper. 26 June.Nickell, S. and R. Layard. 1998. ‘Labour Market Institutions andEconomic Per<strong>for</strong>mance.’ In Ashenfelter, O. and Card, D.(eds.) Handbook of Labour Economics, Vol. 3C. Amsterdam:North Holland.North, Douglass. 1989. ‘Institutions and economic growth: Anhistorical introduction.’ World Development Vol. 17 (9):1319-1332.Organisation <strong>for</strong> Economic Cooperation and Development (OECD).2006. ‘OECD Employment Outlook,’ www.oecd.org.____. 2000. International Trade and Core Labour Standards. Paris____. 1995a. Trade and Labour Standards: Report on a meetingof trade union experts held under the OECD Labour/Management Program. Paris: OECD.____. 1995b. Trade and Labour Standards: A Review of the Issues.Paris: OECD.Pean, Leslie and Peter Watson. 1993. ‘Promotion of small-scaleenterprises in Senegal’s building and construction sector:<strong>The</strong> ‘AGETIP’ experience.’ In Helmsing and Kolstee, 1993.Pradhan, B. K, P.K. Roy, and M.R. Saluja. 1999. ‘In<strong>for</strong>mal Sectorin India: A Study of Household Saving Behaviour.’Contribution of the In<strong>for</strong>mal Sector to the Economy, ReportNo. 1. New Delhi: National Council of Applied EconomicResearch.Ranis, Gustav. 1995. ‘Another Look at the East Asian Miracle.’ <strong>The</strong>World Bank Economic Review, Vol. 9, No. 3, pp. 509-534.Roaring, Elena. 2003. ‘Government Regulatory System and the In<strong>for</strong>mal Sector.’In Yu, Sandra (ed.). Challenge of In<strong>for</strong>mal <strong>Work</strong> in the Philippines.Manila: International Labour Office.Saavedra, J. and M. Torero. 2004. ‘Labour Market Re<strong>for</strong>ms and <strong>The</strong>irImpact over Formal Labour Demand and Job MarketTurnover: <strong>The</strong> Case of Peru.’ In Heckman J. J. and C. Pagés(eds.). <strong>Law</strong> and Employment. Lessons <strong>for</strong> Latin Americaand the Caribbean. London: University of Chicago Press:193

131—182.Sabel, C., D. O’Rourke, and A. Fung. 2000. ‘Ratcheting LabourStandards: Regulation <strong>for</strong> Continuous Improvement in theGlobal <strong>Work</strong>place.’ 23 February draft.Sator, Vanessa and Marilou Renales. 2003. ‘Improving <strong>Work</strong>ingConditions in the In<strong>for</strong>mal Sector.’ In Yu, Sandra, ed.,Challenge of In<strong>for</strong>mal <strong>Work</strong> in the Philippines. Manila:International Labour Offi ce.Sengenberger, Werner. 2005. ‘Globalization and Social Progress: <strong>The</strong>Role and Impact of International Labour Standards.’Second revised and extended version. Bonn: Friedrich EbertStiftung, September.Sethuraman, S. V. (1997) ‘Urban Poverty, and the In<strong>for</strong>mal Sector: ACritical Assessment of Current Strategies.’ Available fromILO at http://www.ilo.org/public/english/employment/recon/eiip/publ/1998/urbpover.htmSingh, N. 2003. ‘<strong>The</strong> Impact of International Standards : A Survey ofEconomic <strong>The</strong>ory.’ in K. Basu, H. Horn, L. Roman and J.Shapiro (eds.) International Labour Standards, Blackwell,Ox<strong>for</strong>d.Stiglitz, J. 2001. ‘Employment, Social Justice, and Societal Well-Being.’Keynote Speech to the ILO Global Employment Forum, 1-3November, ILO Geneva.Sudharshan C. and S.V. Sethuraman. 2001. ‘Social Protection and theIn<strong>for</strong>mal Sector in Developing Countries: Challenges andOpportunities.’ Social Protection Discussion Paper Series.Washington: <strong>The</strong> World Bank. December.Sugden, Robert. 1998. ‘Spontaneous order.’ Journal of EconomicPerspectives, 3: 85-97.Tajgman, David. 2006. ‘Extending labour law to all workers: promotingdecent work in the in<strong>for</strong>mal economy in Cambodia,Thailand and Mongolia.’ Bangkok: International LabourOffi ce.Thanachaisethavut, B and V. Charoenlert. 2006. ‘Extending LabourProtection to the In<strong>for</strong>mal Economy in Thailand.’ In DavidTagjman (ed.), Extending Labour Protection to All <strong>Work</strong>ers:Promoting Decent <strong>Work</strong> in the In<strong>for</strong>mal Economy inCambodia, Thailand and Mongolia. Bangkok: InternationalLabour Offi ce.Tokman, Victor. 2006. ‘Chile: A promising design towards the legalempowerment of the in<strong>for</strong>mal economy.’ Paper prepared <strong>for</strong>the United Nations <strong>Commission</strong> of Legal Empowerment ofthe Poor.____. 2007a. ‘Legal Empowerment Policies: On Labour Rights.’ Paperprepared <strong>for</strong> the United Nations <strong>Commission</strong> of LegalEmpowerment of the Poor. May.____. 2007b. ‘From In<strong>for</strong>mality to Modernization.’ In Towards Full andDecent Employment. London: Zed Books and Hyderabad:Orient Longman and Penang: Third World Network, inassociation with the United Nations, New York:Tomei, Manuela. 2005. Indigenous and tribal peoples: An ethnic auditof selected Poverty Reduction Strategy Papers. Geneva:International Labour Offi ce.Trebilcock, Anne. 2006. ‘Using Development Approaches to Addressthe Challenge of the In<strong>for</strong>mal Economy <strong>for</strong> Labour <strong>Law</strong>.’ InDavidov, G and B. Lagnille (eds.), Boundaries and Frontiersof Labor <strong>Law</strong>: Goals and Means in the Regulation of <strong>Work</strong>.Oregon: Hart.____. 2005. ‘Decent <strong>Work</strong> and the In<strong>for</strong>mal Economy.’ DiscussionPaper No 2005/04, UNU-WIDER, Helsinki.____, 2004. ‘International Labour Standards and the In<strong>for</strong>malEconomy.’ In Les normes internationales du travail: unpatrimoine pour l’avenir. Mélanges en l’honneur de NicolasValticos. Geneva: International Labour Organisation. 585-613UN-Habitat. 2006. Analytical Perspective of Pro-poor Slum UpgradingFrameworks. Nairobi, UN-Habitat and Cities Alliance.February.United Nations Research Institute <strong>for</strong> Social Development (UNRISD).2005. Gender Equality: Striving <strong>for</strong> Justice in an UnequalWorld. New York: UNRISD.Viénot, M. 1995. « Rapport sur le Conseil d’Administration des Sociétéscotées. » Revue de Droit des Affaires Internationales 8:372.Wailes, Nick. 2002. ‘Globalization and National Patterns of IndustrialRelations: <strong>The</strong> Case of Australia,’ in Roger Blanpain (ed),‘<strong>The</strong> Impact of Globalization on Employment Relations: AComparison of the Automobile and Banking Industries inAustralia and Korea.’ Published in a special issue of theBulletin of Labour Relations, Vol. 45.World Bank. 2005. Doing Business in 2005: Removing Obstacles toGrowth. An Overview. World Bank, International FinanceCorporation and Ox<strong>for</strong>d University Press.__________. 2007. In<strong>for</strong>mality: Exit and Exclusion. <strong>The</strong> World Bank,2007.World Bank. 2007. ‘Enterprise Surveys Online Database.’ http://www.enterprisesurveys.org/__________. 2005. A Better Investment Climate <strong>for</strong> <strong>Everyone</strong>, 2005World Development Report. <strong>The</strong> World Bank.__________. 2002a. Voices of the Poor. Washington, DC.__________. 2002b. ‘Empowerment and Poverty Reduction: ASourcebook.’ World Bank, 2002. Washington, DC. http://go.worldbank.org/FD9HH8DH11W__________. 2001. World Development Report 2000/2001: AttackingPoverty. Washington, DC.Yu, S. and A. Karaos. 2004. ‘Establishing the role of communitiesin governance: the experience of the Homeless People’sFederation Philippines.’ Urbanization and Environment. Vol.16 No. 1, April.194

ChapterFOURBusiness Rights195

EXECUTIVE SUMMARY‘<strong>The</strong> opposite of poverty is not wealth — it is justice. <strong>The</strong> 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 <strong>The</strong>ologian, Brazil<strong>Work</strong> is central to our lives. Earning alivelihood is not only a basic need,it is a requirement <strong>for</strong> 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. <strong>The</strong> 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 in<strong>for</strong>mal sector of economies acrossthe world. It begins by outlining the barriers thatentrepreneurs face in accessing opportunities inthe <strong>for</strong>mal economic system. Case studies arepresented to illustrate some solutions and innovations;they are intended to be studied, adaptedand scaled up. <strong>The</strong> report concludes by underliningessential principles and key considerations inmoving re<strong>for</strong>m frontiers towards more inclusive,gender responsive and integrated economies.After examining current policy re<strong>for</strong>m in privatesector development as well as innovation in institutionaldesign and business linkages, our workinggroup <strong>for</strong> this chapter concluded that legalempowerment of in<strong>for</strong>mal 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 in<strong>for</strong>mal 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 en<strong>for</strong>ce contractsor seek redress when contracts are violated.It would also permit them to be represented inrelevant policymaking and rule-setting bodies.196

In<strong>for</strong>mal and <strong>for</strong>mal businesses are inextricablylinked. <strong>The</strong>re are a variety of reasons <strong>for</strong> lack ofadherence to legal and regulatory requirementsby in<strong>for</strong>mal businesses. Non-compliance meansgreater profits <strong>for</strong> in<strong>for</strong>mal businesses, or it couldbe that the requirements are irrelevant, inappropriate,or non-existent <strong>for</strong> in<strong>for</strong>mal businesses.Possibly, in<strong>for</strong>mal businesses cannot af<strong>for</strong>d tocomply with the regulations. Also, many do notknow what is required, or they may be unsureas to what advantages there could be under‘<strong>for</strong>mal’ status. Because of the uncertainties,in<strong>for</strong>mal businesses continue to chart out <strong>for</strong>their own operational support, building networksand in<strong>for</strong>mal contractual arrangements groundedmore on social mores than on any legal basis.Legal, policy and regulatory re<strong>for</strong>m and innovation,derived from what works <strong>for</strong> 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 some<strong>for</strong>m of legal identity or protection <strong>for</strong> themselvesand their livelihood activities.<strong>The</strong> response is a re<strong>for</strong>m 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 in<strong>for</strong>malentrepreneurs and facilitate the protection oftheir businesses. As <strong>for</strong> the objectives, they arebroadly listed as follows: reducing regulatoryburdens; removing unnecessary barriers to <strong>for</strong>malmarkets and institutions; increasing opportunities<strong>for</strong> business linkages; increasing benefits andprotections <strong>for</strong> all working in the in<strong>for</strong>mal sector;strengthening the organisation and representationof the in<strong>for</strong>mal 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 trans<strong>for</strong>mation of the nature andefficiency of its in<strong>for</strong>mal economy. Learning frominstitution-building experiences of industrialisedcountries and those in transition as well from otherdeveloping countries, can be valuable. <strong>The</strong>reare some good-practice examples from aroundthe world that illustrate how the constraintsof in<strong>for</strong>mal 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.<strong>The</strong> In<strong>for</strong>mal 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 in<strong>for</strong>malentrepreneurs 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 <strong>for</strong>mal sector....’ 2 <strong>The</strong>se entrepreneurs arecalled in<strong>for</strong>mal because they operate to some extentoutside the realm of <strong>for</strong>mal legal regulationand protection, and without easy or full access tothe advantages of <strong>for</strong>mal financial and businesssupport systems.<strong>The</strong>re are some 500 million working poor earningless than one dollar per day (ILO 2004). <strong>The</strong>197

vast majority earn their living in the in<strong>for</strong>maleconomy, occupying land they do not own, workingin small, in<strong>for</strong>mal businesses, and relying onfamily or friends <strong>for</strong> in<strong>for</strong>mal moneylenders <strong>for</strong>loans. 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.<strong>The</strong>y 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. In<strong>for</strong>mality, there<strong>for</strong>e,limits the opportunity <strong>for</strong> economic and socialdevelopment <strong>for</strong> individuals, families, businesses,communities, and even entire nations.<strong>The</strong> ILO defines the in<strong>for</strong>mal economy as accommodating‘all economic activities that are —inlaw or practice- not covered or insufficiently coveredby <strong>for</strong>mal arrangements.’ 3 It includes wageworkers and own-account workers and contributingfamily members. In<strong>for</strong>mal entrepreneurs arethe working poor who run very small enterprises.<strong>The</strong>se 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 <strong>for</strong>ms of ownaccountwork, and they are under-representedamong micro-entrepreneurs. On average, earningsin in<strong>for</strong>mal enterprises are low while costs andrisks are high, particularly <strong>for</strong> own-account operators,but especially <strong>for</strong> women operators.Legal Empowerment and LegalIdentityLegal Empowerment of the Poor, such that theirentrepreneurship is linked to greater economicopportunity, means not only re<strong>for</strong>m in legal codesbut also policies to correct asymmetries in accessto in<strong>for</strong>mation, 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 <strong>for</strong>mallyverify 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 in<strong>for</strong>mation as their name, age, sex andmarital status.’ 4Based on evidence, we argue that there is need<strong>for</strong> an effective and enabling environment, regulatoryregime, commercial law and good economicgovernance <strong>for</strong> allowing business to operate withequitable economic rights and guaranteeinggreater accountability in the government’s abilityto issue laws and the capacity to implement anden<strong>for</strong>ce them. This process should empower thepoor to use law and legal tools to prevail overpoverty, while persuading the government toequitably en<strong>for</strong>ce its policies and regulations andrein<strong>for</strong>ce 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 there<strong>for</strong>e 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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> businesses;however businesses in the in<strong>for</strong>mal economy lackaccess to financial markets and the capacity tocompete in product markets.<strong>The</strong> 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 there<strong>for</strong>e important to make surethat business rights do not provide exclusivebenefits and are not en<strong>for</strong>ced 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 —<strong>for</strong>mal and in<strong>for</strong>mal — do not exist independentlyof each other. <strong>The</strong>re 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 material<strong>for</strong> <strong>for</strong>mal sector production, engage intermittentlyas labour in the <strong>for</strong>mal enterprises, anduse products made in the <strong>for</strong>mal sector. Thosewho have been employees in the <strong>for</strong>mal sectorand have acquired new techniques, capabilitiesand business contacts, often move into the moreflexible in<strong>for</strong>mal sector and set up their own businesses.If relationships between different levelsof economic activity are to be anticipated, madestrategic and optimized, policy and institutionalchange <strong>for</strong> 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 <strong>for</strong>malsector, have to be accorded legal protection ona par with enterprises and workers in the <strong>for</strong>malsector.Successful design and support of appropriate policiesand institutions <strong>for</strong> an integrated economymust begin with analysis of innovations emergingat the interface between the in<strong>for</strong>mal and <strong>for</strong>mal.Small producers and micro-entrepreneurs aredaily developing strategies <strong>for</strong> dealing with thedemands of <strong>for</strong>mal institutions, while the latterhave also developed ways of managing their inevitableencounter with those who are the majorityin the poorer countries of the world. <strong>The</strong>se 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 <strong>for</strong> policy and institutional innovations<strong>for</strong> an integrated and inclusive economy.Analysis of current practice could provide guidance<strong>for</strong> the move from a bifurcated to an integrated,cohesive approach to entrepreneurship199

and economic activity. First, in order to encouragegreater engagement between established<strong>for</strong>mal 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 <strong>for</strong>mal 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 <strong>for</strong>ces, affect themodus operandi of millions of entrepreneurs hasto be brought into economic re<strong>for</strong>m considerations.How social and cultural norms conditionthe modes of production and overall situation ofwomen entrepreneurs and indigenous peoples isparticularly pertinent to this consideration.<strong>The</strong> Re<strong>for</strong>m AgendaOur working group <strong>for</strong> Chapter 4 of this reportrecommends the following as key messages in thelegal empowerment of in<strong>for</strong>mal businesses:1. Policy Stance• Legally empowering small in<strong>for</strong>mal businessesrun by poor individuals or households shouldbe seen as a central pillar of a just societyand a central strategy <strong>for</strong> reducing poverty andinequality.• Most policies and the global economy currentlyaccord privilege to large firms/enterprises oversmall firms/enterprises.• In<strong>for</strong>mality is here to stay and is an essentialfeature of the global economy.• Poverty and exclusion go hand in hand. <strong>The</strong>poor have no choice but to accept insecurityand instability as a way of life. Our re<strong>for</strong>magenda reflects the realities of poverty andexclusion experienced by poor people, andthere<strong>for</strong>e focuses on removing the barriers thathold the poor back, and building a frameworkof laws and institutions to provide genuineprotection and opportunity <strong>for</strong> all. This will requirewholesale systemic changes to all facetsof the legal framework, including: the politicalprocess, economic policy, law making, publicadministration, and law en<strong>for</strong>cement.• While national governments and the internationalcommunity should seek to create asmany <strong>for</strong>mal jobs as possible and <strong>for</strong>malise asmany in<strong>for</strong>mal enterprises and jobs as possible,in<strong>for</strong>mality is not going to disappear. <strong>The</strong> realchallenge will be to reduce the ‘decent workdeficits’ of those who work in<strong>for</strong>mally, especiallythe working poor.• Poor people’s enterprise does play a vital role inthe economies of many countries, and the poorthere<strong>for</strong>e have a right to earn a living free fromharassment, extortion, beating, wrongful eviction,expropriation and exploitation. <strong>The</strong>y mustbe offered equal opportunity to access local,national and international markets.• Commercial rights <strong>for</strong> in<strong>for</strong>mal entrepreneurs/operators should be seen as an essential partof a package of rights <strong>for</strong> the working poorin the in<strong>for</strong>mal 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 <strong>for</strong> wage200

workers as well as the self-employed in the in<strong>for</strong>maleconomy, commercial rights are relevantto the half of the working poor in the in<strong>for</strong>maleconomy 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 <strong>for</strong> 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 in<strong>for</strong>mal businesses.• Includes representative voices of the workingpoor in the in<strong>for</strong>mal 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 in<strong>for</strong>mal enterprises.• Seeks to build backward and <strong>for</strong>ward linkageson fair terms between larger and smaller firms.• Promotes social protection <strong>for</strong> in<strong>for</strong>mal 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 <strong>for</strong>malisation of in<strong>for</strong>mal businesses.Formalisation could take on different <strong>for</strong>ms,including:• Expanding <strong>for</strong>mal employment opportunities.• Creating incentives <strong>for</strong> in<strong>for</strong>mal enterprises to<strong>for</strong>malise, such as:• Simplified registration procedures and progressiveregistration fees.• Supportive investment climate.• Fair commercial transactions between in<strong>for</strong>malenterprises and <strong>for</strong>mal firms.• Appropriate legal and regulatory frameworks,including en<strong>for</strong>ceable 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 <strong>for</strong> in<strong>for</strong>malproducers.• Promoting participatory policy processes andinclusive rule-setting institutions that involverepresentatives of associations of in<strong>for</strong>malentrepreneurs.<strong>The</strong> broad effect of re<strong>for</strong>m 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 ‘in<strong>for</strong>mal sector’ was coinedin the early 1970s 6 to describe the range ofsubsistence activities of the urban poor, there hasbeen considerable debate about its definition.<strong>The</strong> in<strong>for</strong>mal 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 ‘in<strong>for</strong>mal economy’ is more appropriateas it comprises the in<strong>for</strong>mal sector while notexcluding possible linkages of in<strong>for</strong>mal operatorswith the <strong>for</strong>mal sector. 7Generally speaking, in<strong>for</strong>mal economyencompasses the expanding an increasinglydiverse groups of workers and businesses inboth rural and urban areas, operating in<strong>for</strong>mally— i.e., they are not recognised or protectedunder the legal and regulatory frameworks. <strong>The</strong>national and local economies continue to be acontinuum that ranges from in<strong>for</strong>mal to <strong>for</strong>mal.<strong>The</strong> in<strong>for</strong>mal 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 in<strong>for</strong>mal economiesand, hence, in the in<strong>for</strong>mal enterprises.In these countries, a much higher proportion ofthose working in the in<strong>for</strong>mal economy are poor,with the share of women relative to men beingmuch higher.202Accordingly, the legal empowerment agenda<strong>for</strong> business rights emphasises re<strong>for</strong>ms, creatingmechanisms and financial arrangements toprovide social protection <strong>for</strong> in<strong>for</strong>mal 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 <strong>for</strong> accessing livelihoodresources, and assets to generate efficient andproductive enterprises. <strong>The</strong> ultimate goal is toguarantee sustainable livelihoods <strong>for</strong> all — alongthe continuum from the in<strong>for</strong>mal to the <strong>for</strong>maleconomy. <strong>The</strong> approach: reorienting gender-baseddevelopment strategies to eradicate poverty. Thisrequires 1) a better understanding of the in<strong>for</strong>malbusinesses and enterprises within the context ofthe <strong>for</strong>mal and in<strong>for</strong>mal 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 <strong>for</strong>equitable 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. <strong>The</strong>richest two percent of adults own more than 50percent of global assets. <strong>The</strong> 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 <strong>for</strong> 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 <strong>The</strong> number of people living in extremepoverty in Africa has nearly doubled from 164million in 1981 to 316 million in 2001. Even <strong>for</strong>the 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 <strong>for</strong>m or another, in rich countries too. 11<strong>Work</strong>, being central to our lives, is a basic requirementto enriching human well-being and thequality of life in general. <strong>Work</strong> 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. <strong>The</strong>re<strong>for</strong>e,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, in<strong>for</strong>mal 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 <strong>for</strong> entrepreneurship, creativity, dynamicand productive job creation is stifled, eitherthrough onerous legal procedures and institutionsor through inequities represented by vested interestsand inadequate en<strong>for</strong>cement, entrepreneurswill gravitate towards the in<strong>for</strong>mal economy.In<strong>for</strong>mal firms and enterprises account <strong>for</strong> 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 <strong>The</strong>size of the in<strong>for</strong>mal economy is inversely relatedto economic development and, while, at thesame time, there is a significant correspondencebetween working in the in<strong>for</strong>mal economy andbeing poor. However, a large number of in<strong>for</strong>malbusinesses 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.In<strong>for</strong>mal Economy and In<strong>for</strong>malBusinesses<strong>The</strong> in<strong>for</strong>mal economy in Africa is estimated tohave been 42 percent of GDP in 2000. WhileZimbabwe, Tanzania and Nigeria were at the highend with the in<strong>for</strong>mal 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 in<strong>for</strong>mal economy, 14 with almost 80 percentof non-agricultural employment and over 60percent of urban employment. 15 In Latin America,the average size of the in<strong>for</strong>mal economy was 41percent of GDP with Bolivia as the largest in<strong>for</strong>maleconomy 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 in<strong>for</strong>mal 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 in<strong>for</strong>mal economy. Activities in the in<strong>for</strong>maleconomy provide certain benefits to a marginalfew. Also, while some activities in the in<strong>for</strong>maleconomy provide viable livelihoods with reasonableincomes <strong>for</strong> some, most in<strong>for</strong>mal workers earninsecure incomes under conditions that are not onpar with decent work standards. 16 <strong>The</strong>y do not, <strong>for</strong>example, receive medical or other benefits. 17 In effect,the decent work deficits are most pronouncedin the in<strong>for</strong>mal 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 <strong>for</strong> theseworkers and their employers to organise. 18 In addition,working conditions in the in<strong>for</strong>mal economyare often unsafe, uncertain, and poor in terms ofremuneration. Other concerns are poor occupationalhealth and safety arrangements, and realfears <strong>for</strong> 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 in<strong>for</strong>mal work <strong>for</strong>ce trapped inpoverty. 20 Nearly all in<strong>for</strong>mal workers are amongthe poorest citizens of their respective countries,and they lack education, money and the ability to204

obtain <strong>for</strong>mal, permanent work. 21 It is importantto add that a larger proportion of women relativeto men work in the in<strong>for</strong>mal economy and suffersfrom poverty.Legal Empowerment and BusinessRights<strong>The</strong> in<strong>for</strong>mal economy includes a growing andincreasingly diverse group of workers and ruraland urban enterprises operating in<strong>for</strong>mally. Whilethe in<strong>for</strong>mal 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 in<strong>for</strong>mal 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.<strong>The</strong> problems and needs under each of thesecategories may be different, but they neverthelessfall into the ‘in<strong>for</strong>mal’ category because theylack recognition or protection under the legal,institutional and regulatory, judicial and disputeresolution frameworks. <strong>The</strong>y also lack access tothe advantages of <strong>for</strong>mal 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 there<strong>for</strong>e 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 in<strong>for</strong>malbusiness is a consequence of inequitablepolicies and discriminatory en<strong>for</strong>cement that failto give support to those businesses and entrepreneurialopportunities in which tangible benefitsmight accrue to the poor. Accordingly, <strong>for</strong> mostsmall entrepreneurs and self-employed people,working in the in<strong>for</strong>mal economy is a survivalstrategy rather than an option.Balancing Human Rightsand Market-Based ApproachLegal empowerment aims to address relativedeprivation in all <strong>for</strong>ms, including social,political and economic dimensions in the pursuitof a life of choice, freedom, respect and dignity.<strong>The</strong> issue of equity, in having rights and beingable to en<strong>for</strong>ce 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 en<strong>for</strong>ceable rights.<strong>The</strong> recognition of human rights is there<strong>for</strong>e necessary.Equally necessary are the legal means andcapacities to en<strong>for</strong>ce those rights through accessibleand effective institutions and processes thatare transparent, participatory and accountable.At the same time, institutional re<strong>for</strong>ms 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 <strong>for</strong> 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 <strong>for</strong>ces alone canaccomplish little. Existence of markets is a prerequisite<strong>for</strong> 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 <strong>for</strong>mal or in<strong>for</strong>malcharacter 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 in<strong>for</strong>mal economies.At the same time, governments shouldnot hesitate to step in, possibly in the <strong>for</strong>m 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 <strong>Commission</strong>on Legal Empowerment of the Poor (CLEP)and re<strong>for</strong>m the development agenda by broadeningthe discussion of business rights and the in<strong>for</strong>maleconomy in a comprehensive manner thatgoes beyond <strong>for</strong>malisation 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 en<strong>for</strong>cement, and to havethe ability to work with governments and otherstakeholders to create new rights, capacities, andopportunities.<strong>The</strong> adverse effects of unequal opportunitiesof representation and political voice andpower <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> maximising benefits from the macroglobal environment and promoting distributionalequity.<strong>The</strong>re is evidence, we believe, to argue the case<strong>for</strong> an effective and enabling environment, <strong>for</strong> aregulatory regime and <strong>for</strong> 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 anden<strong>for</strong>ce laws. This would empower the poor to uselaw and legal tools to prevail over poverty, whilepersuading the government to equitably en<strong>for</strong>ceits policies and regulations and rein<strong>for</strong>ce 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, there<strong>for</strong>e, 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 <strong>for</strong> business rights <strong>for</strong> 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 in<strong>for</strong>mal 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 <strong>for</strong> 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 efficientlytrans<strong>for</strong>m their labour into a successful business.<strong>The</strong>y 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 <strong>for</strong>businesses; however businesses in the in<strong>for</strong>maleconomy 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 demand<strong>for</strong> financial services, including an estimated annualcredit demand exceeding US$10 billion. 25Similarly, those in the in<strong>for</strong>mal economy are notcovered by safety and health regulations and arenot, there<strong>for</strong>e, eligible <strong>for</strong> social security benefits,pensions or other <strong>for</strong>ms of social protection.Enhanced access to basic financial services— savings, credit, insurance, pensions andtools <strong>for</strong> risk management — is a critical input <strong>for</strong>emerging and potential entrepreneurs to leverageeconomic opportunities and improve their qualityof life. <strong>The</strong> 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 <strong>The</strong> regulatory structures,there<strong>for</strong>e, have to ensure broader access to financialservices, particularly <strong>for</strong> the poor, as well asa deepening of the financial sector and establishmentof greater accountability.Institutional Changes<strong>The</strong> 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 there<strong>for</strong>e important to make surethat the business rights do not provide exclusivebenefits and are not en<strong>for</strong>ced 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. <strong>The</strong>re<strong>for</strong>e,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 in<strong>for</strong>malbusinesses, the character and attributes of thein<strong>for</strong>mal sector will most certainly vary from onecountry to the next. It would there<strong>for</strong>e appear thatthe effectiveness of recommendations on the convenienceof doing business should be measuredby the extent to which the proposed changesare mainstreamed and translated into improvedper<strong>for</strong>mance of the institutions and their operatingenvironment. Without such measure, theexpected increase in <strong>for</strong>eign investment would beillusory.Because the in<strong>for</strong>mal economy and in<strong>for</strong>mal businessesare predominantly local, the criteria determiningease of doing business must incorporatethe needs of the in<strong>for</strong>mal businesses. Subsequentrecommendations should there<strong>for</strong>e encompassand be judged by the ability of the macro-levelchanges to the business climate to impact locallevelinstitutions and, there<strong>for</strong>e, businesses in thein<strong>for</strong>mal economy.Improvement in the quality of institutions in aneconomy has to proceed simultaneously with thetrans<strong>for</strong>mation of its in<strong>for</strong>mal economy. Valuablelessons can be learned from the institution-buildingexperience of the industrialised countries208

and those in transition, as well as from otherdeveloping countries. <strong>The</strong>re are good-practiceexamples from around the world that illustratehow constraints of in<strong>for</strong>mal 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 <strong>for</strong> and a catalyst of demand<strong>for</strong> 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 in<strong>for</strong>maleconomy has an added advantage in that it allowslearning-by-doing in implementing institutionalre<strong>for</strong>ms. It also allows <strong>for</strong> synergistic linkages betweenre<strong>for</strong>ms 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 <strong>for</strong> Change<strong>The</strong> emphasis of the document is placed oncreating larger options and opportunities <strong>for</strong>entrepreneurs and businesses in the in<strong>for</strong>maleconomies to operate proficiently and equippingthem with capabilities, enabling environmentand equitable governance systems to make correctchoices to maximise their welfare. 29<strong>The</strong>Legal Empowerment Framework does not look to<strong>for</strong>malising 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 in<strong>for</strong>mal economy and proposing amethodology and sequence of actions to addressthe underlying complex issues of in<strong>for</strong>mal businessesand poverty alleviation.<strong>The</strong> ‘agenda <strong>for</strong> change’ proposes a comprehensivestrategy to address three inter-relatedcomponents that run the continuum fromthe in<strong>for</strong>mal to the <strong>for</strong>mal end of the economy;they include:• Creating more entrepreneurship and businessopportunities by ensuring that those in thein<strong>for</strong>mal 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 in<strong>for</strong>mal sector simply because of lowercost.• Enabling those enterprises currently in thein<strong>for</strong>mal 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 <strong>for</strong> the businessesin the in<strong>for</strong>mal sector.It is obvious that the interventions under thethree categories will have common characteristics.<strong>The</strong> guiding principle would be to tackle theroot causes of in<strong>for</strong>mal businesses rather than209

negative manifestations of in<strong>for</strong>mal businessesand in<strong>for</strong>malisation. Also, the changes have tooccur at the local level, which basically definesthe in<strong>for</strong>mal economy. Successful mobilisation ofbusinesses at local level, whether by the ef<strong>for</strong>tsof 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 re<strong>for</strong>m will depend on public recognitionand ownership of evidence-based trans<strong>for</strong>mationwithin the cultural, social and political milieu. 30To Sum UpThis introduction provided an overall frameworkon the legal empowerment agenda <strong>for</strong> businessrights and sets the stage <strong>for</strong> the sections thatfollow. We proposed that re<strong>for</strong>ms 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. <strong>The</strong>next section will look at in<strong>for</strong>mal businesses andenterprises within the context of the in<strong>for</strong>mal-<strong>for</strong>malcontinuum; it will examine the relationshipbetween the in<strong>for</strong>mal economy, poverty and productivity,and it will map the in<strong>for</strong>mal economiesthat involve women and indigenous people.2. In<strong>for</strong>mal Economy andIn<strong>for</strong>mal BusinessesIn<strong>for</strong>mal-Formal ContinuumEven though any debate on ‘in<strong>for</strong>mality’ centreson the dichotomy between <strong>for</strong>mal andin<strong>for</strong>mal, the concept is a lesser representative ofdualism and embodies a continuum when viewedfrom any of the perspectives of activities, institutionsor contracts. <strong>The</strong> definition of in<strong>for</strong>mality,however, is ambiguous and in<strong>for</strong>mal economydenotes a plurality of activities that are also contextual.<strong>The</strong> term ‘in<strong>for</strong>mal sector’ is inadequatebecause it fails to represent the inherent heterogeneity,complexity and dynamism of this economyand its constituent activities. Also, the genderbias in the in<strong>for</strong>mal economy is probably underestimatedand women are more likely to be in thosein<strong>for</strong>mal activities that are under-counted, includingproduction <strong>for</strong> own consumption and paiddomestic activities in private households. Basedon the ILO’s classification, 31 the term ‘in<strong>for</strong>maleconomy’ 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.<strong>The</strong> in<strong>for</strong>mal economy is differentiated in termsof production units as well as employment status.In<strong>for</strong>mal may there<strong>for</strong>e 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 in<strong>for</strong>mal economy.Not surprisingly, any discussion of the in<strong>for</strong>maleconomy 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 labour<strong>for</strong>ce and to their upward movement along thein<strong>for</strong>mal-<strong>for</strong>mal continuum are the subject ofChapter 3 of this report on Labour Rights. <strong>The</strong>thrust of this discussion, there<strong>for</strong>e, will maintainthe focus on in<strong>for</strong>mal businesses and enterpriseswhich, <strong>for</strong> 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. <strong>The</strong>se, wehave observed, make it easier <strong>for</strong> 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 <strong>for</strong> its employees.Poverty and In<strong>for</strong>mal EconomyIncreasing poverty spurs growth of the in<strong>for</strong>maleconomy. In turn, the in<strong>for</strong>mal economy promoteseconomic growth, serving to reduce poverty. <strong>The</strong>problem 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 <strong>for</strong> the resulting change, if any, ininequality from this kind of economic growth. 32In<strong>for</strong>mation and data on the in<strong>for</strong>mal economyin developing countries is sketchy since very fewcountries undertake survey of employment andengagement in the in<strong>for</strong>mal economy on a regularbasis. Even though nearly 75 percent of the poorpeople in developing countries live in rural areasand engage in in<strong>for</strong>mal economic activities relatedto agriculture, many countries exclude agriculturefrom their measurement of the in<strong>for</strong>mal economy.33An in<strong>for</strong>mal sector survey carried out by ILOin 1995 found that 41 percent of the workerswere in the in<strong>for</strong>mal 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 in<strong>for</strong>mal economy, almost all those who arein<strong>for</strong>mal are poor. Urban areas of most developingcountries expose the contemporaneous existenceof in<strong>for</strong>mal workers’ shacks with the <strong>for</strong>mal workers’more affluent homes. In the name of economicdevelopment and en<strong>for</strong>cement of propertyrights, the <strong>for</strong>mer are first to be destroyed by governmenteven though the services provided to the<strong>for</strong>mal settlements by them are perfectly legal.In<strong>for</strong>mal EnterprisesDespite the fact that the self-employed andemployers face many barriers to setting up andoperating in<strong>for</strong>mal enterprises, they account <strong>for</strong>70 percent of the jobs in sub-Saharan Africa andabout 60 percent in the other developing regions.In India, nearly 93 percent of the work<strong>for</strong>ce is inthe self-organised in<strong>for</strong>mal sector, with nearly 10211

million persons and their dependents relying onstreet vending <strong>for</strong> their livelihood. 35Studies alsoindicate that in the absence of in<strong>for</strong>mal economies,a majority of private sector householdswould have fallen deeper into poverty. 36<strong>The</strong>re is a prevalent assumption that in<strong>for</strong>malenterprises 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 in<strong>for</strong>maleconomy have limited output, employment orincome to even be at the level of taxable entities.<strong>The</strong> root causes of the manifestation of in<strong>for</strong>malenterprises encompass the legal and institutionalhurdles that make it difficult to become or stay<strong>for</strong>mal. For instance, the regulatory environmentmay be excessively burdensome, overly punitiveand especially, in the cases of crises countries,non-existent. In addition, in<strong>for</strong>mal businesseshave little access to public infrastructure and dependon in<strong>for</strong>mal and unfair institutional arrangements<strong>for</strong> their essentials. Essentials could rangebroadly from credit, markets and non-marketinstitutions, training, developing skills and knowledge,to social protection, and even in<strong>for</strong>mationon demographic trends (including rural-urbanmigration and cross-border labour migration), andnational policies that constrain or limit employmentgeneration in the <strong>for</strong>mal economy.Lack of registration and regulation of in<strong>for</strong>malbusinesses and enterprises prevents in<strong>for</strong>malworkers from enjoying the rights of the decentwork that may be accorded under their nationallabour legislation. <strong>The</strong> use of the term ‘in<strong>for</strong>mal’does not mean an absence of norms or rules <strong>for</strong>operations of the enterprises. Businesses in thein<strong>for</strong>mal economy have their own institutions,mechanisms, rules, financial arrangements, andsystems <strong>for</strong> 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 in<strong>for</strong>maleconomy, as they operate on the fringes of thelaw. This area, however, is beyond the scope ofour chapter.In<strong>for</strong>mal Enterprises and ProductivityA large in<strong>for</strong>mal 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 in<strong>for</strong>malsector, also termed ‘shadow economy’, could beinversely related to Gross Development Product(See Figure 1). In<strong>for</strong>mality restrains efficient useof resources and productivity. <strong>The</strong> inefficiency orsub-optimal productivity of the in<strong>for</strong>mal economyis there<strong>for</strong>e linked in part, to the absence of legalprotection, inability to en<strong>for</strong>ce contracts and theneed <strong>for</strong> security that comes from the dearth ofproperty rights and decent work attributes. <strong>The</strong>irability to organise <strong>for</strong> social protection is weak,with little or no voice to make their businessrecognised or protected. <strong>The</strong> 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 in<strong>for</strong>malbusinesses 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, in<strong>for</strong>mation, 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 ef<strong>for</strong>t by governmentsto create necessary conditions <strong>for</strong> 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 In<strong>for</strong>mal Economies 40Although, the studies that describe countrylevel patterns and changes have at best beensketchy, given the complexity of measuring thein<strong>for</strong>mal economies precisely, they are certainlyindicative. Over the last fifteen years or so, thein<strong>for</strong>mal sector in Sub-Saharan Africa has apparentlyincreased from about two-thirds to nearlythree-quarters of non-agricultural employment. 41Street vending predominates, with women traders<strong>for</strong>ming the majority in many of the countries inthe region. Former retailing establishments oftenencourage in<strong>for</strong>mal economy operators to expandtheir markets to low income groups and ruralareas who can be reached most easily by itineranttraders and street vendors.In<strong>for</strong>mal 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 in<strong>for</strong>maleconomy presents 92 percent of the total job opportunitiesoutside of agriculture compared to 71percent <strong>for</strong> men. Almost 75 percent of these jobsare per<strong>for</strong>med as self-employed and own-accountworkers, and only 5 percent as paid employees.Most small scale enterprises are without a <strong>for</strong>malestablishment: over 33 percent of the in<strong>for</strong>malactivities 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.<strong>The</strong> major sources of livelihoods, especially<strong>for</strong> women engaged in in<strong>for</strong>mal activities (foodprocessing, handicrafts, hawking and vending),have been affected by trade liberalisation and bycross-border trading. Cross-border trading is verysignificant in the in<strong>for</strong>mal 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 <strong>for</strong> sale. While normally the in<strong>for</strong>maltrade 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 in<strong>for</strong>mal 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 the<strong>for</strong>mal economy and a high rate of employmentcreation in the in<strong>for</strong>mal 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 <strong>for</strong> nearly 70 percent ofthe total employment.In the transition countries of Central and EasternEurope and the countries of the Commonwealthof Independent States (CIS), the in<strong>for</strong>mal 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, thein<strong>for</strong>mal economy has expanded rapidly becauseof economics and social trans<strong>for</strong>mations, closureof many state- owned enterprises, increasedprivatisation, labour retrenchment and collapse of214

social insurance, and need <strong>for</strong> institutional, businessand labour re<strong>for</strong>ms that have lacked en<strong>for</strong>cementand failed to keep in touch with changingeconomic realities.<strong>The</strong> expansion of manufacturing and industryhas led to a relative decline in the in<strong>for</strong>maleconomy in China, Japan, the Republic of Koreaand Singapore. While the in<strong>for</strong>mal 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 in<strong>for</strong>mal economy,economic prosperity has also been directly relatedto an increase in the in<strong>for</strong>mal economy, asin Indonesia, because of increased opportunitiesand the ability of the in<strong>for</strong>mal enterprises to respondto new market opportunities. An expansionof the in<strong>for</strong>mal economy in the <strong>for</strong>mer circumstancesreflects marginalization of economic activitiescharacterised by low productivity, low incomesand low standards of living. 47 On the otherhand, expansion of the in<strong>for</strong>mal economy duringan economic boom is related to the expediencyof bypassing over-bearing bureaucratic processesand business practices that can constrain firmsin the <strong>for</strong>mal economy from responding quickly tomarket signals and increasing demand.Women in the In<strong>for</strong>mal EconomyWorldwide, women’s share of in<strong>for</strong>mal economyemployment has remained between 60 percentand 80 percent. Moreover, the number of femalesin the labour <strong>for</strong>ce is continuously on the rise andwomen in the in<strong>for</strong>mal economy most probablynumber much more than reflected in availablestatistics. (Girls, too, would be among their numbers.)<strong>The</strong>y 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 in<strong>for</strong>maleconomy because they lack the right to ownand inherit property and are there<strong>for</strong>e obstructedfrom activity in the <strong>for</strong>mal economy, as they donot have assets to use as security <strong>for</strong> credits, etc.A statistical snapshot of women in the in<strong>for</strong>maleconomy around the world reveals: 481) In<strong>for</strong>mal employment is generally a largersource of employment <strong>for</strong> women than <strong>for</strong> menin the developing world. Other than in the MiddleEast and North Africa, where 42 percentof women workers are in in<strong>for</strong>mal employment,60 percent or more of women workers in thedeveloping world are in in<strong>for</strong>mal employment(outside agriculture). <strong>The</strong> comparative figures<strong>for</strong> in<strong>for</strong>mal 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-<strong>for</strong>ce 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 <strong>for</strong>ce 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 <strong>for</strong> 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 In<strong>for</strong>malBusinessesAlthough 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. <strong>The</strong>y also face hugebarriers in obtaining legal protection (throughen<strong>for</strong>cement opportunities), access to resourcesand wealth creation. Due to past experiencesof bias and discrimination, many indigenouspeoples <strong>for</strong>go <strong>for</strong>mal 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 there<strong>for</strong>e resort to finding employment inoccupations that are not <strong>for</strong>mally 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: <strong>The</strong> 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 <strong>for</strong>ms ofbarter, gift exchange, and other <strong>for</strong>ms of reciprocalexchange. A better understanding of these‘principles of reciprocity’ would be needed tounderpin the work of the <strong>Commission</strong>. 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 <strong>for</strong> indigenouspeoples and women in the in<strong>for</strong>mal and homebasedsectors. However, indigenous peoples’perceptions of credit and loans are often compromisedin the interests of entering the globaleconomy. Ef<strong>for</strong>ts 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 throughEntrepreneurship<strong>The</strong> 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.<strong>The</strong> main window of opportunity <strong>for</strong> income andemployment generation opened to community memberswas the Revolving Loan Fund, which providesassistance to groups and individuals <strong>for</strong> 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. <strong>The</strong> fund has supported various projectsproposed by the Indigenous communities.Source: ILOEmpowering In<strong>for</strong>mal BusinessesClearly, the in<strong>for</strong>mal business economy also links<strong>for</strong>mal sectors to consumers. In fact it providesmany low and middle-income employees of the<strong>for</strong>mal sector with goods and services and contributesto economic growth. Economic growth,while a necessary condition, is not a sufficientcondition <strong>for</strong> creating productive employment andpoverty reduction. As discussed earlier, an increasein economic growth does not usually resultin the alleviation of an in<strong>for</strong>mal economy or thetransition from in<strong>for</strong>mal to <strong>for</strong>mal 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, there<strong>for</strong>e,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 in<strong>for</strong>mal 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 pooren<strong>for</strong>cement, lack of economic infrastructure anda poor supply of public services. Given the impedimentsto operate businesses in most developingcountries, the opportunity costs of in<strong>for</strong>malityappear to be much lower compared to operating<strong>for</strong>mally. It is there<strong>for</strong>e not surprising that in<strong>for</strong>malnetworks also coordinate many transactionsamong the <strong>for</strong>mal enterprises. Emphasis must fallon improving the business environment, and in amanner that it is particularly beneficial <strong>for</strong> enterpriseat local level, including the rural areas. Forinstance, India’s economic re<strong>for</strong>ms, which alsocover the business environment, have generallyfocused on the corporate and the organised sectorthat provides employment to nearly three percentof the country’s work <strong>for</strong>ce, with another three to217

four percent employed in the public sector andgovernment. <strong>The</strong> balance, or roughly 93 percentof the work<strong>for</strong>ce, which is essentially the self-organisedin<strong>for</strong>mal economy, remains untouched bythose economic re<strong>for</strong>ms. 50Accordingly, it is important to improve theeconomic governance structure that could allowsmaller <strong>for</strong>mal enterprises to grow with greaterefficiency, productivity and quality working conditions.It is equally necessary to facilitate theproblems faced by in<strong>for</strong>mal 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. In<strong>for</strong>mal enterprises also need to besensitised to the requirements <strong>for</strong> 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 <strong>for</strong>mal enterprisesshould be improved comprehensively and in anintegrated manner by en<strong>for</strong>cing 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 <strong>for</strong>mal costs, reducing growthbarriers and implementing cost-efficient andproficient policies, guidelines and procedures <strong>for</strong>en<strong>for</strong>cement of compliance. If a one-stop shopis a solution <strong>for</strong> 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 in<strong>for</strong>mation, but would also be a disincentiveto operate in<strong>for</strong>mally if cost was the solerationale <strong>for</strong> such an action.Awell-structured tax system that is understandableand transparent would also dissuadefirms from adopting the inefficiencies ofin<strong>for</strong>mality simply to avoid taxes. Also, if locallevies translate into fees <strong>for</strong> enhancing access tocommunity resources as well as public serviceswith greater accountability, the attractiveness andlower opportunity cost of in<strong>for</strong>mal sector woulddiminish significantly.It would also be helpful to introduce propertyrights registration, contract en<strong>for</strong>cement mechanismsand clear policy guidelines to encouragemarket participation of street vendors, etc., ina manner that is participative, and incorporatesin<strong>for</strong>mal and popular rules. By bringing diversegovernance structures within the purview of the<strong>for</strong>mal 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 in<strong>for</strong>mal-<strong>for</strong>mal<strong>for</strong>ward and backward linkages.Given suitable conditions, including provision <strong>for</strong>capacity development, vocational training, andskill building, many in<strong>for</strong>mal enterprises mayef<strong>for</strong>tlessly glide into <strong>for</strong>mal ones. This empowermentprogramme has to be an integral componentof poverty reduction strategies using incentivesbased on participation, a level playing field ofregulations, and en<strong>for</strong>cements thereof that, interalia, enhances efficient, af<strong>for</strong>dable 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 re<strong>for</strong>magenda. So, legal identity must be internalisedin policies and actions that target the integrationof markets of the poor with other <strong>for</strong>mal markets,thereby enabling them to meet the unmet de-218

mand <strong>for</strong> af<strong>for</strong>dable 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 in<strong>for</strong>mal to the <strong>for</strong>malend of the economy is not technological; it is instructuring institutions, capacities, incentivesand regulations to provide certainty to economicexchange and there<strong>for</strong>e to equitable economicgrowth. 53issues highlighted in this section, which also providedan overview of in<strong>for</strong>mal economies aroundthe globe. <strong>The</strong> next section on legal identity andbusiness rights discusses, among other issues,the need <strong>for</strong> an effective enabling environment,regulatory regime, commercial law and good economicgovernance that is required <strong>for</strong> businessto operate with equitable economic rights andwith guarantees of greater accountability in thegovernment’s ability to issue laws with the capacityto implement and en<strong>for</strong>ce them.Economic growth draws upon activities that arecomplex, fluid and geographically dispersed. <strong>The</strong>yrequire an elaborate and ever evolving division oflabour ranging from owners of <strong>for</strong>mal and in<strong>for</strong>malenterprises, producers, managers, and theiremployees, who are an integral component of thevalue chain. Such a large-scale division of labourrequires state-like institutions <strong>for</strong> public en<strong>for</strong>cementof laws and contracts 54 and <strong>for</strong> 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 in<strong>for</strong>mal labourassociations. This would ensure ownership by allrelevant actors and create inexpensive approachesto en<strong>for</strong>ce 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 <strong>for</strong> growth ofthe in<strong>for</strong>mal economy and a main cause of theblossoming of in<strong>for</strong>mal enterprises strugglingto overcome legal and institutional hurdles thatmake it difficult prevent <strong>for</strong> businesses to becomeor stay <strong>for</strong>mal. <strong>The</strong>se are some of the broad219

3.Business Rights:Unlocking Barriers/Constraints to EmpowerIn<strong>for</strong>mal Enterprises<strong>The</strong> 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 in<strong>for</strong>mal economy could helpto unlock pent-up talents and energies amongthe working poor and create an efficient andinclusive private sector. <strong>The</strong> 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, en<strong>for</strong>ceablelaws and regulations, effective institutions, practicesand dedicated people to support inclusiveand equitable development of the domesticprivate sector.This chapter there<strong>for</strong>e argues <strong>for</strong> 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 equitablyen<strong>for</strong>ce policies and regulations. This wouldrein<strong>for</strong>ce 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 there<strong>for</strong>e essential to build upon and refinethe above issues in the context of the work of the<strong>Commission</strong> and re<strong>for</strong>m the development agendaby broadening the discussion of business rightsand the in<strong>for</strong>mal economy in a comprehensivemanner that goes beyond <strong>for</strong>malisation per se.In other words, the legal empowerment of thein<strong>for</strong>mal 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 en<strong>for</strong>cing andhave the ability to work with governments andother stakeholders to create new rights, capacities,and opportunities.<strong>The</strong> core set of legal en<strong>for</strong>cement 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. <strong>The</strong> example, below, demonstrateshow LE could address the specific conditionsof street vendors.Different levels of commercial rights are appropriateto the circumstances of different typesof in<strong>for</strong>mal businesses: notably, street vendors,in<strong>for</strong>mal manufacturers, in<strong>for</strong>mal transport providers,and small farmers. Commercial rights <strong>for</strong>in<strong>for</strong>mal businesses can be stratified as follows:• Basic commercial rights: right to work, in-220

Box 2 Unlocking Barriers: Legal Mechanisms to Empower In<strong>for</strong>malBusinesses1) Legal and bureaucratic procedures that allow in<strong>for</strong>maloperators or businesses to operate:• Simplifi ed registration procedures;• Simplifi ed licensing and permit procedures;• Identifi cation devices, including: ID cards <strong>for</strong> 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,<strong>for</strong>ests, and waterways;• appropriate zoning regulations where governing andunder what conditions in<strong>for</strong>mal operators or businessescan operate in central business districts,suburban areas, and/or industrial zones.5) Appropriate legal frameworks and standards <strong>for</strong>what in<strong>for</strong>mal 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: <strong>for</strong>example, public health and sanitation concerns restreet food;• Marketing licenses <strong>for</strong> products and services.6) Appropriate legal tools to govern the transactionand contractual relationships of in<strong>for</strong>mal operators orbusinesses including:• Bargaining and negotiating mechanisms/power;• Legal and en<strong>for</strong>ceable 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 in<strong>for</strong>maloperators 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 <strong>for</strong> in<strong>for</strong>mal operators and businessesto join or <strong>for</strong>m 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 <strong>for</strong> 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 <strong>for</strong> themSecure vending sites.Provide access to capital on fair terms: a loan producttailored to their daily need <strong>for</strong> 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 <strong>for</strong> larger, more advanced in<strong>for</strong>malenterprises.<strong>The</strong>se 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 regulated<strong>for</strong> 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.<strong>The</strong> 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 empoweringin<strong>for</strong>mal businesses is critical to unlocking theproductive potential of individuals, communitiesand countries. <strong>The</strong>re are significant barriers tobasic business rights, including the cost of, anddifficulty with repsect to accessing and obtaininglicenses or permits, the cost of <strong>for</strong>ming 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 in<strong>for</strong>maleconomy, because they make all other costs,including legal costs, that much more onerous.Below is an elaboration of implications <strong>for</strong> thosecurrently doing business in<strong>for</strong>mally.Legal, Regulatory, and AdministrativeBarriersRegulatory barriers comprise inappropriate orrigid requirements and stem from a governmentpolicymaking environment that normally wishesto have a total control either <strong>for</strong> a political or socio-economicagenda. Many developing countriesare emerging from a history of heavy-handedregulation, with approvals required <strong>for</strong> 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 en<strong>for</strong>cement. Poor quality law-making overthe years has created a tangle of complex andinconsistent laws that present a daunting regulatoryhurdle to the would-be <strong>for</strong>mal enterprise. Assuch, the regulatory systems of these countriesare not well developed to support a flourishingmarket economy that will create growth and<strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong> many advancedcountries (3%).<strong>The</strong> 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 in<strong>for</strong>mal economy.Two methods were used to produce the ranking —one involved averaging out a country’s per<strong>for</strong>manceacross the indicators, and the other used the rawvalues of indicators. Both regressions showed thatthere is a statistically significant correlation betweena country’s overall per<strong>for</strong>mance on the DoingBusiness indicators and the size of its in<strong>for</strong>malFigure 3 Regulatory Burdens Impacting on In<strong>for</strong>mal Enterprises (World Bank, 2005)Starting a BusinessNumber of ProceduresTime (days)CostMinimum CapitalRegistering PropertyNumber of ProceduresTimeCostHiring and Firing of <strong>Work</strong>ersDiffi culty of hiringRigidity of hoursDiffi culty of fi ringRigidity of employmentFiring costsGetting CreditCost to create collateralLegal rights of borrowers and lendersCredit in<strong>for</strong>mationPublic 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 <strong>Work</strong>ers• 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 in<strong>for</strong>mation 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 <strong>for</strong> doing businesscorrelates with a larger in<strong>for</strong>mal economy. <strong>The</strong>analysis also examined the relationship betweenthe individual measures of ease of doing businessand the size of the in<strong>for</strong>mal economy.<strong>The</strong> World Bank has conducted a comprehensivestudy, 58 in identifying and quantifyingthe cost of barriers <strong>for</strong> all regions of the worldand individual countries. <strong>The</strong> extreme cases aresummarissed in Box 3.<strong>The</strong> World Bank study also shows that regulatoryenvironment and in<strong>for</strong>mality are highly correlated:the greater the difficulty in business operation,the larger the size of the in<strong>for</strong>mal sector. In otherwords, barriers or extent of difficulties in doingbusiness <strong>for</strong>ce many operators to take the in<strong>for</strong>malroute.Administrative barriers are the bureaucraticrequirements that flow from regulations, their implementationand en<strong>for</strong>cement. 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 in<strong>for</strong>mal 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).<strong>The</strong> time and money spent complying with governmentregulations impose significant transac-224

Figure 4 Regulatory Environment and In<strong>for</strong>malityGreater ease of doing business is associated with less <strong>for</strong>malityIn<strong>for</strong>mal sector (share of GDP)HigherImplied cut in the in<strong>for</strong>mal 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 <strong>for</strong> 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 in<strong>for</strong>malsector. <strong>The</strong> regulations imposed on business fallinto several categories. Some regulations governingbusiness start-up raise the costs of enteringthe <strong>for</strong>mal 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 <strong>for</strong>eign trade.Governance Issues: In many developing countries,corruption and rent-seeking reduce in<strong>for</strong>mationflows and weaken contract en<strong>for</strong>cement, reducingeconomic activity, especially <strong>for</strong>eign investment.Every major study on barriers to <strong>for</strong>malisation 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 <strong>for</strong>mal manufacturingcompany. 60 Although Peru has substantially re<strong>for</strong>medand simplified the process of setting upa small business, de Soto’s overall conclusionsremain as valid <strong>for</strong> 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 Development<strong>The</strong> 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 andin<strong>for</strong>mal, which is, strictly speaking,, illegal, inUkrainian terms.Key problem: Corruption and other rent-seekingbehaviour. It is widely agreed that the biggestissue <strong>for</strong> the regulatory environment <strong>for</strong> Ukrainianbusinesses is its unpredictability. Regulationsare often confusing or unclear, many regulatoryactivities lack a comprehensive legislativebasis, in<strong>for</strong>mation is lacking and procedures areunnecessarily complex. Rules change frequently— <strong>for</strong> example there were 34 amendments tokey tax laws in 2004. <strong>The</strong> lack of clear and accuratein<strong>for</strong>mation <strong>for</strong> 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. <strong>The</strong> typical smallfirm spent 22 days dealing with inspections in2001, compared to 27 days in 2000. <strong>The</strong>re isno comparable figure <strong>for</strong> 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 re<strong>for</strong>m and donor assistanceover several years, the 140 steps thatbusinesses had to take <strong>for</strong> 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 <strong>for</strong>malisation 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 <strong>for</strong>maleconomy. 61 In a study of the in<strong>for</strong>mal sector inUkraine, 82 percent of businesses believed thatbribes to officials were necessary in order to continueto operate. 62 <strong>The</strong> smallest businesses suffermost from paying bribes, because these sumsdecrease the paltry profits made by thm.Financial Barriers: Financial institutions dependon the credibility of <strong>for</strong>mal documentation toprovide the security and en<strong>for</strong>ceability necessaryto extend credit. As in<strong>for</strong>mal businessescommonly do not possess land title or a standingrelationship with a bank, the most prevalent<strong>for</strong>ms 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, in<strong>for</strong>malentrepreneurs unaccustomed to separating theirbusiness and personal transactions or recordingand maintaining the firm’s in<strong>for</strong>mation, or whouse in<strong>for</strong>mal suppliers who are unable to providedocumentation as solicited by the lender, will berequired to make significant adjustments to theirdaily operations.<strong>The</strong> 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 <strong>for</strong> aguarantee of 150 percent of the value of a loan.<strong>The</strong> 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. <strong>The</strong>re 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 <strong>for</strong> the othermembers), loans are essentially secured by peerpressure. However, such lending schemes shouldnot be considered a replacement <strong>for</strong> traditionalcredit providers, as their small lending portfolios,often prohibitively high interest rates, and relianceon external funding limit the potential reach.Costs of In<strong>for</strong>mality<strong>The</strong> barriers discussed above clearly establishthe reasons why the poor opt to remain inin<strong>for</strong>mal businesses. In<strong>for</strong>mal 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 in<strong>for</strong>mal businesses assume larger risks(than the larger and usually <strong>for</strong>mal firms) andspend more time and resources to monitor theiragents and partners (which explains why theyusually hire relatives and close friends). <strong>The</strong>ychoose low-risk businesses that often yield lowreturns. <strong>The</strong>y operate with a limited amount ofcapital and as a result, they are <strong>for</strong>ced 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. 64<strong>The</strong> relationship between poverty, in<strong>for</strong>mality andpolitical alienation leaves the poor especially vulnerableto organised crime and other unscrupulousparties that rise up to fill the gaps. <strong>Making</strong> <strong>for</strong>malitymore accessible could legally empower the poorto grow their businesses, enjoy the appreciation oftheir assets in <strong>for</strong>mal property markets, and accesscredit more easily. This is the vision of the <strong>Commission</strong>as a means to alleviate poverty. 65<strong>The</strong> benefits that a business person would obtainby going into the <strong>for</strong>mal economy, would be thatregistration of ownership rights in property wouldmean having capital to collateralise; there couldbe state support <strong>for</strong> collection of obligations;greater ease and record of transactions and hopefully,increased protection <strong>for</strong> intellectual property227

<strong>The</strong> Chart below captures broadly the costs and benefits to businesses of being <strong>for</strong>mal versus in<strong>for</strong>mal.INFORMALITYCostsFewer mechanisms <strong>for</strong> 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 labourEn<strong>for</strong>cing contracts only by <strong>for</strong>ceLimited 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 of<strong>for</strong>mality (taxes, permits,regulations)FORMALITYCostsAdministrative PermitsTaxesProduct RegulationsLabour Regulations228BenefitsLimited LiabilityShielding the fi rms from shareholders & creditorsEn<strong>for</strong>ceable rules and agreements among partners Predictable rules to withdraw capitalfrom the fi rm<strong>The</strong> 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 in<strong>for</strong>mation about the nationalidentity, address, the assets they own, their financial history, etc.Access to rules that establish en<strong>for</strong>ceable standards of responsibility among partners,administrators and workers, allowing a more efficient division and specialization of labourand achieving economies of scaleEn<strong>for</strong>ceable contracts, Access to <strong>for</strong>mal conflict resolution mechanismsLegally advertise and protection of brands and trademarksPredictable and speedy rules <strong>for</strong> 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 in<strong>for</strong>maleconomy routinely trade across borders, inAfrica, only the people in the <strong>for</strong>mal 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 <strong>for</strong>mal market, there<strong>for</strong>e, 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 in<strong>for</strong>malto the <strong>for</strong>mal economies easier. <strong>The</strong> role <strong>for</strong> thelaw, then, is to reduce the costs and enhance thebenefits of entering the <strong>for</strong>mal economy. Becausethe process may be long, and because theexistence of the in<strong>for</strong>mal economy is an adaptiveresponse rather than moral failure, the law shouldnot seek to <strong>for</strong>ce the poor out of the in<strong>for</strong>maleconomy by increasing costs or reducing benefits.<strong>The</strong> point is to empower the poor to leave thein<strong>for</strong>mal economy and to provide incentives <strong>for</strong>them to choose to do so.Rights-based Legal EmpowermentMost people enter the in<strong>for</strong>mal economy not bychoice but out of a need to survive. <strong>The</strong> decentwork deficits are most pronounced in the in<strong>for</strong>maleconomy, where the majority of in<strong>for</strong>mal businesseshave little or no social protection andreceive little or no social security. Poor respect<strong>for</strong>, or lack of freedom of association, make it difficult<strong>for</strong> workers and employers to organise in thein<strong>for</strong>mal economy. 66In 2001, an ILO Conference concluded thatin<strong>for</strong>mality is principally a governance issue and itencouraged employers’ and workers’ organisationsto extend their representation throughout the in<strong>for</strong>maleconomy. <strong>The</strong> growth of the in<strong>for</strong>mal economycan often be traced to inappropriate, ineffective,misguided or badly implemented macroeconomicand social policies, often developed withouttripartite consultations among workers, employersand governments. <strong>Work</strong>ers’ representatives on thecommittee <strong>for</strong>cefully stressed that in<strong>for</strong>mality isnot a solution to unemployment and the resultingreport called on governments to provide conducivemacroeconomic, social, legal and political frameworks<strong>for</strong> the large-scale creation of sustainable,decent jobs and business opportunities.However a fundamental concern in the recognitionof rights is the need <strong>for</strong> individual legalidentity, as expressed by M. Woolcock: 67To the extent there is now a broad scholarly andpolicy consensus on the importance of propertyrights <strong>for</strong> development — i.e., <strong>for</strong> encouraginginvestment by the poor (and others) insmall business ventures; or, concomitantly, arecognition that endemic corruption, costlybureaucratic delays and weak contract en<strong>for</strong>cementall 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 in<strong>for</strong>mation 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 re<strong>for</strong>m, labour monitoring,and access to credit, which are good starts229

in helping the poor create wealth. However, institutionalre<strong>for</strong>m is needed to eradicate poverty, attaindevelopment, and successfully transition to freemarket economies. Re<strong>for</strong>ms that reduce bureaucraticred tape and bring the cost of legal complianceunder that of extra-legality are necessary to<strong>for</strong>malise those who were previously excluded.Such re<strong>for</strong>ms should also create greater regulatorytransparency, allow <strong>for</strong> 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 <strong>for</strong> poverty reduction, development,and attaining legal inclusion <strong>for</strong> in<strong>for</strong>mals. 68To Sum Up<strong>The</strong> constraints and barriers discussed in thischapter clearly establish the reasons why the pooropt to remain in in<strong>for</strong>mal businesses. In<strong>for</strong>malenterprises often have limited access to broadereconomic opportunities and are especiallyvulnerable to uncertainties, corruption and evenviolence which is prevalent outside the rule oflaw. <strong>The</strong>y 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 <strong>for</strong>malitymore accessible could legally empower the poorto grow their businesses, enjoy the appreciationof their assets in <strong>for</strong>mal property markets, andaccess credit more easily. This is the vision of the<strong>Commission</strong> 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 In<strong>for</strong>malEnterprises through accessto markets, goods andservices, and infrastructureImproving the functioning of markets<strong>The</strong> close correlation between being poor andoperating in the in<strong>for</strong>mal economy in the ruraland the urban sectors is conspicuous. Also, highbusiness costs and the in<strong>for</strong>mal economy movein parallel in response to ill-designed, unstableand non-participatory rules and regulations, lackof secure property rights, inadequate governmentcapacity and resources to en<strong>for</strong>ce 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, particularly<strong>for</strong> in<strong>for</strong>mal businesses.Agriculture accounts <strong>for</strong> a large share of grossdomestic product (GDP) and employment inSub-Saharan Africa. It is primarily a family activity,a component of the in<strong>for</strong>mal economy with themajority of farmers being small holders owningbetween 0.5 and 2.0 hectares. Women providenearly 50 percent of the labour <strong>for</strong>ce and producemost of the food crops <strong>for</strong> the family. <strong>The</strong> recentreview by the Independent Evaluation Group ofthe World Bank assistance to agriculture in Sub-Saharan Africa makes a pressing case <strong>for</strong> 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 there<strong>for</strong>eimportant 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.<strong>The</strong>se migrants glide into the burgeoning in<strong>for</strong>maleconomy of the countries of destination and inthe absence of inclusive development processes,the in<strong>for</strong>mal 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 <strong>for</strong> the children are adistant hope. As the pro poor growth re<strong>for</strong>m mustincrease the utilisation of the marketable assetsof the poor, it is vital to ensure that markets <strong>for</strong>the poor are better integrated in to the economywith efficient backward and <strong>for</strong>ward linkages.Accordingly, targeted public investments needto be stepped up in education, healthcare,water and sanitation and energy services, andinfrastructure 71 <strong>for</strong> enabling entrepreneurship andgenerating sustainable livelihoods. Also publicinvestments are crucial <strong>for</strong> 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. <strong>The</strong> interventions <strong>for</strong> engaging theprivate sector would reduce the vulnerabilityof the poor and increase their resiliencethrough investments in enhancing accessto resources, building assets <strong>for</strong> 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 <strong>for</strong> overcoming shocks andstresses, when required.economic growth. In the absence of adequateinfrastructure, health services, education, inclusivefinancial services, etc., market <strong>for</strong>ces 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 in<strong>for</strong>mationand regulatory and transaction barriers to marketaccess and market creation <strong>for</strong> new productsand services. <strong>The</strong>se, in turn limit the supply ofthese goods and services. Additional supply-sideconstraints include the reluctance of the privatesector to invest in measuring the demand <strong>for</strong> 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 <strong>for</strong> 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 ef<strong>for</strong>ts to engagein trade and business. <strong>The</strong> poor pay many timesmore <strong>for</strong> 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 canaf<strong>for</strong>d 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 <strong>for</strong> rural in<strong>for</strong>mal 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.‘Be<strong>for</strong>e, 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.<strong>The</strong>ir baby corn is sold in Tesco and Sainsbury’sand their aubergines, chillies and okra aredestined <strong>for</strong> the tables of the Asian communityin the UK.’When VegCARE came and said thatthey would market our produce <strong>for</strong> us, mostpeople doubted them. I was one of the first inthe Kwa Kyai scheme, which now has over 300farmers who decided to join VegCARE.’<strong>The</strong> 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. <strong>The</strong> 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 <strong>for</strong>med 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 living<strong>for</strong> themselves, their families and their communities.Source: CARE Canada, 2007232

primary health system. Similarly, it is estimatedthat achieving the Millennium Development Goals<strong>for</strong> 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.<strong>The</strong>re is need across much of this world <strong>for</strong>greater 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 <strong>for</strong> deliveryof integrated services have inadequate capacityand are not accountable. Accordingly, capacitydevelopment, participation, transparency and accountabilityare mandatory to ensuring that fundsallocated to public service <strong>for</strong> 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, <strong>for</strong> example)and increasing participation of delivery throughoperators in the in<strong>for</strong>mal economy. Privatisationhas not yielded many positive results as itreduces the ability of the state to define an activesocial and economic agenda. In<strong>for</strong>mal operatorsrequire regulation as well as capacity development,particularly <strong>for</strong>m the perspective of qualitycontrol and also <strong>for</strong> 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 <strong>for</strong> developmentand poverty alleviation. This would work best inpartnerships that also include civil society organisations,because they are vital in assuring theparticipatory and accountable approaches needed<strong>for</strong> 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 <strong>for</strong> en<strong>for</strong>cing accountability,reducing costs of varying kinds (<strong>for</strong> transactions,negotiations and en<strong>for</strong>cement of contracts), and<strong>for</strong> 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 in<strong>for</strong>mal 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 <strong>for</strong>ce; b) gaining marketshares by applying a five-point marketing strategy;and c) establishing strategic cooperativealliances involving other networks and internationalagencies. By promoting participatorymechanisms <strong>for</strong> dialogue and capacity building<strong>for</strong> local partners, REDTURS supported thecreation of four national community tourismnetworks that have benefited several indigenouscommunities. Source: ILO<strong>The</strong> provision of efficient, reliable and af<strong>for</strong>dablepublic infrastructure services should work as acatalytic incentive encouraging enterprises inthe in<strong>for</strong>mal economy to move upwards along thecontinuum towards greater <strong>for</strong>malisation.Inclusive financial servicesLimited access to working capital and financialservices including risk management services isresponsible <strong>for</strong> holding back the growth potentialof in<strong>for</strong>mal enterprises. Micro-entrepreneurs inthe in<strong>for</strong>mal economy regard the need <strong>for</strong> financeas a top priority. <strong>The</strong> ILO’s Global Agenda <strong>for</strong>Employment 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 rein<strong>for</strong>ceself organisation among those in the in<strong>for</strong>maleconomy. It is often the monetary transactionsthat catalyse the <strong>for</strong>mation of joint liability andsolidarity groups, some of which develop multipurposeself-help organisations.Access to finance is essential <strong>for</strong> 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 thein<strong>for</strong>mal sector do not have collateral to offer as aguarantee. Most operators in the in<strong>for</strong>mal economythere<strong>for</strong>e look to in<strong>for</strong>mal financial sources.Micro-finance‘<strong>The</strong> poor are bankable’ is the important lessonwe have learnt after nearly three decades ofCase Study:Alternate Model of In<strong>for</strong>mal Credit: SMEs Helping In<strong>for</strong>mal Enterprises in PeruVincent Sanchez lives in the community ofSan Martin de Porres, with his wife, Ruth, andtheir two kids. This is a semi-<strong>for</strong>mal 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 <strong>for</strong> 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, <strong>for</strong> their kids to attendschool, and to pay off the loan on the machine.Be<strong>for</strong>e negotiating the loan <strong>for</strong> the machine,Vincent commuted an hour and a half each wayto work. Now, he only travels once a week tothe in<strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong>mal 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 options<strong>for</strong> access to capital are through in<strong>for</strong>mal financialarrangements with priced transactions, rotatingsavings and credit associations (ROSCAs),or moneylenders who usually provide emergencyloans, often on usurious terms. <strong>The</strong> 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.<strong>The</strong>se ef<strong>for</strong>ts, however, need to be leveraged toenhance access to financial resources by microand small enterprises. <strong>The</strong> commonality betweenin<strong>for</strong>mal 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 <strong>for</strong> 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. <strong>The</strong> micro-finance institutionshave induced more competition in the creditmarket and there<strong>for</strong>e lowered the credit interestrate that poor people have to pay. Currently theseinstitutions are unable to meet requests <strong>for</strong> 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 <strong>for</strong> savings instruments andinstitutions. <strong>The</strong> creation over time of smootherflows of income can work to <strong>for</strong>m 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 in<strong>for</strong>mal economy,particularly micro and small entrepreneurs, donot have access to risk management and safetynetmechanism tools that large private firmsdo. <strong>The</strong>se 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, in<strong>for</strong>mal mechanisms such as savingsand other traditional risk management structures,80 have proven very expensive and there<strong>for</strong>eunsustainable 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 <strong>for</strong> 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 <strong>for</strong> managing risks <strong>for</strong> populationswith low incomes. If this kind of insurancecould be delivered cost-effectively through microfinanceinstitutions (MFIs), it could represent aprofitable segment <strong>for</strong> the insurance industry.While previous attempts to launch such productshave not been entirely successful they have pointedthe way to eventual growth. <strong>The</strong>re 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 <strong>for</strong> adequate medicaltreatment to the borrower in the event of serioushealth problems. Additionally, micro-insurancehas the potential to be used as collateral <strong>for</strong> borrowingadditional credit <strong>for</strong> business enterprises.Herein lies an important tool <strong>for</strong> 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. <strong>The</strong>se 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.<strong>The</strong> private and <strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong>the insurance products are common barriers <strong>for</strong>consumers and suppliers. <strong>The</strong>re is anticipationthat these barriers can be overcome, in part, byproviding an operational linkage between microinsuranceand remittances.RemittancesWhile the search <strong>for</strong> 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 in<strong>for</strong>m public policyand development interventions <strong>for</strong> migration andfinancial services and <strong>for</strong> 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 <strong>for</strong> 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, <strong>for</strong>mal channels will substitute in<strong>for</strong>maltransfers. 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 offerings<strong>for</strong> migrants and their families. Although theissues are complex, remittance are important <strong>for</strong>developing 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 <strong>for</strong> themselves and their familiesback in Mexico.Constraint: Construmex recognised that itsearlier model of serving low-income clientsin Mexico would not work <strong>for</strong> migrants inthe U.S., as the latter approached commercialtransactions with extreme caution. <strong>The</strong>company 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 <strong>Work</strong>s <strong>for</strong>Development- Development <strong>Work</strong>s <strong>for</strong> Business.’ June 2007<strong>The</strong>re are several ongoing initiatives at this timeundertaken by different countries, developmentagencies and institutions, and the learning isevolving. <strong>The</strong> 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. <strong>The</strong>se 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.<strong>The</strong>se collaborative ef<strong>for</strong>ts can also catalyse public238

private-partnerships (PPPs) that can lead to innovativedemand-based products and services <strong>for</strong>meeting the needs of the poor people.To summarize: an enabling environment, capacityand institutions that will enhance access tofinance and safety net mechanisms are critical<strong>for</strong> the entrepreneurs at the bottom of thepyramid and require innovative approaches.Remittances can be an attractive business <strong>for</strong>micro-finance institutions and a valuable additionalfinancial service <strong>for</strong> current and potentialmicro-finance clients. Also, micro-insurance canassist in increasing the demand <strong>for</strong> micro-financeand potentially take micro-finance activities to alarger scale.Public-Private Partnerships<strong>The</strong> in<strong>for</strong>mal 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 re<strong>for</strong>ming 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 <strong>for</strong> 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.<strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong>mulatingappropriate 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.<strong>The</strong> 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 af<strong>for</strong>dable 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 <strong>for</strong>real 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 Partnership<strong>The</strong> 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.<strong>The</strong> 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 in<strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong> Waste Collectors:A Public-Private-Community Partnership ModelWaste collectors are amongst the poorest ofthose working in the in<strong>for</strong>mal economy. In SouthAfrica, since legislated racial segregation ofurban areas was abolished, there have beenincreasing numbers of waste collectors operatingthroughout its cities. <strong>The</strong>y 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/<strong>The</strong>kwini. <strong>The</strong> 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 <strong>for</strong> many residents, a buybackcentre was established in the inner city.This is a public-private-community partnership.<strong>The</strong> Council provided a small plot of centrallylocatedland that was converted into the centre,and a large private-sector recycler provided thescales, storage containers <strong>for</strong> the cardboard andtrolleys <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong> nurturingpartnerships, en<strong>for</strong>cing 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. <strong>The</strong>ir energiescould be tapped to meet the needs of the poor <strong>for</strong>basic services. For instance, it is estimated thatthe achievement of the MDG goals <strong>for</strong> water andsanitation will require enormous annual budgetaryoutlays. A very different and more manageablescenario is <strong>for</strong>eseen if ef<strong>for</strong>ts to achievethese targets were supplemented by servicedelivery through PPPs, particularly if the localcommunities were empowered to manage theirneeds through effective value-chain strategies. Ifeffectively <strong>for</strong>mulated, 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. <strong>The</strong> balanceis, of course, country-specific and dependson the level of development. While recognisingthe critical role of governments in creating foundations<strong>for</strong> 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 <strong>for</strong> creating greater equity isin place, and above all — that the arrangementworks.To Sum Up<strong>The</strong> 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 <strong>for</strong>delivery of basic goods and services and accessto markets. In addition, issues were explored concerningaccess to finance and safety net mechanismswhich are critical <strong>for</strong> the in<strong>for</strong>mal entrepreneurs,particularly micro-finance, micro-insuranceand the matter of remittances and savings amongvarious other financial services and portfolios.<strong>The</strong> 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 ef<strong>for</strong>ts of the government,the private sector or NGOs, represents collectiveaction at the local level. Though the interventionsinvolved in working <strong>for</strong> new economicgrowth outcomes reflect local interventions, theirimplementation recognises a global context that241

5. Institutional changesand legal toolsmaking a difference <strong>for</strong>in<strong>for</strong>mal 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.<strong>The</strong> 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.<strong>The</strong> <strong>for</strong>mat we adopt <strong>for</strong> evidence-based solutionsare the same — from business start-up tobusiness exit — as described in our discussion ofbarriers and constraints to keep con<strong>for</strong>mity andmaintain the linkage. We also present cases ofre<strong>for</strong>ms 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 trans<strong>for</strong>mationof the nature and efficiency of its in<strong>for</strong>maleconomy. Learning from the institution-buildingexperience of the industrialised countries, andthose in transition, as well as from other developingcountries, can be valuable. <strong>The</strong>re are severalgood practice examples from around the world toillustrate how constraints of in<strong>for</strong>mal 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 <strong>for</strong>, and a catalyst of,derived demand <strong>for</strong> 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 in<strong>for</strong>mal economy has an addedadvantage in that it allows <strong>for</strong> a learning-by-doingapproach to implementing institutional re<strong>for</strong>ms.It also allows a synergistic linkage betweenre<strong>for</strong>ms from above, including those initiated bygovernments or promoted by international organisationswith effective action from below — <strong>for</strong>example, by civil society organisations and theorganisations of the poor themselves.Legal empowerment entails making laws andregulations appropriate and relevant to the realitiesof in<strong>for</strong>mal businesses. Some successfulinnovations are discussed below. It also requiresa just and fair system of en<strong>for</strong>cement 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 <strong>for</strong>242

Case Study:‘Tell us how to make legal mechanisms and tools work<strong>for</strong> in<strong>for</strong>mal businesses.’ President Benjamin Mkapa, TanzaniaIn 2005 President Benjamin Mkapa of Tanzaniaproposed that the next government should speedup the process of bringing in<strong>for</strong>mal businesseswithin the legal ambit to shore up achievementsrecorded and spur further the country’s economicgrowth. <strong>The</strong> president made the remarks whenhe launched a report on the Diagnosis Phase ofthe Property and Business Formalisation Programme<strong>for</strong> 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 in<strong>for</strong>mal 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 re<strong>for</strong>ms should be instituted torecognise, protect and ’<strong>for</strong>malise’ of the in<strong>for</strong>maloperators’ assets?d) What needs to be done to ensure our peoplebenefit from the growing <strong>for</strong>mal and marketeconomy?e) Due to lack of recognition legally, in<strong>for</strong>malentrepreneurs have created their own mechanismsof documentation, registration, fungibilityand collateral, and testament.<strong>The</strong>se in<strong>for</strong>mal 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 <strong>for</strong> 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 ef<strong>for</strong>ts. Mkapa said Tanzaniacontinues to be excluded from the benefits ofan expanded market economy, and it was time tobring them in. He called <strong>for</strong> support from stakeholdersand development partners, non-governmentalorganisations, financial institutions ,andothers in the protection and <strong>for</strong>malisation 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;• En<strong>for</strong>cement officers who apply the law uni<strong>for</strong>mlyto all;• Ease of entry into <strong>for</strong>mal business so that variousbusiness <strong>for</strong>ms are quickly and cheaply<strong>for</strong>med, some to limit the owners’ liability totheir investment in the business;• Significant ef<strong>for</strong>t to reduce grand corruptionand, ultimately, to rein<strong>for</strong>ce 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. <strong>The</strong>y 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. <strong>The</strong> laws also do not address whocontrols the military. <strong>The</strong>y do, however, create avocabulary and a virtual <strong>for</strong>um <strong>for</strong> discussion oflegal predictability and, generally, of the rule oflaw; in this way the laws have facilitated discussionsamong actors in the <strong>for</strong>mal economy,including business people as well as lawyers,academics and judges. <strong>The</strong> same vocabularyand <strong>for</strong>um allow social norms underlying <strong>for</strong>mallaws to influence the in<strong>for</strong>mal economy, too, <strong>for</strong>example when business people with one foot ineach economy are vectors <strong>for</strong> transfer of in<strong>for</strong>mation.<strong>The</strong> appearance in the in<strong>for</strong>mal economy ofrelationships and documents mimicking those inthe <strong>for</strong>mal economy suggests the power of suchtransfers from the <strong>for</strong>mal 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 in<strong>for</strong>mal entrepreneursand may be termed ‘empowering’. Most countrieswould expect the following from a <strong>for</strong>mally 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 <strong>for</strong> 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 <strong>for</strong>malitiesand registration are as follows:1. Diagnose the problem:Australia: A task<strong>for</strong>ce was created to measure theadministrative burden, resulting in the establishmentof a Business License In<strong>for</strong>mation Systems(BLIS) as a one-stop-shop service designed to deliverpertinent governmental in<strong>for</strong>mation to smallbusinesses regarding licenses, application <strong>for</strong>msand contact details. <strong>The</strong> results of BLIS are veryimpressive. <strong>The</strong>y have reduced the administrativeburden <strong>for</strong> business by reducing the in<strong>for</strong>mationsearch 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 <strong>for</strong> 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 <strong>for</strong>malities, includingstart-up requirements. <strong>The</strong> comprehensiveness ofthe approach led to a more fundamental re<strong>for</strong>mthan if the government had sought fast results.2. Provide adequate training and resources to244

Case Study:Business Registration Re<strong>for</strong>m in UgandaIn Uganda, firms must apply <strong>for</strong> annual ‘tradelicenses’, which combine basic registration oftheir status with other approvals. This processis a major deterrent to <strong>for</strong>malising 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 <strong>for</strong> fee payments, registrars<strong>for</strong> 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 <strong>for</strong> afew firms which pose significant risks to publichealth or security. <strong>The</strong> DFID project introduceda simplified trade licensing process in Entebbemunicipality, involving only provision of basicin<strong>for</strong>mation by the entrepreneur, payment of afee, and immediate issue of the license document— all in one stop. This re<strong>for</strong>m 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 <strong>for</strong> government:Entebbe municipality estimates a 10 percentreduction in administrative costs. Administrativetime ef<strong>for</strong>t by staff is down by 25 percent.<strong>The</strong>re are reduced waiting lines and hassles <strong>for</strong>businesses.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 in<strong>for</strong>mation.<strong>The</strong>se re<strong>for</strong>ms 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 <strong>for</strong>malisation can be reducedwithout large-scale legal change, but ratherthrough small incremental change. <strong>The</strong> Entebbeexperience is now being replicated in other localauthorities in Uganda.licensing authorities:Australia: Training to licensing authorities on theuse of new technologies <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> business <strong>for</strong> entrepreneurs:Turkey: a one-stop registration launched in June2003 by combining seven procedures into a singlevisit to the company registry. <strong>The</strong> time to start abusiness was cut from 38 days to nine. In addition,application <strong>for</strong>ms were unified and shortened, andregistry officers were trained in customer relations.<strong>The</strong> 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 areper<strong>for</strong>med in only three visits.4. Introduction of standardised <strong>for</strong>ms 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. <strong>The</strong>se can cover allbusiness <strong>for</strong>ms: sole proprietorship, partnership,limited liability, or corporation.5. Electronic registration, online <strong>for</strong>ms and registrydata base in Denmark, Italy, UK, and Norway:electronic registration, an innovative and efficientprocedure, has become norm.Australia and Canada: <strong>The</strong> 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 <strong>for</strong> real time access to the database byinspectorates and others who need the in<strong>for</strong>mation,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 <strong>for</strong>mation 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 in<strong>for</strong>mation(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 <strong>for</strong>malities to open alow-risk business <strong>for</strong> individuals (tax registration)and <strong>for</strong> business (tax registration and enterpriseregistration). Under the SARE system, it takesone working day to comply with federal startup<strong>for</strong>malities <strong>for</strong> 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 en<strong>for</strong>ced in Armenia, Georgia, andMorocco. All four are among the world’s fastest20 percent <strong>for</strong> registering a business.9. Reduce or scrap the minimum capital requirement<strong>for</strong> 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 details<strong>for</strong> 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. <strong>The</strong> trend in Europe is toward administrativemanagement of registries and away fromlegal process involving courts and notaries.(A recent study 93 <strong>for</strong> the European <strong>Commission</strong>found that key drivers of good registration areimprovements in internal efficiency in public bodiesthrough better management techniques andper<strong>for</strong>mance measures, accountability, and userconsultation, which implies a client-orientationfocused on business needs. <strong>The</strong> study found thatreduction in the involvement of court notaries andother legal bodies were associated with substantialefficiency improvements.)12. Licensing Re<strong>for</strong>ms — 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 applied<strong>for</strong> licenses and permits dropped by a third.13. ‘Get out of the Courts.’ Eliminate the need<strong>for</strong> mandatory use of both notaries and judgesfrom registration:Bosnia-Herzegovina will make registration anadministrative process, without resorting to thecourts. Also eliminates the need <strong>for</strong> judges.Italy: registration was taken out of the courts,saving three months.Serbia and Montenegro adopted legislation to dothe same in May 2004. <strong>The</strong> 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. <strong>The</strong>y usually lead tobribes and corruption:Russia: According to a new Inspection <strong>Law</strong>, anyone state agency can carry out no more than oneinspection of one and the same firm in two years.<strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>Law</strong> 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 <strong>for</strong> federal and 20 percent <strong>for</strong> regionalbudgets; 3.3 percent of revenue <strong>for</strong> federaland 6.7 percent <strong>for</strong> regional budgets, if revenuewas below 7.5 million roubles and employmentbelow 20 people. <strong>The</strong> 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.<strong>The</strong> aim is to reduce tax evasion and unreportedactivities by employing computerised tax officesand management in<strong>for</strong>mation systems, setting upregional in<strong>for</strong>mation 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. <strong>The</strong> resultsof this practice have been astonishing: reducedpaper; expanded customer service coverage; itiseasier <strong>for</strong> 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. <strong>The</strong> Centre has brought togetherthe three revenue generating departments in onebuilding with one tax and customs file <strong>for</strong> 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 re<strong>for</strong>m replaced a concessionladensystem with a single flat tax offering noexemption. <strong>The</strong> 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 in<strong>for</strong>mationin the registry sharing credit in<strong>for</strong>mation:<strong>The</strong>re is a need to put more emphasis on positivein<strong>for</strong>mation like outstanding loans, assets, landpayment behaviour on accounts in good standing.<strong>The</strong> public registries in Belgium, Brazil, andTurkey began sharing more positive in<strong>for</strong>mation.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 <strong>for</strong>lenders were launched. In addition, negativein<strong>for</strong>mation like defaults and arrears should alsobe displayed.2. Improve data quality (re<strong>for</strong>ms on registries):Bangladesh: the public registry raised the penalty<strong>for</strong> banks that withhold data from 2,000 takasto 500,000 takas and the penalty <strong>for</strong> disclosingcredit in<strong>for</strong>mation 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 <strong>for</strong>providing incomplete in<strong>for</strong>mation. More than adozen countries are improving data protectionlaws, which include incentives and safeguards <strong>for</strong>quality.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 <strong>for</strong> gender bias. Creditors can nowobtain in<strong>for</strong>mation instantly.4. Introduce universal security <strong>for</strong> debtors andcreditors:Slovakia permitted debtors to use all movable assetsas collateral — present and future, tangibleand intangible, and abolished the requirements<strong>for</strong> 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 en<strong>for</strong>cement:Spain: introduced out of court en<strong>for</strong>cementthrough notaries execution, allowing debtors andcreditors to agree on en<strong>for</strong>cement methods. Timeto en<strong>for</strong>ce was cut from more than one year tothree months.Slovakia: the gains from re<strong>for</strong>ms were even larger.It took 560 days to en<strong>for</strong>ce a mortgage throughthe old system. Now it is possible to en<strong>for</strong>ce it in45 days.India: state-owned banks which account <strong>for</strong> 90percent of lending, were permitted to en<strong>for</strong>cesettlement 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 en<strong>for</strong>cewithin 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 toen<strong>for</strong>ce collateral privately, bypassing the lengthycourt procedures required be<strong>for</strong>e.Croatia cut several months from en<strong>for</strong>cement bymaking it harder <strong>for</strong> debtors to delay the en<strong>for</strong>cementprocess. 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 be<strong>for</strong>ethe 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:<strong>The</strong> development of leasing as a complementarytool to bank loans provides an alternative solution,which can significantly expand access tocapital <strong>for</strong> 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 possible<strong>for</strong> SMEs to reduce income be<strong>for</strong>e 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 <strong>for</strong> business. <strong>The</strong>y 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 appropriate<strong>for</strong> 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.En<strong>for</strong>cing Contracts1. Summary proceedings:Russia: the most popular re<strong>for</strong>m in 2003 was theintroduction of summary proceedings <strong>for</strong> 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 <strong>for</strong>collection of debt. <strong>The</strong> 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. <strong>The</strong>average 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 <strong>for</strong> consultation withcourt clerks and other judges.3. Privatise en<strong>for</strong>cement process and make itcompetitive:Private en<strong>for</strong>cement or specialised public collectionagencies to collect debt are more effective.<strong>The</strong> best way to speed the recovery of overdue debtis by allowing competition in en<strong>for</strong>cing judgments.Colombia scrapped the monopoly of the courts toen<strong>for</strong>ce 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 privateen<strong>for</strong>cement.ExitWith higher recovery rates, banks are more willingto lend and more money goes to new businessventures. <strong>The</strong> 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 <strong>for</strong>eclosureor 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 invoked<strong>for</strong> 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 <strong>for</strong>eclosure proceedings, the creditors needonly to prove that a payment is overdue. Appeal isnot possible.El Salvador: in contrast, the debtor can appeal<strong>for</strong>eclosure 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 <strong>for</strong>disputes to be resolved. Allowing the <strong>for</strong>eclosureor 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 in<strong>for</strong>mal 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 <strong>for</strong> rural women in Mozambique, intellectualproperty rights <strong>for</strong> indigenous peoplein southern Africa3. Use rights to public resources and appropriatezoning regulations:• Rights to urban public land;• Rights to common and public resources: pastures,<strong>for</strong>ests, and waterways;• Appropriate zoning regulations stipulatingwhere and under what conditions in<strong>for</strong>maloperators or businesses can operate in centralbusiness districts, suburban areas, and/orindustrial zonesExamples:Warwick Junction in Durban/e<strong>The</strong>kwini;Dedicated Built Market <strong>for</strong> Traditional MedicineVendors in Durban/e<strong>The</strong>kwini, SouthAfrica;Buy-Back Centre <strong>for</strong> Waste Collectors in Durban/e<strong>The</strong>kwini,South Africa;street vendors zoning in Bangkok and Manila.4. Appropriate legal frameworks and standards<strong>for</strong> what in<strong>for</strong>mal 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 <strong>for</strong> products and servicesExamples:Appropriate standards <strong>for</strong> handling and processingof milk in Nicaragua, Kenya;market license <strong>for</strong> gum collectors in India.5. Appropriate legal tools to govern the transactionand contractual relationships of in<strong>for</strong>maloperators or businesses:• Bargaining and negotiating mechanisms/power;• Legal and en<strong>for</strong>ceable 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 <strong>for</strong> packagedcashew nuts in Senegal;brand name and fair prices <strong>for</strong> Ghanaianchocolate in UK;use of IT to market fish products in Senegal,India.6. Legal rights and mechanisms to provide in<strong>for</strong>maloperators 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 <strong>for</strong> in<strong>for</strong>mal operators and businessesto join or <strong>for</strong>m 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 <strong>for</strong>mal and in<strong>for</strong>maleconomies as a dichotomy, practice is beginningto recognise them as a continuum. Slowly butsurely, the more enlightened policymakers arebeginning to understand that legal empowermentin the <strong>for</strong>m 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. <strong>The</strong> 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 <strong>for</strong> sustained businesslinkages and skills development has to takeplace.To design and support the development of appropriatepolicy and institutions <strong>for</strong> an integratedeconomy, innovations emerging at the interfacebetween the in<strong>for</strong>mal and <strong>for</strong>mal have to beanalysed. Small producers and micro entrepreneursare daily developing strategies <strong>for</strong> dealingwith the demands of <strong>for</strong>mal institutions whilethe latter have also developed ways of managingtheir inevitable encounter with those who arethe majority in the poorer countries of the world.<strong>The</strong>se 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 <strong>for</strong>mal 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 <strong>for</strong>mal 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 In<strong>for</strong>mal Economy— <strong>The</strong> 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 in<strong>for</strong>maleconomy 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 <strong>for</strong> 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 <strong>for</strong>research, training, and communication).<strong>The</strong> first three are democratic membershipbasedorganisations, governed by elected representatives.<strong>The</strong> 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 re<strong>for</strong>m 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 <strong>The</strong>latter was always known as the social welfareapproach; it now needs to be looked at througha business and wealth creation lens. Within aninclusive economy, entrepreneurship, whether<strong>for</strong>mal or in<strong>for</strong>mal, 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 <strong>for</strong>ce;• 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. <strong>The</strong>se 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. <strong>The</strong>se corporateentities of micro-enterprises can become thenatural partners of larger corporate entities thatmight outsource many of their operations andcomponent inputs to these entities. <strong>The</strong> 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 <strong>for</strong>maland in<strong>for</strong>mal 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 in<strong>for</strong>mal sectorto become <strong>for</strong>mally integrated with the macroeconomy.98To Sum Up<strong>The</strong>re 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 <strong>for</strong> successful implementation.Another example of integration is the prospect oflarge numbers of micro-enterprises, living precariouslives in the in<strong>for</strong>mal sector, coming togetherto <strong>for</strong>m large corporate entities, and competing innational and global markets. This could providea new perspective on the role of the in<strong>for</strong>mal255

6. Pursuing the agenda <strong>for</strong>changeOver 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 re<strong>for</strong>ms of national legalcodes, public institutions, and bureaucraticprocesses. <strong>The</strong> anticipated result is a legalinfrastructure conducive to market-led economicgrowth. However, the re<strong>for</strong>m movement has notfully (perhaps only marginally) addressed themultifarious issues of in<strong>for</strong>mal economic activity.Deregulation was expected to result in significantshifts of entrepreneurial activity from in<strong>for</strong>malto <strong>for</strong>mal. But, as pointed out earlier the scaleof in<strong>for</strong>mal economic activity is actually growing,not decreasing. <strong>The</strong> in<strong>for</strong>mal sector is hereto stay. At the same time, policy re<strong>for</strong>m, thatstrengthens what works <strong>for</strong> the working poor andresponds to what does not, is long overdue.<strong>Law</strong>s, 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 in<strong>for</strong>mal businesseswill remain unprotected, insecure, andvulnerable.Business-related re<strong>for</strong>ms are now really comingunder closer scruitiny. 99 In fact, there is anincreasing demand <strong>for</strong> re<strong>for</strong>ms to contain ‘valuebased policies, strategies and institutions’ thatwill bring long-term sustainable benefits to thepoor in general and to in<strong>for</strong>mal enterprises inparticular.What is needed at this juncture are policiesregarding <strong>for</strong>malisation that not only simplify<strong>for</strong>malities or improve the quality of regulation,but also increase the value of in<strong>for</strong>mationprovided by public registers to their users, bothpublic and private. This is because business <strong>for</strong>malisationis an ordinary productive process thatincurs costs but also provides valuable publicand private services. <strong>The</strong> 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 <strong>for</strong>malisation — acost paid only once — but rather to reduce transactioncosts in all business dealings. . . . <strong>The</strong>restructuring of <strong>for</strong>malities is in itself insufficient<strong>for</strong> reducing total transaction costs. It may alsobe a costly distraction. It is necessary, rather, toenhance the value of <strong>for</strong>malisation.’ 100Addressing in<strong>for</strong>mality, there<strong>for</strong>e, is a multi-facetedproposition requiring a thorough understandingof the factors that create and drive in<strong>for</strong>mality.Re<strong>for</strong>m initiatives may also require that the<strong>for</strong>mal sector be re-defined to accommodatemany of the principles and values which characterisethe vibrancy and resilience of the in<strong>for</strong>malsector. Clearly, there is no single approach tore<strong>for</strong>m 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 in<strong>for</strong>mal 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 in<strong>for</strong>mal businesses.Changes have to be Context SpecificAlthough development interventions tend to favourre<strong>for</strong>m through standardised, ‘best practice’ institutional<strong>for</strong>ms, 101 what is required is an empiricallygrounded perspective using context-specificresearch, organisational innovation and politicalentrepreneurship rather than the importation ofinstitutional templates (‘toolkits’) <strong>for</strong>ged 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. 103<strong>The</strong>re<strong>for</strong>e context-specificity is a fundamentalrequirement in moving towards change. Thisspecificity must also extend to the reality ofdifferent categories of in<strong>for</strong>mal businesses inspecific locales and industries. Any policy orinstitutional re<strong>for</strong>m has to recognise and supportboth the self-employed (differentiating betweenmicro-entrepreneurs and own-account operators)and wage workers in the in<strong>for</strong>mal economy. <strong>The</strong>lack of recognition and understanding of thesebasic components of the in<strong>for</strong>mal economy oftenhinders the development of appropriate policy.Re<strong>for</strong>m Processes Must beParticipatory and Gender ResponsivePolicy and institutional re<strong>for</strong>m should be participatoryand inclusive and allow <strong>for</strong> policies tobe developed through consultation with in<strong>for</strong>malbusinesses, and through consensus of relevantgovernment departments, the organisations ofin<strong>for</strong>mal businesses and other appropriate socialactors. In order to have a voice, those who arein the in<strong>for</strong>mal economy must be organised andtheir ef<strong>for</strong>ts 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 <strong>for</strong>a common economic purpose and without politicalmanipulation.Of course, <strong>for</strong>mulating appropriate policies andstrategies is not an easy task. However, with theinvolvement of the organisations that representin<strong>for</strong>mal businesses it is likely to succeed. <strong>The</strong>way <strong>for</strong>ward 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 in<strong>for</strong>malworkers and their organisations, based on recognitionof their right to organise, is crucial.<strong>The</strong> 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 work<strong>for</strong>ceis in the in<strong>for</strong>mal economy and, within thein<strong>for</strong>mal economy, more women tend to be concentratedin lower-return segments than are men.As a result, even within the in<strong>for</strong>mal economy,there is a significant gender gap in earnings andin the benefits and protection af<strong>for</strong>ded 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 in<strong>for</strong>mal economy, wherea gendered approach is a pro-poor approach.Supporting women’s work will, in effect, lead tosupport <strong>for</strong> poor households and poor children.Legal empowerment of in<strong>for</strong>malbusiness should be prioritised as agovernance issue<strong>The</strong> re<strong>for</strong>m process should be based on an in<strong>for</strong>medunderstanding of the economic contribu-257

Case Study:Technology and the In<strong>for</strong>mal 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 <strong>for</strong> only a couple of hours be<strong>for</strong>e 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, <strong>for</strong>example, 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. ‘<strong>The</strong>‘law of one price’ — the idea that in efficientmarket identical goods should cost the same— had come into effect, in the <strong>for</strong>m of a singlerate <strong>for</strong> 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 paid<strong>for</strong> themselves within two months. And the benefitsare enduring, rather than one-off.’This shows the importance of the free flow ofin<strong>for</strong>mation to ensure that markets work efficiently,which in turn improve welfare.tion of in<strong>for</strong>mal businesses and serve to mainstreamthe concerns of the in<strong>for</strong>mal businessesin those institutions that deal with economicplanning and development. In the past, themanagement or regulation of in<strong>for</strong>mal 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 thein<strong>for</strong>mal economy in traffic, health, policy orsocial departments ignores its economic aspects.Institutions that govern the in<strong>for</strong>mal economyshould be those dealing with economic planningand development. That is why this report hasemphasised that re<strong>for</strong>m has to be couched withinan integrated economy approach where in<strong>for</strong>maland <strong>for</strong>mal are seen as equally important economicplayers, each demanding equal attentionin national governance laws and institutions.Strategies and Institutions to SupportIn<strong>for</strong>mal Businesses258

In developing and promoting new approaches,some considerations and innovations outlinedbelow could be considered. 104Market-based institutions <strong>for</strong> the poor<strong>The</strong> capacity of in<strong>for</strong>mal businesses to operate onmore equal terms in the market place dependsgreatly on their capacity <strong>for</strong> collective action.<strong>The</strong> 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 the<strong>for</strong>m of marketing cooperatives, or corporate bodiesof the poor, remain crucial interventions. <strong>The</strong>issue there<strong>for</strong>e remains, posed as a challenge: toinvest the poor and in<strong>for</strong>mal 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 in<strong>for</strong>mal businessesMany NGOs around the world provide marketingservices to the poor, <strong>for</strong> particular commodities,in particular markets. <strong>The</strong> best service that canbe provided is to help the poor and in<strong>for</strong>mal businessesadd value to their labours by moving upmarketthrough either agro-processing or providinginputs to the corporate sector. <strong>The</strong> pioneeringrole of Amul Dairy in India and, more recently,BRAC, are instructive model examples. <strong>The</strong>y 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 <strong>for</strong> developing amacro-perspective <strong>for</strong> poverty eradication than inthe area of monetary policy. <strong>The</strong> instruments ofmonetary policy appear to be exclusively targetedtowards ensuring macroeconomic stability, moderatinginflation and meeting the credit needs ofthe corporate sector. <strong>The</strong> financial needs of thepoor, once left to the in<strong>for</strong>mal 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, there<strong>for</strong>e, 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. <strong>The</strong>re 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 <strong>for</strong> the Poor’ and ‘MobileBanking <strong>for</strong> Villages’. In Egypt, the Social Fund,Credit Guarantee Company and Micro-financeNGOs are not only successful providers of creditto in<strong>for</strong>mal businesses but also organisers of permanentexhibitions <strong>for</strong> MSMEs’ products, offeringentrepreneurial training and outreach services topoor enterprises.Mutual funds <strong>for</strong> 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. <strong>The</strong> mutual fund isbut one institutional mechanism to link the poorto the corporate sector. <strong>The</strong> underlying premise ofthe mutual fund is the notion of creating possibilities<strong>for</strong> the poor to own corporate assets. Opportunitiesare there<strong>for</strong>e opening <strong>for</strong> 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 shareholders<strong>The</strong> largest single <strong>for</strong>eign corporate investment inBangladesh is manifested in the GrameenPhone experience.GrameenPhone is a commercial joint ventureto provide cellular phone services. <strong>The</strong> 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 single<strong>for</strong>eign 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 <strong>for</strong>these rural women to become direct stakeholdersin the largest private enterprise in the country. <strong>The</strong>goal 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. <strong>The</strong>prospect of poor rural women in Bangladesh owningone of the largest corporate enterprises in the countrycould have a trans<strong>for</strong>ming 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. <strong>The</strong> two260

institutional instruments to make this possibleremain the mutual fund and the need <strong>for</strong> privatelimited companies to trans<strong>for</strong>m themselves intopublic limited companies. Here monetary and fiscalpolicy can provide incentives to encourage thecorporatisation of private wealth along with thereservation of space <strong>for</strong> equity ownership of thiswealth by the poor.Institutionalising the collectiveidentity of poor and in<strong>for</strong>malbusinesses 106Suggestions about building a collective identity<strong>for</strong> the poor and in<strong>for</strong>mal businesses throughspecially constructed institutions derives fromthe need <strong>for</strong> the poor to claim a place in societythat is more commensurate with their numbers.<strong>The</strong> poor remain disempowered because they areisolated; bring them together and they emergeas a major <strong>for</strong>ce in the economy, in society and,eventually, in the political arena. Institutionalarrangements that can add value to the re<strong>for</strong>magenda are:a) Corporations of the poor and in<strong>for</strong>mal businesses:Community-based or self-help organisations(CBOs) of the poor, cooperatives andactivity-based organisations, that bring groupsof the poor together, should aspire to <strong>for</strong>ge aninstitutional identity. Corporatising the CBOs willprovide the legal foundations <strong>for</strong> collective action,to enable these bodies of the poor to accesscredit, enter into contractual relationships anddeal with international organisations. <strong>The</strong> 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: <strong>The</strong> prospectof large numbers of micro-enterprises, livingprecarious lives in the in<strong>for</strong>mal sector, comingtogether to <strong>for</strong>mer large corporate entities thatwould compete in national and global markets,provides a new perspective on the role of thein<strong>for</strong>mal sector in the national economy. <strong>The</strong>secorporate entities of micro-enterprises can becomethe natural partners of larger corporate entitiesthat could outsource many operations andcomponent inputs to them... <strong>The</strong> larger corporateentities of micro-enterprises would eliminate boththe cost and managerial problems associated withbuilding this linkage and open up new horizonsof opportunity to the in<strong>for</strong>mal sector to <strong>for</strong>mallyintegrate 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 In<strong>for</strong>mal 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 in<strong>for</strong>malbusinesses are more vulnerable than the rest ofthe population to perils such as illness, accidentaldeath and disability, theft or fire, agriculturallosses, natural or manmade disasters. <strong>The</strong>y 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 in<strong>for</strong>mation 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 in<strong>for</strong>mation. <strong>The</strong> barcodestickers are especially useful <strong>for</strong> illiterate clientswho can attach them onto pre-addressed envelopesto identify themselves.Business Rights — providevalue-based change process.<strong>The</strong> rationale <strong>for</strong> changes in the in<strong>for</strong>mal businessessuch that some elements and advantagesof <strong>for</strong>malisation are incorporated is rooted in awider appreciation of how both individuals andbusinesses can be disadvantaged by operatingoutside the <strong>for</strong>mal economy and the recognitionthat there are benefits to <strong>for</strong>malisation. Neverthelessmicro-entrepreneurs make an economiccalculation along the lines of a cost-benefitanalysis, which determines a minimum thresholdof participation in <strong>for</strong>mal arrangements <strong>for</strong> whichthe costs remain lower than the benefits. Somefirms will there<strong>for</strong>e choose to participate in onlya subset of institutions at any point in time. Inaddition, benefits and costs of participating in a<strong>for</strong>mal context vary <strong>for</strong> firms of different size andexpected lifetime. It would <strong>for</strong> instance seem thatyoung, inefficient and small firms are disproportionatelyin<strong>for</strong>mal.<strong>The</strong> chart below illustrates the phases an enterprisemight hypothetically go through be<strong>for</strong>e itbecomes an official <strong>for</strong>mal enterprise. <strong>The</strong> chartalso illustrates that the transition from an in<strong>for</strong>malto a <strong>for</strong>mal status is gradual and that it isimportant to initiate the relevant processes thatcould assist enterprises to reach a more <strong>for</strong>malexistence. Any interventions in support of movingenterprises towards a more <strong>for</strong>mal existenceshould be prioritised and concentrated on wherethe maximum effects can be reached. <strong>The</strong> waythat the in<strong>for</strong>mal enterprises themselves rank theproblems that they are facing would indicate howto prioritise interventions.In order to make a smooth transition from in<strong>for</strong>malto <strong>for</strong>mal 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 in<strong>for</strong>mality are complexand defy simple explanations. Consequently,the trans<strong>for</strong>mation can only be tackled successfullyby a linking set of policy initiatives thatdeliver both pull and push pressures. <strong>The</strong> 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 In<strong>for</strong>mal EnterprisesSUPPLY PUSH• Regulatory Re<strong>for</strong>ms• Reducingadministrativebarriers• Af<strong>for</strong>dableBusiness Fees• Simplified Taxation• AccessibleBusiness Licensingand Registration• ReducingCorruption• Adaptable Labour<strong>Law</strong>sGradual Transition through Business RightsIn<strong>for</strong>malSubsistenceBusinessesUnofficialBusinessesPartlyOfficialBusinessesFormalSustainableBusinessesDEMAND 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 re<strong>for</strong>ms, reducing administrativebarriers, af<strong>for</strong>dable business and licensing fees,accessible business and licensing and registrationprocedures; reducing corruption; adaptablelabour laws, etc. <strong>The</strong> chart further highlightsthat the number of in<strong>for</strong>mal enterprises movingtowards <strong>for</strong>mal sustainable enterprises is smallcompared to the huge size of subsistence in<strong>for</strong>malenterprises.Formalisation may there<strong>for</strong>e be seen as anincremental process that begins by introducingappropriate incentives and benefits of <strong>for</strong>mality,then progressively en<strong>for</strong>ces compliance with thecosts and regulations associated with operating<strong>for</strong>mally which would depend on the size, output,or location of the enterprises. Once conditions aremet, the working poor in the in<strong>for</strong>mal economywould be entitled to the benefits of <strong>for</strong>mality and,at the same time, they would be enabled to complywith the duties of <strong>for</strong>malisationPillars of Change<strong>The</strong> sustainability of any proposed re<strong>for</strong>m toa country’s governing institutions depends onpublic recognition of the changes to be made.Recognition will thus depend on the capacity ofthe re<strong>for</strong>m to be legitimised within the public’scultural and social milieu. Failure may preventthe successes of legal re<strong>for</strong>ms that are otherwisecognizant of larger policy aims to promotemarket-driven economic growth. For Sub-SaharanAfrica, <strong>for</strong> example, failure to incorporate widely263

accepted customary <strong>for</strong>ms could mean outrightrejection by the private sector. <strong>The</strong>re<strong>for</strong>e, indetermining what can be done to legally empowerin<strong>for</strong>mal businesses to better access the opportunities,finances, services and facilities of the <strong>for</strong>malsector, one would have to take into accountthat which already works.<strong>The</strong> recommendations of the working group <strong>for</strong>Chapter 4 of this report may be summarised indescriptions of five proposed pillars of re<strong>for</strong>m:Pillar 1: Adopt an inclusive and integratedapproach to economic development so that thereis legal recognition and empowerment of in<strong>for</strong>malbusinesses.Legally empowering small in<strong>for</strong>mal businessesrun by poor individuals or households should beseen as a central pillar of a just society and acentral strategy <strong>for</strong> 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. <strong>The</strong>se billions are the producersand consumers who make markets profitable <strong>for</strong>the privileged. <strong>The</strong>ir share has to be duly recognisedthrough much greater public and privatesector cognisance and support to small firmsand enterprises. In<strong>for</strong>mality, with its flexibilityand space <strong>for</strong> 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 en<strong>for</strong>ced throughregulatory bodies.Commercial rights <strong>for</strong> in<strong>for</strong>mal 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. <strong>The</strong> 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. <strong>The</strong>se commercialrights should address all categories of in<strong>for</strong>malenterprise, 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 <strong>for</strong> larger,more advanced in<strong>for</strong>mal enterprises.Pillar 3: Reduce Decent <strong>Work</strong> ‘defi cits’ of thosewho work in<strong>for</strong>mally.This means support to in<strong>for</strong>mal businesses in the<strong>for</strong>m of:• Participation in policy processes of a representativevoice of the working poor in the in<strong>for</strong>maleconomy. Recognition and correction of thebias in existing commercial policies, regulations,laws and procedures favouring largerfirms and enterprises. Extension of governmentincentives and procurements to the smallestin<strong>for</strong>mal enterprises;• Facilitation as appropriate of backward and264

<strong>for</strong>ward linkages on fair terms between largerand smaller firms;• Promotion of market access and fair trade <strong>for</strong>smaller firms and enterprises;• Social protection of in<strong>for</strong>mal operators throughproperty, health, life, disability insurance;• Adequate and relevant retraining, life-longlearning, and other support to labour mobility.Pillar 4: Broaden access of in<strong>for</strong>mal businessto financial services and support innovation infinancial products and processes. This requiresthat there be:• Awareness in both <strong>for</strong>mal and in<strong>for</strong>mal creditsystems of the way the working poor use creditand the barriers and often inappropriate rulesin <strong>for</strong>mal 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 <strong>for</strong> both the lendersand borrowers from in<strong>for</strong>mal business;• Support to innovation in financial products andservices with a view to deepening their outreach.Pillar 5: Engage in evidence-based re<strong>for</strong>m.<strong>The</strong>re are now hundreds of good practice examplesthat illustrate how the constraints of in<strong>for</strong>malbusinesses have been successfully addressedaround the world. <strong>The</strong>se examples should bestudied and the lessons learnt should be groupedaccording to what constraint or need was beingaddressed and the policy lesson drawn from theexperience. <strong>The</strong> policy re<strong>for</strong>m that ensures shouldbe participatory and targeted to the realities of thedifferent sub-sectors in the in<strong>for</strong>mal economy.ConclusionsThis report has outlined how the process ofachieving greater legal empowerment (throughbusiness rights and access to the advantagesof <strong>for</strong>malisation) can and should take different<strong>for</strong>ms. Incentives to encourage in<strong>for</strong>mal entrepreneursto actively engage in the change processmust show actual benefits to their livelihoods andtheir well-being. <strong>The</strong>se incentives are essentiallywhat would result if the barriers to entry intoand/or interaction with <strong>for</strong>mal and legal economicactivity were addressed. Incentives could be inthe <strong>for</strong>m of• Simplified registration procedures and progressiveregistration fees;• A supportive investment climate and a businessenabling environment;• Fair commercial transactions between in<strong>for</strong>malenterprises and <strong>for</strong>mal firms;• Appropriate legal and regulatory frameworks,including: en<strong>for</strong>ceable commercial contracts;private property rights; more equitable use ofpublic land; and tax-funded incentives, suchas government procurement, tax rebates, taxfundedsubsidies, and incentive packages.<strong>The</strong>se 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 in<strong>for</strong>malproducers have to be put into place and policyand institutional re<strong>for</strong>m undertaken in a participatorymanner. <strong>The</strong> participation of in<strong>for</strong>mal entrepreneurs,both women and men, would be bestensured through proactive and iterative dialogue— on an ongoing basis — with representatives ofassociations of in<strong>for</strong>mal entrepreneurs.265

Recommendations and Key MessagesObjectives of Empowerment ProcessLegal empowerment of in<strong>for</strong>mal 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 <strong>for</strong>mal 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 <strong>for</strong> growth, in<strong>for</strong>mal 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 <strong>for</strong>larger, more developed, in<strong>for</strong>mal enterprises.Means to Meet ObjectivesDifferent Instruments — Policies and laws, regulationsand procedures, business developmentinfrastructure, and organisation and representationof in<strong>for</strong>mal business.Policy and Regulatory Environment - Legal empowermentof in<strong>for</strong>mal 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 in<strong>for</strong>mal 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 in<strong>for</strong>mal enterprises;• Seeks to build backward and <strong>for</strong>ward linkageson fair terms between larger and smaller firms;• Seeks to promote market access and fair trade<strong>for</strong> smaller firms and enterprises;• Promotes social protection <strong>for</strong> in<strong>for</strong>mal operators(property, health, life, disability insurance)plus retraining, life-long learning, and othersupport to mobility.<strong>The</strong> Formalisation Debate:In response to the question of whether and howto <strong>for</strong>malise in<strong>for</strong>mal businesses, the <strong>Commission</strong>should highlight the point that <strong>for</strong>malisation hasdifferent dimensions:• Expanding <strong>for</strong>mal employment opportunities.• Creating incentives <strong>for</strong> in<strong>for</strong>mal enterprises to<strong>for</strong>malise, including1) Simplified registration procedures and progressiveregistration fees;2) Supportive investment climate;3) Fair commercial transactions between in<strong>for</strong>malenterprises and <strong>for</strong>mal firms;4) Appropriate legal and regulatory frameworks,including en<strong>for</strong>ceable 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 in<strong>for</strong>mal enterprises;• Creating mechanisms and financing arrangementsto provide social protection to in<strong>for</strong>malentrepreneurs;• Promoting participatory policy processes andinclusive rule-setting institutions that includerepresentatives of associations of in<strong>for</strong>malentrepreneurs.267

Chapter 4 Endnotes1 A business has been defined as an organisational entity designedto sell goods and/or services in an ef<strong>for</strong>t to generate profit or a financialreturn. <strong>The</strong>y can be also be a source of employment <strong>for</strong> others — inaddition to the owner and operator - and provide wealth and livelihoodsto the owners as well as the employees. In<strong>for</strong>mal Businesses andIn<strong>for</strong>mal Enterprises are used interchangeably in this report.2 George A. Aryee: ‘Promoting Productivity and Social Protection inthe Urban In<strong>for</strong>mal 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 ‘<strong>The</strong> In<strong>for</strong>mal Economy,’ Committee onEmployment and Social Policy, ILO, March 2007.4 Woolcock M., ‘Some Initial Thoughts on Empowering In<strong>for</strong>malBusinesses,’ contribution to CLEP, June 2007.5 Hyden G., African Politics in Comparative Perspective,Cambridge University Press, New York, 2006.6 Hart, K. (1973) In<strong>for</strong>mal income opportunities and urbanemployment in Ghana. Journal of Modern African Studies, 11, 61-897 Devey, R., Skinner, C,, and Valodia, Imraan. ‘In<strong>for</strong>mal 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%20In<strong>for</strong>mal%20Economy%20employment%20data%20in%20ZA.pdf8 UNU-WIDER. 2006.9 Stiglitz, J. <strong>Making</strong> Globalization <strong>Work</strong>. Penguin Group. UK. 2006.p11.10 Stiglitz, J. Op Cit p11. Even if the targets of the MillenniumDevelopment Goal (MDG) <strong>for</strong> 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 ef<strong>for</strong>t to generate profi tor a fi nancial return. <strong>The</strong>y can be also be a source of employment <strong>for</strong>others — 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 In<strong>for</strong>mality, Viewpoint 298,World Bank, Washington D.C., August 200514 Xaba, J. Horn, P. and Motala, S. ‘<strong>The</strong> In<strong>for</strong>mal Sector in Sub-Saharan Africa’. <strong>Work</strong>ing paper on the in<strong>for</strong>mal 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 In<strong>for</strong>mal 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 In<strong>for</strong>mal Economy,’ 11th AfricanRegional Meeting, Addis Ababa, 26 April, 2007. http://www.ilo.org/public/english/region/afpro/addisababa/pdf/in<strong>for</strong>maleconomy.pdf, p.117 Mofokeng, C. ‘<strong>The</strong> In<strong>for</strong>mal 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 ‘<strong>The</strong> Dilemma of the In<strong>for</strong>mal Sector.’ 1991.19 Mofokeng, C. Op Cit. p.6.20 Gallin, D. ‘Organising in the Global In<strong>for</strong>mal 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_in<strong>for</strong>mal_economy.htm21 ‘Market Life in West Africa: Markets and the In<strong>for</strong>mal 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 in<strong>for</strong>mation 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 <strong>for</strong> 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 <strong>The</strong> 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 <strong>for</strong>malisation system, an entrepreneur always decideswhether or not to <strong>for</strong>malise 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 in<strong>for</strong>maleconomy. 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 thein<strong>for</strong>mal economy.31 Decent work and the in<strong>for</strong>mal 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.<strong>The</strong> World Bank. In Analysing and Achieving Pro-Poor Growth. Povertyin Focus. International Poverty Centre. UNDP. March 2007.268

33 Chen, M. Rethinking the In<strong>for</strong>mal Economy: Linkages with theFormal Economy and the Formal Regulatory Environment. EGDI andUNU-WIDER Conference ‘Unlocking Human Potential: Linking theFormal and In<strong>for</strong>mal Sectors.’ Helsinki, Finland. 17-18 September 200434 Dar es Salaam In<strong>for</strong>mal Sector Survey. 1995. ILO35 Manushi S. <strong>Law</strong>s, Liberty & Livelihood. A bottom up Agenda ofEconomic Re<strong>for</strong>ms. www.manushi-india.org36 Ishengoma, E. K., Kappel, R.. Formalising In<strong>for</strong>mal 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. <strong>The</strong> OECD country data is based on the average WB reportedGDP per capita at constant 1995 US$.38 Loyaza, N. <strong>The</strong> economics of the in<strong>for</strong>mal sector; A simple modeland some empirical evidence from Latin America. World Bank PolicyResearch Papers. 199739 Cord, L. Promoting Pro-Poor Growth: Lessons from countryexperiences. <strong>The</strong> 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 In<strong>for</strong>mal 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 in<strong>for</strong>mal economy;How global trade and investment impact on the working poor,background paper <strong>for</strong> ILO Report, 2002. May 2001.44 F. Verdera: In<strong>for</strong>mality in Latin America: Recent trends, policiesand prospects. Paper prepared <strong>for</strong> ILO Technical <strong>Work</strong>shop on Old andNew facets of in<strong>for</strong>mality, Geneva. 2 March 2001.45 http://info.worldbank.org/etools/docs/library/76309/dc2002/proceedings/pdfppt/statistics.pdf46 Nurul Amin, A.T.M. <strong>The</strong> In<strong>for</strong>mal sector in Asia from the decentwork perspective. ILO. 2002.47 <strong>The</strong> role of in<strong>for</strong>mal sector through the stages of developmentand cycles of economic growth: <strong>The</strong> Asia Evidence. Paper presentedat the ILO Technical <strong>Work</strong>shop on Old and New Facets of In<strong>for</strong>mality.Geneva. 2 March 2001.48 WIEGO-Women in In<strong>for</strong>mal 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 In<strong>for</strong>mal Firms: Whatcan be done? March 2007. Op Cit.52 Legal Identity <strong>for</strong> Inclusive Development. ADB. 2007. <strong>The</strong>Philippines. 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 ef<strong>for</strong>ts 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. <strong>The</strong> same rationale will apply <strong>for</strong> theprovision of an estimated US$700 billion of investment required tobring electricity to an additional US$1.4billion people.54 Rodrik, Dani. <strong>The</strong> Limits of Self En<strong>for</strong>cing Contracts. ReactionEssay. August 9, 2007.55 <strong>The</strong> 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 <strong>for</strong> 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: <strong>The</strong> Case <strong>for</strong> Re<strong>for</strong>mand Emerging Best Practice, 200560 De Soto, H. 1989. <strong>The</strong> Other Path (New York: Basic Books)61 Ibid.62 Ibid.63 Building Resources Across Communities (<strong>for</strong>merly known asBangladesh Rural Advancement Committee)64 ILD paper on Legal Tools to Empower In<strong>for</strong>mal Businesses,submitted in 2006 to our working group on Chapter 4.65 De Soto, Hernando. 1989. <strong>The</strong> Other Path (New York: BasicBooks), and 2000. <strong>The</strong> Mystery of Capital (New York: Basic Books).66 ILO DGReport ‘<strong>The</strong> Dilemma of the In<strong>for</strong>mal Sector’ 199167 Woolcock M., ‘ Some Initial Thoughts on Empowering In<strong>for</strong>malBusinesses,’ a note to CLEP <strong>Work</strong>ing 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 in<strong>for</strong>mal water market and the communities’willingness to pay <strong>for</strong> 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. <strong>The</strong> peri-urban andmusseque population is <strong>for</strong>ced to pay extremely high prices <strong>for</strong> (oftenuntreated) water pumped from the Bengo River and distributed by tankertrucks to in<strong>for</strong>mal 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. <strong>The</strong>study of the water market demonstrated that musseque residents wereaccustomed to paying up to 10,000 times more <strong>for</strong> water to the privatesellers than the well-to-do in the cement city were paying <strong>for</strong> treatedwater piped to their household taps by the provincial water company.Ironically the poor were far more accustomed to pay dearly <strong>for</strong> services269

than the rich. It further demonstrated that US$35 million per year waspaid by the urban poor <strong>for</strong> purchasing water, and that much of thisincome could eventually be recovered in water fees if a just set of tariffswas set at equitable prices <strong>for</strong> all consumers. Cain, A. Livelihoods and theIn<strong>for</strong>mal 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 <strong>for</strong> 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 <strong>for</strong> Employment: Discussion Paper.75 Besley, T., Burgess, R. and Esteve-Volart, B. <strong>The</strong> Policy Originsof Poverty and Growth in India. In Analysing and Achieving Pro-PoorGrowth. March 2007. International Poverty Centre. UNDP76 Decent work and the in<strong>for</strong>mal 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 In<strong>for</strong>mal Economy: <strong>The</strong> Role of Micro-fi nanceInstitutions. <strong>The</strong> Ford Foundation. New York.82 Cohen, Monique and Jennefer Sebstad. 2003. ReducingVulnerability: <strong>The</strong> Demand <strong>for</strong> Microinsurance. Microsave-Africa. Nairobi.83 <strong>The</strong> 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. <strong>The</strong> World Bank.Washington DC. 200786 Stiglitz, J. Op Cit. Also, nearly 741 million Indians in ruralareas are poorly served, despite a huge demand <strong>for</strong> 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 <strong>The</strong> MonterreyConsensus highlights the necessity to engage the private sectoras a prerequisite <strong>for</strong> poverty alleviation. <strong>The</strong> report of the UN’s<strong>Commission</strong> on the Private Sector and Development entitled ‘UnleashingEntrepreneurship — <strong>Making</strong> Business <strong>Work</strong> <strong>for</strong> the Poor’ emphasisesimproving the environment <strong>for</strong> private sector development and privateinvestment. <strong>The</strong> 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 <strong>for</strong> them to do so. In highlighting the need<strong>for</strong> 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 <strong>The</strong> 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 <strong>for</strong> 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 <strong>The</strong> 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 <strong>for</strong> the Enterprise Directorate General of theEuropean <strong>Commission</strong>; 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 <strong>for</strong> 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 <strong>Commission</strong>’s In<strong>for</strong>malBusinesses <strong>Work</strong>ing Group: World Bank.104 Sobhan, R. ‘A Macro Policy <strong>for</strong> 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

Chapter 4 BibliographyADB, ‘Legal Identity <strong>for</strong> Inclusive Development’. 2007. Manila,Philippines.Amin, A.T.M. Nurul. ‘<strong>The</strong> In<strong>for</strong>mal sector in Asia from the decent workperspective’. ILO. 2002.Arruñada, Benito. ‘Pitfalls to Avoid When Measuring Institutions: IsDoing Business Damaging Business?’ Pompeu FabraUniversity. Barcelona. June 2007.Aryee, George A.: ‘Promoting Productivity and Social Protection in theUrban In<strong>for</strong>mal Sector — An Integrated Approach. Reporton Pilot projects in Bogota, Dar es Salam and Manila -Summary of activities,lessons and recommendations’ ILO,third (updated ) edition Dec 2006Bannock, G. et al. ‘Indigenous Private Sector Development andRegulation in Africa and Central Europe: A 10 CountryStudy.’ London, Bannock Consulting. 2002Besley, Timothy, Robert Burgess and Berta Esteve-Volart. <strong>The</strong> PolicyOrigins of Poverty and Growth in India. In Analysing andAchieving Pro-Poor Growth. March 2007. InternationalPoverty Centre. UNDPBrown, Warren. ‘Why MFIs are providing insurance to low incomepeople?’ Dhaka, 2000. Cain, Allan. ‘Livelihoods and theIn<strong>for</strong>mal Economy in Post-War Angola’. Published inMonograph No. 102, August 2004.Brustinow, Angelika, ‘<strong>Making</strong> Rights <strong>Work</strong> <strong>for</strong> the Poor; AlternativeDispute Resolution.’ Prepared by, UNECE, 2006.CARE, Canada, ‘Heads or Tails — Extra National Dimensions ofInternational Development’ April 2007.______., ‘<strong>The</strong> Missing Middle of Investment in Developing Countries’Aril 2007______., ‘<strong>The</strong> Story of John and Juan- Social Entrepreneurialism andbarriers to the business <strong>for</strong>mation’ February 2007Carr, M., M. A. Chen: Globalization and the in<strong>for</strong>mal economy; Howglobal trade and investment impact on the working poor,background paper <strong>for</strong> ILO Report, 2002. May 2001Chang, Ha-Joon. ‘Understanding Institutional Changes and EconomicDevelopment’ Policy Brief. UNU-WIDER. Finland. 6November 2007.Charmes, Jacques, (cited in) Women in In<strong>for</strong>mal Employment:Globalization and Organising (WIEGO), 2 nd Annual Meeting,Cambridge, Massachusetts. 22-24 May 2000.Chen, Martha ‘Empowerment of In<strong>for</strong>mal Businesses: Legal and otherInterventions’ Harvard University, Coordinator WIEGO Dec2006______ , ‘Legal Mechanisms to Empower In<strong>for</strong>mal Businesses:Unpacking the Issue,’ Harvard University , Coordinator,WIEGO Dec 2006______., ‘Institutional Mismatch — Formal Institutions and In<strong>for</strong>malRealities, May 2007.______., ‘In<strong>for</strong>malisation of Labour Markets: Is Formalisation theAnswer?’ Harvard University, Coordinator WIEGO.______., ‘Mapping size and diversity of in<strong>for</strong>mal economy’ May 2007.______., ‘<strong>The</strong> Business Environment and the in<strong>for</strong>mal economy —creating conditions <strong>for</strong> Poverty reduction’ November 2005.______.. Rethinking the In<strong>for</strong>mal Economy: Linkages with the FormalEconomy and the Formal Regulatory Environment. EGDIand UNU-WIDER Conference ‘Unlocking Human Potential:Linking the Formal and In<strong>for</strong>mal Sectors.’ Helsinki, Finland.Sept. 2004Cohen, Monique and Jennefer Sebstad. Reducing Vulnerability: <strong>The</strong>Demand <strong>for</strong> Microinsurance. Microsave-Africa. Nairobi.Consultative Group <strong>for</strong> Poor (CGAP), World Bank, ‘Safe and Accessible:Bringing poor saver into <strong>for</strong>mal fi nancial system’September 2006.Cord, Louise. Promoting Pro-Poor Growth: Lessons from countryexperiences. <strong>The</strong> World Bank. In Analysing and AchievingPro-Poor Growth. Poverty in Focus. International PovertyCentre. UNDP. March 2007Crecentia, Mofokeng. ‘<strong>The</strong> In<strong>for</strong>mal Economy in Africa & Its Impact onWomen,’ Paper presented at the Symposium on Women’sRights and the Role of Women in Africa, Canada, October3, 2005Dayaratna-Banda, O. G., ‘In<strong>for</strong>mal Trade in Sri Lanka,’ Departmentof Economics and Statistics, Faculty of Arts, University ofPeradeniya, Peradeniya, 20400, Sri Lanka, Nov.2006.De Soto, Hernando. <strong>The</strong> Other Path (New York: Basic Books), 1989 and .<strong>The</strong> Mystery of Capital (New York: Basic Books) 2000.Devey, Richard, Skinner, Caroline, and Valodia, Imraan. ‘In<strong>for</strong>malEconomy Employment Data in South Africa: A CriticalAnalysis,’ Forum Papers, Development Policy Research Unit,School of Economics, University of Cape Town, 2003Discovering Hidden Assets-Financing the Base of the Pyramid.Developing Alternatives. Vol.10, Issue 1. Winter 2005.Djankov, Simeon, Ira Lieberman, Joyita Mukherjee, and Tatiana Nenova,‘Going In<strong>for</strong>mal: Benefi ts and Costs,’ World Bank, 2002FIAS/World Bank Group-ISSER, ‘Regional Conference on EnterpriseFormalisation in Africa,’ Accra, Ghana, January 10-11,2007Gallin, Dan. ‘Organising in the Global In<strong>for</strong>mal Economy’, BogaziciUniversity Social Policy Forum: Changing Role of Unionsin the Contemporary World of Labor, Istanbul, November26-27, 2004.Golub, Stephen, ‘Beyond Rule of <strong>Law</strong> Orthodoxy — <strong>The</strong> LegalEmpowerment Alternative,’ Carnegie Endowment, October2003.Government of India ‘Report on Social Security <strong>for</strong> Unorganised<strong>Work</strong>ers,’ prepared by the National <strong>Commission</strong> <strong>for</strong>Enterprises in the Unorganised Sector, Government of India.May 2006.Hart, K. In<strong>for</strong>mal income opportunities and urban employment inGhana. Journal of Modern African Studies, 1973.Hyden G., African Politics in Comparative Perspective, CambridgeUniversity Press, New York, 2006.ILO, DG report ‘<strong>The</strong> Dilemma of the In<strong>for</strong>mal Sector’ 1991______., Dar es Salaam In<strong>for</strong>mal Sector Survey. 1995.______. Central bank of the West African States: Data Bank on microfinance institutions in West African Monetary Union, 1999______., Decent work and the in<strong>for</strong>mal economy. , 90 th Session. 2002271

______., ‘Ghana Decent <strong>Work</strong> Pilot Programme- Ghana <strong>Work</strong>ing Out ofPoverty’, January 2006.______., Discussion Paper ‘<strong>The</strong> In<strong>for</strong>mal Economy’, Committee onEmployment and Social Policy, March 2007______.: A Global Agenda <strong>for</strong> Employment: Discussion PaperILO, UNIDO, UNDP ‘Roadmap Study of the in<strong>for</strong>mal sector in mainlandTanzania’, 2002.Indon, Reginald ‘Legal Mechanisms to Empower In<strong>for</strong>mal Businesses-Philippines Experience,’ February 2007Ishengoma, Esther K and Robert Kappel, ‘Economic Growth andPoverty: Does Formalisation of In<strong>for</strong>mal Enterprises Matter,’German institute of Global and Area Studies, April 2006______., Formalising In<strong>for</strong>mal Firms: What can be done? In Analysingand Achieving Pro-Poor Growth. Poverty in Focus.International Poverty Centre. UNDP. March 2007Kapila, Sunita, ‘Unleashing the Entrepreneurial Potential of Microand Small Businesses in Kenya: Some Experiences andDirections,’ Nairobi, October 2006.Karunagoda, Nanda, ‘In<strong>for</strong>mal Markets <strong>for</strong> Financial Services in SriLanka,’ Sri Lanka, Aug.2006Kashyap, Arun, ‘Business Rights - Outline and Framework,’ UNDP, July-October 2007.Kawas, Celina and Marla Gitterman. Roundtable on MicroinsuranceServices in the In<strong>for</strong>mal Economy: <strong>The</strong> Role of Micro-fi nanceInstitutions .<strong>The</strong> Ford Foundation. New York. 2000Kenyon, Thomas and Emerson Kapaz, ‘In<strong>for</strong>mality Trap’ Public Policy <strong>for</strong>Private Sector, World Bank, Dec 2005.Kuchta-Helbling, Catherine ‘Background Paper — Barriers toparticipation: <strong>The</strong> in<strong>for</strong>mal sector in emerging democracies’<strong>The</strong> World Movement <strong>for</strong> Democracy, Sao Paulo, Brazil, 2000Lex Mundi Pro Bono Foundation ‘Technical Papers from Bangladesh,Thailand, Philippines, Mexico, Bolivia, Peru, South Africa,Sri Lanka’Loyaza, Norman. <strong>The</strong> economics of the in<strong>for</strong>mal sector; A simple modeland some empirical evidence from Latin America. WorldBank Policy Research Papers. 1997Loayza, N. and Jamele Rigolini,’ In<strong>for</strong>mality Trends and Cycles’ <strong>The</strong>World Bank, 2005Lundström, Susanna and Per Ronnås, Swedish InternationalDevelopment Cooperation Agency, Sida in ‘Analysing andachieving Pro-Poor Growth.’ International Poverty Centre,Brazil, March 2007.Moore Dickerson, Claire, ‘Harmonizing Business <strong>Law</strong>s in Africa’ OHADA,2005______., ‘Legal Mechanisms to empower in<strong>for</strong>mal businesses— suggested outline and notes’ June 2007.Musiolek Bettina, <strong>Work</strong>ing Paper on In<strong>for</strong>mal Economy ‘Decent <strong>Work</strong>in the In<strong>for</strong>mal Sector: Central and Eastern Europe / andCommon Wealth of Independent States and other <strong>for</strong>merSoviet Republics,’ ILO. 2002.Nicholas, Stephen and Elizabeth Maitland, ‘How business interactswith in<strong>for</strong>mal institutions,’ OECD, 2005Ocici, Charles, ‘Entrepreneurship- Ugandan Experience’, International<strong>Law</strong> Institute, Ugandan, African Centre <strong>for</strong> LegalExcellence, Kampala Uganda, November 2006.Olomi,. Donath R.,’Unleashing Entrepreneurial Potentials of the Poorin Tanzania: Prospects, Challenges and Way Forward.’University of Dar es Salaam Entrepreneurship Centre(UDEC), Dar-e- Salaam, Tanzania, November 2006.Palmade, Vincent and Andrea Anayiotos, Rising In<strong>for</strong>mality, Viewpoint298, World Bank, Washington D.C., August 2005Pasquel, Enrique, ‘Legal Tools to Empower Business Organisations- A New Approach to Formalisation’ prepared by ILD, Lima,Peru, December, 2006Daly, Gabriel ‘Best Practices to Empower Business Organisationsprepared by, ILD, Lima, Peru, Dec 2006.Khoudeir, Ayman H. R.: <strong>The</strong> In<strong>for</strong>mal Sector Impacts on theEnvironment- In Reference to Egypt prepared by of SocialFund, Cairo, Egypt. Dec 2006Pritchett, Lant and Michael Woolcock, ‘Solutions when the Solution isthe Problem: Arraying the Disarray in Development’ WorldDevelopment 32(2): 2004Sangathan, Manushi. <strong>Law</strong>s, Liberty & Livelihood. A bottom up Agendaof Economic Re<strong>for</strong>ms. www.manushi-india.orgSarvananthan, Muttukrishna’In<strong>for</strong>mal Economy in the Confl ict AffectedRegion of Sri Lanka: An Exploration, <strong>The</strong> Pathfi nderFoundation, Colombo, Sri Lanka. August 2006.Scott, James ‘Seeing Like a State: How Well-Intentioned Schemes toImprove the Human Condition Have Failed ‘ New Haven:Yale University Press1998.Sen, Amartya. ‘Development as Freedom’. First Anchor Books, USA.1999SEWA ‘ Public Private Partnership in Agriculture — SEWA’s experienceand Recommendations, SEWA, Ahmedabad, India.November 2006.SEWA, ‘Self-employed Women’s Association Trade Facilitation Centre(SFTC) — An Overview,’ Prepared by SEWA, Ahmedabad,India.Sobhan, Rehman ‘A Macro Policy <strong>for</strong> Poverty Eradication throughStructural Change,’ UN University, Wider, January 2005State of the World: ‘Our Urban Future,’ Worldwatch Institute. 2007Stiglitz, Joseph. ‘Beyond Scarcity: Power. Poverty and the global watercrisis.’ New York. 2006.______.. ‘<strong>Making</strong> Globalization <strong>Work</strong>’. Penguin Group. UK. 2006.UN Report on Social Development 2005UNDP, ‘Growing Inclusive Markets: Business <strong>Work</strong>s fro Development,Development works <strong>for</strong> Business,’ June 2007UNDP, ‘Unleashing Entrepreneurship, <strong>Making</strong> Business <strong>Work</strong> <strong>for</strong> thePoor,’ March 2004.United Nations Expert Group on Women and Finance, Women’s WorldBanking, 1994USAID, Removing Barriers to Formalisation: <strong>The</strong> Case <strong>for</strong> Re<strong>for</strong>m andEmerging Best Practice, 2005______. ‘Land and Business Formalisation <strong>for</strong> Legal Empowerment ofthe Poor’ Nov, 2006.Verdera, F. In<strong>for</strong>mality in Latin America: Recent trends, policies andprospects. Paper prepared <strong>for</strong> ILO Technical <strong>Work</strong>shop onOld and New facets of in<strong>for</strong>mality, Geneva. March 2001.272

WIEGO, ‘Accra Hawkers Association,’ News from Ghana Daily Graphic,May 2006,WIEGO Women in In<strong>for</strong>mal Economy: Globalising and Organising, www.wiego.orgWomen’s World Banking, ‘Banking <strong>for</strong> 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 In<strong>for</strong>malBusinesses,’ World Bank notes to CLEP, June 2007.World Bank ‘Doing Business 2007 — How to Re<strong>for</strong>m’, September 2006.______. ‘Rural Investment Climate Survey: Indonesia,’ September2006.______., Doing Business Report 2003-2006Xaba, Jantjie, Horn, Pat, and Motala, Shirin. ‘<strong>The</strong> In<strong>for</strong>mal Sectorin Sub-Saharan Africa.’ <strong>Work</strong>ing paper on the in<strong>for</strong>maleconomy, Employment Sector, International Labour Offi ce,Geneva. 2002.273

ChapterFIVERoad Maps <strong>for</strong>Implementationof Re<strong>for</strong>msImplementation 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 <strong>for</strong>legal empowerment. Support of central authoritiesis also vital <strong>for</strong> 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 in<strong>for</strong>mal institutions have onthe poor. A full contextual analysis <strong>for</strong>ms the basis<strong>for</strong> a feasibility review of various empowermentscenarios.<strong>The</strong> most important constraints set by the nationalsocio-political context are:• <strong>The</strong> domestic social structure, especially its gender,class and ethnic makeup, as well as culturalattitudes toward participation and equality;• <strong>The</strong> economic context — including the distributionof wealth and income, and the level and rateof economic growth;• <strong>The</strong> characteristics of the state — both the politicaland the administrative system;• <strong>The</strong> extent of economic and political in<strong>for</strong>malityand tensions with the <strong>for</strong>mal and officially recognisedsystems.Practitioners and policymakers can use the tool ofcontextual analysis within a country to determine:1) if conditions appear ripe <strong>for</strong> legal empowermentre<strong>for</strong>ms; 2) which implementation options seemmost probable; 3) what sequencing and timelines<strong>for</strong> re<strong>for</strong>m look doable; 4) how the re<strong>for</strong>ms 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. <strong>The</strong> 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. <strong>The</strong> purpose of the stakeholderanalysis is to get a firmer grasp of the probabilityof moving <strong>for</strong>ward with various legal empowermentalternatives, and to begin serious thinking aboutwhat it might take to build a minimum winningcoalition <strong>for</strong> legal empowerment in the country.Stakeholders act out of regard <strong>for</strong> 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 legalre<strong>for</strong>ms 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, <strong>for</strong> 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 <strong>for</strong> confrontationremains because important stakeholders believeothers’ gains come at their expense. <strong>The</strong> 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. Ef<strong>for</strong>tswould be made to find a simple, incremental, andsustainable way <strong>for</strong>ward, 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. <strong>The</strong> procedures in determining a suitablere<strong>for</strong>m 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 in<strong>for</strong>mationavailable 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 re<strong>for</strong>ms 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 <strong>for</strong>ward 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 <strong>for</strong> re<strong>for</strong>ms, which can create self-fulfillingprophecies of slippage. One should there<strong>for</strong>elook <strong>for</strong> interventions promising short-term rewards<strong>for</strong> 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 re<strong>for</strong>m takesa mix of experience, professional judgment, andwillingness to take chances. Creative policymakerslook to open up policy windows that create thespace needed to move <strong>for</strong>ward in solving particularproblems even under difficult circumstances.Six common sets of tasks are associated withdeveloping specific national roadmaps <strong>for</strong> LegalEmpowerment of the Poor. <strong>The</strong>y 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 <strong>for</strong>change, develop policy issues, and make decisionsto launch policy re<strong>for</strong>ms. 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 re<strong>for</strong>m measures. However,besides technical content, re<strong>for</strong>m measuresneed to be accepted and be seen as necessaryand important. Through their representatives, thepoor should be part of the re<strong>for</strong>m design process.• Constituency Building: Convince beneficiaries ofthe advantages of re<strong>for</strong>ms, 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:Re<strong>for</strong>mers need to create and nurturenetworks and partnerships <strong>for</strong> cooperation andcoordination, and provide <strong>for</strong> 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 <strong>for</strong> 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. <strong>The</strong> task is to establishthis floor using human rights law. For every facetof empowerment, there<strong>for</strong>e, 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.<strong>The</strong> base organisation of the poor must be engagedin the design of interventions of any kind. In<strong>for</strong>mationdissemination will be a central strategy<strong>for</strong> 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. <strong>The</strong> importantdifferences among countries and regions call<strong>for</strong> a flexible, demand-driven approach that is appropriateto local realities. <strong>The</strong> 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 ef<strong>for</strong>ts that would furtherthe Legal Empowerment of the Poor agenda. Similarly,and particularly in the case of the rights tojustice and asset holding, evaluations <strong>for</strong> learningwill prove to be valuable.In addition, a range of measures should be undertakento prepare <strong>for</strong> 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. <strong>The</strong>se 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. <strong>The</strong> region and sub-region arecritical <strong>for</strong> success of the legal empowerment agenda;at these levels global norms can be adaptedto different socio-economic contexts. Buildingpolitical will <strong>for</strong> change will occur through regionaland sub-regional organisations, UN Regional <strong>Commission</strong>s,sub-regional bodies, and in partnershipwith regional development banks. A series of new‘Regional Social Contracts’ could be an importantmechanism to <strong>for</strong>ge 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 re<strong>for</strong>m advocatesaround the world. <strong>The</strong>se 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; <strong>for</strong>ce 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 in<strong>for</strong>mant interviews;strategic planning framework; technical assistanceand training on leadership, group work, andrelated management issues; travel grants/internships<strong>for</strong> officials; web-based support; and workshops.<strong>The</strong>se 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 <strong>for</strong>re<strong>for</strong>m.• Situation analysis or legal empowerment diagnostic:A detailed assessment should be made ofthe relevant issues to be addressed. <strong>The</strong> 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: <strong>The</strong>se 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 re<strong>for</strong>msby building on experiences in the pilot phase andscaling-up phase to re<strong>for</strong>m the organisations andrules that shape the institutional context.Both the <strong>for</strong>mulation and monitoring phases ofimplementation look to indicators of democratisation,good governance, human rights protection,and many other variables related to legal empowerment.<strong>The</strong>re are numerous measures of differentaspects of governance in the public domain, butun<strong>for</strong>tunately, 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 <strong>for</strong> evaluating the socio-economicenvironment and gauging accomplishments, basedon surveys and interviews.Action planning and progress monitoring are especiallyimportant <strong>for</strong> outside agencies. Among itstools are:• A management in<strong>for</strong>mation system based on280

targeted indicators endorsed by national stakeholders;• Stakeholder monitoring to identify the responsesof those that benefited or those that lost fromthe policy re<strong>for</strong>m measures;• Problem-solving studies to devise tailored andpractical solutions to implementation issues;• Process and impact evaluations to support learningover time.<strong>The</strong> design of each component should respectsome important principles: adaptation to userneeds and availability of resources; user participation;parsimony (the least amount of in<strong>for</strong>mationand cost required to accomplish the task), andsimplicity. Monitoring of the implementation policyre<strong>for</strong>m 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 re<strong>for</strong>m 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 oruni<strong>for</strong>m approaches to empowering the poor andthink creatively about how to make policies available,af<strong>for</strong>dable and acceptable. <strong>The</strong> following corevalues belong front and centre:• Poverty reduction is the ultimate objective, soevery re<strong>for</strong>m 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.• <strong>The</strong> peaceful struggle against impoverishmentmust be participatory and based on respect <strong>for</strong>human 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 trans<strong>for</strong>mation — 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 <strong>for</strong> 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 <strong>for</strong>mulas<strong>for</strong> 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 <strong>for</strong> many more poor people to improvetheir lives in the <strong>for</strong>eseeable 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.• <strong>Work</strong> from the bottom up and the top down.• Decentralise — except when it is better to centralise.• Balance demand <strong>for</strong> change with the capacity toaccommodate change.• Put together in<strong>for</strong>mal and <strong>for</strong>mal institutions.• Look <strong>for</strong> 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.• <strong>Work</strong> 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 in<strong>for</strong>mation.282

1. Introduction: Attributesof Legal EmpowermentA singularly promising means <strong>for</strong> empowering poorpeople, the <strong>Commission</strong> contends, is to establishlawful claims they can use to lift themselves outof poverty. <strong>The</strong> four interdependent domains ofempowerment highlighted by the <strong>Commission</strong> are acoherent, accessible legal order; more secure rightsto assets and possessions; stronger and clearerlabour rights; and fairer, more constructive rules <strong>for</strong>small 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.<strong>The</strong> 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 re<strong>for</strong>ms. 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 re<strong>for</strong>m 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 GoalsVoiceOrganizationRepresentationInstitutionalRe<strong>for</strong>m+}Identity& AssetsCitizensAsset Holders<strong>Work</strong>ersEntrepeneurs+LegalRe<strong>for</strong>mExerciseof RightsJusticePropertyLabourBusinessProtectionEconomicOpportunitiesLegalEmpowermentImproved Living Standards283

so the <strong>Commission</strong> 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 <strong>for</strong> additionalinstitutional re<strong>for</strong>m, 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. <strong>Making</strong> 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 <strong>for</strong> building inclusive domainsof power 1 — the challenge is to adapt the broadprinciples of institutional and legal re<strong>for</strong>m 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: ‘<strong>The</strong>re’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 <strong>for</strong>pro-poor policy to be diluted and delayed while beingcarried out.Reports from the working groups <strong>for</strong> Chapters 1through 4 have analysed the way rights-expandingpolicies in the four domains of empowerment canblunt impoverishing <strong>for</strong>ces. 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 <strong>for</strong> poor people to trans<strong>for</strong>m 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 <strong>Commission</strong>, in view of thefact that a significant share of the poor are eitherself-employed or already in charge of micro-enterprises.<strong>The</strong>se 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. <strong>The</strong> 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 ef<strong>for</strong>ts 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 <strong>for</strong> workers, whether in enterprises orhome-based, juridical recognition of in<strong>for</strong>mal businesses,and many other concrete activities.Table 5.1 lists representative specific re<strong>for</strong>msidentified by the different working groups that havebeen involved in preparing this volume. <strong>The</strong>y areonly illustrations, and may not necessarily be themost pressing required <strong>for</strong> a particular country inachieving legal and institutional change. (For thecomplete record of recommended possible re<strong>for</strong>ms,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 feasible<strong>for</strong> every country. Re<strong>for</strong>mers need to look at theTable 5.1 Sample Legal Empowerment of the Poor Re<strong>for</strong>msJustice• Effective, af<strong>for</strong>dable 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 re<strong>for</strong>m enabling community-based groups to pool legal risks.Property• Legal recognition of joint registration of land rights and re<strong>for</strong>m of discriminatory inheritance and divorce laws andpractices.• Legal guidelines <strong>for</strong> <strong>for</strong>ced 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 en<strong>for</strong>cement.• 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 in<strong>for</strong>mal economy.• More opportunities <strong>for</strong> education, training and retraining.285

menu of possible Legal Empowerment of the Poorre<strong>for</strong>ms 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 <strong>for</strong> 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 statecentredre<strong>for</strong>m; a balanced legal empowermentstrategy is community-driven and grounded inlocal needs, which, however, can be translated intonational-level re<strong>for</strong>ms <strong>for</strong> wider impact on upwardmobility (Golub 2003).In some cases, the positive outcomes <strong>for</strong> 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 en<strong>for</strong>ced — <strong>for</strong> instance,a bill of rights that calls <strong>for</strong> treating everyone insociety equally. A third possibility <strong>for</strong> aiding theBox 5.1 Removing Barriers toPublic <strong>Work</strong>s Contracts<strong>The</strong> development of public investment policies thatpromote the use of labour-based technologies hasimproved access of small local contractors to publicprocurement processes <strong>for</strong> services and works inAndean countries. Activities range from contractingof micro-enterprises <strong>for</strong> 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 in<strong>for</strong>mation 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 <strong>for</strong> 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 <strong>for</strong> 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) <strong>for</strong> small contracts.See: José Yeng and Serge Cartier van Dissel,Improving access of small local contractors to publicprocurement — <strong>The</strong> 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 and<strong>for</strong>ced 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 there<strong>for</strong>e aleading factor to consider with implementation.<strong>The</strong>re is also the question as to who proposes sucha policy and who <strong>for</strong>mulates the approach. <strong>The</strong>degree of domestic enthusiasm and support is whatmatters most <strong>for</strong> implementation, though externaldonors and international agencies are a usefulsource of ideas <strong>for</strong> policy re<strong>for</strong>m. Often, a crisissuch as a natural disaster, or warfare, may act as apowerful stimulus <strong>for</strong> introducing new policies; butit is neither a necessary nor a sufficient condition<strong>for</strong> implementation. In the wake of the Asian financialmeltdown in the second half of the 1990s, <strong>for</strong>instance, Indonesia enacted a series of importantlabour law re<strong>for</strong>ms that began with guaranteeingthe fundamental right of freedom of association.<strong>The</strong> 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 <strong>for</strong>m federations as they wished. <strong>The</strong>se re<strong>for</strong>msmight well have been shelved under normal conditions.Building on earlier work analysing political will<strong>for</strong> anti-corruption activities and on policy re<strong>for</strong>m(Brinkerhoff 2000; Brinkerhoff and Crosby 2002),the following initiating scenarios <strong>for</strong> 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 <strong>for</strong> insiders whocan potentially champion change.2.Choice of Legal Empowerment of the Poor re<strong>for</strong>mis based on country actors’ consideration andanalysis of options, anticipated outcomes <strong>for</strong>various 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 re<strong>for</strong>m. Commitment is questionablewhen the initiative <strong>for</strong> re<strong>for</strong>m 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 <strong>for</strong> the changesenvisioned? Are legislators involved? Are thereongoing ef<strong>for</strong>ts to build constituencies in favourof new Legal Empowerment of the Poor re<strong>for</strong>ms?5.Government publicly commits and allocatesresources to Legal Empowerment of the Poorre<strong>for</strong>m. 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 ef<strong>for</strong>t. Anothersituation is the assignment of resourcesand ef<strong>for</strong>t over the long-term to achieve LegalEmpowerment of the Poor goals. One-shot or episodicef<strong>for</strong>ts would signal weak or wavering own-287

ership. Legal Empowerment of the Poor re<strong>for</strong>ms,by their very nature, are long-term undertakings.7. Key actors monitor Legal Empowerment of thePoor progress <strong>for</strong> learning and adaptation. Itshows a level of commitment when country actorsestablish a system <strong>for</strong> tracking Legal Empowermentof the Poor re<strong>for</strong>m 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 <strong>for</strong> 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 possibility<strong>for</strong> outsiders to assess the possibility <strong>for</strong> change.While external support can be a strong catalyst<strong>for</strong> change, external micro-management can alsoeasily render the process too burdensome <strong>for</strong>re<strong>for</strong>mers and policy champions within government.It is important that the donor role in LegalEmpowerment of the Poor be supportive and notself-defeating.Be<strong>for</strong>e 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. Agrarianre<strong>for</strong>m has often gone wrong, with the supposedbeneficiaries becoming victims. <strong>The</strong> 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. <strong>The</strong> 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 <strong>for</strong> the poor, because they can potentiallysidestep local spheres of interest in support ofmarginalized and disadvantaged communities. <strong>The</strong>ycould serve as counterweight <strong>for</strong> 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 <strong>for</strong>ced labour in remoterural areas of the country (ILO 2001: 25).Policy Champions<strong>The</strong> degree of initial government support <strong>for</strong> 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 <strong>for</strong>ward over time. Securing political will <strong>for</strong> 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 re<strong>for</strong>m.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, in<strong>for</strong>mality)Policy initiative(intended expansionof justice, assetholding, labourand entrepreneurialrights)Policy stakeholders(beneficiaries, allies,practitioners, challengers)Policy characteristics(complexity, ambiguity,discord)Policy outcomeInstitutional/legalprotection/ opportunities<strong>for</strong> excluded groupsthe <strong>Commission</strong>’s empowerment agenda.A policy champion can come <strong>for</strong>ward 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, <strong>for</strong>example, 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 re<strong>for</strong>ms 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 <strong>for</strong> 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 <strong>for</strong>ces as the ‘who’, the ‘where’, and the‘what’ of policy implementation. (<strong>The</strong> ‘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. <strong>The</strong> arrows in Figure 5.2 areshown as diminishing in size during the implementationventure, to convey the idea that these tend289

to be frictional <strong>for</strong>ces that reduce the probabilityof fully attaining projected policy outcomes. <strong>The</strong>large initiating arrows also assume there is strongpolitical will <strong>for</strong> the policy, which may or may notbe true. <strong>The</strong> frictional influences on implementingLegal Empowerment of the Poor will test the resourcefulnessof policymakers seeking to carry outthe <strong>Commission</strong>’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 <strong>for</strong>wardor stop it in its tracks. Some of these groups maybe set up as <strong>for</strong>mal entities, while others may beunorganised collectives with shared interests butno official representation or recognition. Stakeholdersact out of regard <strong>for</strong> their own advantage, asthey define it. 2 To implement policy requires a criticalmass of supportive constituencies and minimisationor neutralisation of the unsupportive groups.<strong>The</strong> 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 <strong>The</strong>re are many possible<strong>for</strong>mats 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.<strong>The</strong> 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 <strong>for</strong> 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). <strong>The</strong> 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 <strong>for</strong>Policymakers(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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>ces <strong>for</strong> 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 <strong>for</strong> developingcommon policy positions. Such an institutionalarrangement will there<strong>for</strong>e need to be expresslybrought together <strong>for</strong> purposes of implementingLegal Empowerment of the Poor. <strong>The</strong> challengesof establishing commonly agreed upon definitionsof problem situations and identifying the relevantstakeholders must be overcome as a first step.Adversarial situations are even riskier <strong>for</strong> 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 <strong>for</strong> development professionalsis to understand stakeholder preferences<strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>th among them, <strong>for</strong> 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. <strong>The</strong>y are the ma-291

jority of the population in many countries. <strong>The</strong> term‘the poor’ is a convenience, of course, <strong>for</strong> this multitudeis far from a monolithic constituency despitesharing hunger, ill health, inadequate housing andother pathologies of poverty. <strong>The</strong>y live in remote ruralvillages and in urban shantytowns. <strong>The</strong>y work assubsistence farmers, agricultural labourers, domesticworkers, street vendors, and trash recyclers. <strong>The</strong>yare members of underrepresented ethnic minorities— often internal or external migrants seeking improvedopportunities in a new area where they lackclear legal status. <strong>The</strong>y 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 <strong>for</strong> 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 legalre<strong>for</strong>ms 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 empowermentplat<strong>for</strong>ms 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, <strong>for</strong> 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. <strong>The</strong> newproperty owners also become liable <strong>for</strong> paying localtaxes and service charges, <strong>for</strong>cing some to sell becausethey cannot af<strong>for</strong>d to pay. A few people who,by statute, come to own dwellings, cannot not livein them because in<strong>for</strong>mal 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 in<strong>for</strong>mal institutions).Poor women present a particular challenge <strong>for</strong>Legal Empowerment of the Poor because insome cases their advantage can be to the disadvantageof the male half of the poor population. In EastAfrica, <strong>for</strong> 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 <strong>for</strong>men. Women there<strong>for</strong>e are without secure claim to anatural resource they use <strong>for</strong> daily supplies of fuel,water and food. Legal insecurity inhibits economicprogress because women cannot make decisionson expanding or developing land (UNEP 2004:99).<strong>The</strong>ir fathers, husbands and sons are likely to balkat ef<strong>for</strong>ts 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. <strong>The</strong>se 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 <strong>for</strong> 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. <strong>The</strong>y may speak a separate language. Indigenouspeople often live in remote sites with higheconomic potential <strong>for</strong> water, timber, or medicinalplants, but lack legal instruments to preventover-extraction of natural resources by outsiders.All these characteristics make it all the moreimportant <strong>for</strong> government to reach these wouldbebeneficiaries. (See Box 5.2 <strong>for</strong> 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.<strong>The</strong> 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. <strong>The</strong>study 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 <strong>for</strong> the realisationof these rights, and the availability of mechanisms <strong>for</strong>redressing violations or fulfilling rights.Metagora’s method of work is based on a bottom-up approachconsisting of:• <strong>Work</strong>ing with the shareholders in pilot countries, toidentitfy issues in human rights, democracy; andgovernance <strong>for</strong> which evidence-based assessment ishighly relevant;• Applying statistical methods and tools to that particularcontext;• Assessing these methods <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>ceon account of the involvement of an international projectin partnership with the <strong>Commission</strong> on Human Rights ofthe Philippines, its Regional Offices, the National <strong>Commission</strong>on Indigenous People, and National StatisticalCoordination Board (NSCB).<strong>The</strong> 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 per<strong>for</strong>mance,making it harder <strong>for</strong> 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 re<strong>for</strong>ms.<strong>The</strong>se 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.Allies<strong>The</strong> 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 <strong>Law</strong> SchoolDeans supports legal assistance <strong>for</strong> the indigent inthat country. National bar associations are engagedin similar activities in many nations.Certain politicians may come out as allies. It is notuncommon, <strong>for</strong> 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 <strong>for</strong> 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). <strong>The</strong>se firmsoften say they would like to <strong>for</strong>ge 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, <strong>for</strong> example, has a productive alliancebetween in<strong>for</strong>mal 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 <strong>for</strong> bribes from city inspectors.<strong>The</strong> uncertainty <strong>for</strong>ces the vendors to limit theirstock and hinders their productivity and income. <strong>The</strong>two 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 <strong>for</strong> everyone’sbusiness. Interestingly, the vendors’ group wants itsmembers to pay licensing fees, on the argument thatpaying gives the members legal cover and providesleverage <strong>for</strong> 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.<strong>The</strong> 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, <strong>for</strong> citizens cannot decode legaljargon easily on their own. <strong>The</strong> interests and attitudesof government officials at all levels must there<strong>for</strong>ebe factored into the implementation process. InBeijing, <strong>for</strong> example, law en<strong>for</strong>cement 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.<strong>The</strong>se comments do not imply that bureaucrats arealways spoilers of re<strong>for</strong>m. 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 ef<strong>for</strong>t to get it implemented.As noted, entrepreneurial ef<strong>for</strong>t 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. <strong>The</strong>se competingor oppositional stakeholders may include <strong>for</strong>eignbusinesses 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 <strong>for</strong>cefulpoor people and may try to pre-empt improvementsin poor people’s status and income. <strong>Law</strong>yers, <strong>for</strong>example, may lose the upper hand with clients iflaws are translated into everyday language or if inexpensiveconflict resolution <strong>for</strong>ums are made widelyavailable.A common and tricky problem of implementation iswhen contending stakeholders do not try to block re<strong>for</strong>msoutright, 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, <strong>for</strong> example prospectivetitling programmemes often have the perverse effectof inducing speculators to buy up land ahead oftime from squatters at slightly better than in<strong>for</strong>malprices. <strong>The</strong> 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.<strong>The</strong> sequential and conditional release of funds isone strategy <strong>for</strong> 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. <strong>The</strong>se 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 ofre<strong>for</strong>ms 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 there<strong>for</strong>eguide all decisions on if, when and how to go <strong>for</strong>wardwith 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:• <strong>The</strong> domestic social structure, especially itsgender, class and ethnic makeup, plus culturalattitudes toward participation and equality.• <strong>The</strong> economic context — including the distributionof wealth and income, and the level and rateof economic growth.• <strong>The</strong> characteristics of the state — both the politicaland the administrative system.• <strong>The</strong> extent of economic and political in<strong>for</strong>malityand tensions with the <strong>for</strong>mal and officially recognisedsystems.<strong>The</strong>se are the critical factors <strong>for</strong> contextual analysisand the parameters within which practitionersmust operate as they try to steer implementation oflegal empowerment re<strong>for</strong>ms.Social StructureSeveral important points regarding social structurewere already implied in the discussion of stakeholders,which emphasised the task of buildingwinning coalitions <strong>for</strong> 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 ef<strong>for</strong>t compared toa country where the population is deeply divided bylanguage, religion or national origin. <strong>The</strong> 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).<strong>The</strong>se 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 en<strong>for</strong>cement and dispute resolutionthat the poor typically use. Indigenous people areparticularly likely to have elaborate but officiallynon-existent systems in place <strong>for</strong> organising economiclife. <strong>The</strong>re 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 in<strong>for</strong>malinstitutions, 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. <strong>The</strong> distribution patternmay reflect historical injustice whereby a privilegedfew used their political influence and access tothe justice system to legitimise unfair claims toproperty. <strong>The</strong> more unequal the initial pattern ofownership of land, capital, and other productiveassets, the more cautious will re<strong>for</strong>mers have to beabout regularising the system of economic rights.<strong>The</strong>re 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 <strong>Commission</strong>’s agendathat Legal Empowerment of the Poor re<strong>for</strong>ms 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 <strong>for</strong> their survival. Indigenouspeoples, and pastoralist and subsistence farmersmust assure their use of <strong>for</strong>ests, pastures andarable fields, but, as mentioned earlier, that bringsthem into head-on conflict with richer claimantsto the same limited resources. Land re<strong>for</strong>ms 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 ef<strong>for</strong>t needed to confront that socialproblem. Economic growth makes it easier to redistributeassets to the poor, yet, ironically, growth isalso an unsettling <strong>for</strong>ce <strong>for</strong> 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 in<strong>for</strong>maltownship 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. <strong>The</strong>seredevelopment 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 ef<strong>for</strong>t (Patel 2007). On the other hand,mitigation may not have been <strong>for</strong>thcoming at allwere it not <strong>for</strong> 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 en<strong>for</strong>ce 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 <strong>for</strong> them.Empowering the poor is a long-time endeavor soongoing budget support is problematic. Take manyof the emerging market economies in Asia. <strong>The</strong>ystill 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 <strong>for</strong>implementation if change is not a high priority.Political SystemPolitical system variables (i.e., factors affectingthe demand side of government) are crucial <strong>for</strong>implementation and need to be taken apart andlooked at carefully. To combat legal disempowerment,there is no substitute <strong>for</strong> collective action bypoor men and women to push <strong>for</strong> rights and protections,as in the Mumbai case cited above. Whendoing contextual analysis, there<strong>for</strong>e, 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. <strong>The</strong> 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 <strong>for</strong> 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 <strong>for</strong>mal venues setup <strong>for</strong> 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 <strong>for</strong>ms of socialexclusion: <strong>for</strong>mal, which refers to the poor anddisadvantaged not showing up at meetings, andsubstantive, which refers to their not speaking upin these venues. In India, <strong>for</strong> 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 re<strong>for</strong>m 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).<strong>The</strong> 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 be<strong>for</strong>e 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 <strong>for</strong> the economicdisparities that persist under democracy is theholdover of identity politics that divide the poor(Varshnay 2005). <strong>The</strong>re 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 in<strong>for</strong>mal settlements,implementation of which is left to partnershipsbetween community groups, local governments,and the private sector. Local governments are alsorequired to set aside land <strong>for</strong> relocation of in<strong>for</strong>malsettlers and to compile lists of in<strong>for</strong>mal settlers whoare eligible <strong>for</strong> 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 <strong>for</strong>estry laws favour thepoor on paper, but practice is different. In Nicaragua,constitutional and legislative provisionsexist <strong>for</strong> the demarcation and titling of indigenousterritories. Yet the government continues to grantindustrial logging concessions on community landswithout fulfilling these requirements. In Honduras,small-scale <strong>for</strong>est producers have use rights butseldom can meet transaction costs of securingpermits and other approvals, owing to regulatorycomplexity and bureaucratic corruption. This <strong>for</strong>cesthem to rely on timber traders to secure permitsand other approvals, which, in turn, fuels collusionbetween traders and public officials, and elite captureof community <strong>for</strong>est 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.<strong>The</strong>se anecdotes obviously do not mean dictatorshipsare consistently better at confronting povertythan are countries classified as democratic. <strong>The</strong>reare examples throughout history of authoritarianregimes that carried out successful land re<strong>for</strong>ms 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 <strong>for</strong> 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 trans<strong>for</strong>m into extensivepower. Development practitioners should be carefulnot let preconceptions about regimes blind them tothese possibilities.Administrative state<strong>The</strong> 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 re<strong>for</strong>min 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 there<strong>for</strong>e improvise andfigure out how to protect assets and resolve disputesthrough pragmatic means, such as aligningwith a political patron (see discussion of in<strong>for</strong>malgovernance below).Administrative weakness is usually rooted in lackof human and financial resources, but a viciouscycle rein<strong>for</strong>ces 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 en<strong>for</strong>ce 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 <strong>for</strong> 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 <strong>for</strong>individualised special treatment. Thus bureaucraticcorruption will tend to rein<strong>for</strong>ce the existingconfiguration of wealth and power. In cases wherepublic sector wages are low and virtually everythingthe civil service does is <strong>for</strong> sale, it may be almostimpossible <strong>for</strong> the poor to get public administrationto work in their favour. Legal Empowerment of thePoor re<strong>for</strong>mers would have to address corruption300

e<strong>for</strong>e 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 functionaries<strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong>malone 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 <strong>for</strong> legalempowerment is currently problematic in Somalia,though there may be local or regional space <strong>for</strong>Box 5.3 Empowering <strong>Work</strong>ersthrough CommunityContracting‘As in many other places in Somalia, the civil war thathas been raging on <strong>for</strong> 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 responsible<strong>for</strong> … organising community contributions, transporthire, procurement of tools and materials, authorizationof payments, decisions on workers’ wages, selection andsupervision of workers and ensuring workers’ safety. <strong>The</strong>ywere also responsible <strong>for</strong> solving all disputes related toproject implementation.’‘<strong>The</strong>re is a great potential <strong>for</strong> 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, in<strong>for</strong>mal 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. <strong>The</strong> change opened up new opportunities <strong>for</strong> poormen and women; the ILO is working with local partnerstowards ensuring that the jobs are safe and productive.Source: ILO, Success Africa: Partnership <strong>for</strong> Decent <strong>Work</strong> — ImprovingPeople’s Lives, 2nd vol. (Addis Ababa, Apr. 2007), pp. 2- 4 and31-33.301

e<strong>for</strong>m, as Box 5.3 indicates.Post-conflict states present a special situation<strong>for</strong> 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 <strong>The</strong> international community has recognisedinstitutional re<strong>for</strong>m of the legal infrastructureis essential <strong>for</strong> reconstruction and reconciliation.Yet, a realistic timeframe <strong>for</strong> recreating a justicesystem following serious armed conflict with <strong>for</strong>malcourts, trained judges and a retrained police <strong>for</strong>ceis close to 20 years (Samuels 2006: 19). That is along period <strong>for</strong> implementation with many chances<strong>for</strong> 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. <strong>The</strong>three 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. <strong>The</strong>se areheuristic, but they suggest the possibilities <strong>for</strong> 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 <strong>for</strong> 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 thein<strong>for</strong>mation to think creatively but realistically aboutwhat empowering re<strong>for</strong>ms will work in that context.<strong>The</strong> 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. <strong>The</strong> 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. <strong>The</strong> prospect of working with state actorsvaries according to the administrative capacity ofthe government.In<strong>for</strong>malityAcross-cutting dimension of the policy environmentis the extent of in<strong>for</strong>mality — in theeconomy, in the polity, and in the juridical system.People, organisations, and firms can operate underconditions of in<strong>for</strong>mality <strong>for</strong> some purposes andunder conditions of <strong>for</strong>mality <strong>for</strong> others. LegalEmpowerment of the Poor re<strong>for</strong>mers must besensitive to the vulnerability of in<strong>for</strong>mal empowermentmechanisms to cooptation and domination byelites and <strong>for</strong>mal organisations. Let us look at thephenomenon and consider the impact on implementationof Legal Empowerment of the Poor.In the economic sense, in<strong>for</strong>mality refers to smallscale,self-financed and unskilled labour-intensiveproductive activities, which the poor use to survive.<strong>The</strong>se 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 re<strong>for</strong>ms inhuman and economic rights;assert claims to existing legaland basic welfare services;work through established civilsocietyRule through stable andlegitimate organisationsand procedures; opencompetition <strong>for</strong> powerthrough programmematicpartiesRules of the game widelyrecognized as legitimateand not subject tosignifi cant change; conflictsresolved through appeal tothe rulesHigh. Organisationschallenged to improveper<strong>for</strong>mance on a sustainedbasis.Rule through stable andlegitimate organisationsand procedures; no opencompetition <strong>for</strong> 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 citizens<strong>for</strong> 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. <strong>The</strong>re 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 <strong>for</strong> 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.<strong>The</strong>re is no effective centralgovernmentExtremely low. <strong>The</strong>re 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 <strong>for</strong>mal 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 in<strong>for</strong>mal economywhile minimising the low productivity and hazardousworking conditions that go along with it, isone of the challenges of the legal empowermentagenda.Economic in<strong>for</strong>mality does have some advantages<strong>for</strong> the poor; <strong>for</strong> example, women may find home-303

ased work easier to fit in around their householdresponsibilities. Formal sector businesses maychoose to outsource work to in<strong>for</strong>mal 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 in<strong>for</strong>mal economy workers andentrepreneurs consent to support certain politicians.In return, the politicians agree not to en<strong>for</strong>ce tax,environmental, or labour regulations; and to keepthe police and inspectors from harassing the poor.This arrangement is difficult <strong>for</strong> either side to getout of and it limits the options <strong>for</strong> legal empowerment.Tendler suggests the way to break the ‘devil’sdeal’ is by demonstrating the paths by which smallfirms grow into <strong>for</strong>m ones, including treating workersbetter and helping to upgrade their skills.<strong>The</strong> boundary between the in<strong>for</strong>mal and the <strong>for</strong>maleconomies is fluid and poor people can push it in adirection that favours them. Cairo, to take an example,has an in<strong>for</strong>mal 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. <strong>The</strong> city tried to bring refuse collectionunder municipal control by issuing licenses to largecorporate contractors. Refuse collection is a majorenterprise <strong>for</strong> poor people so the city was threateningtheir livelihood. After negotiation and mutualadjustment, a new arrangement emerged in whichsmall-scale service providers selectively adoptedinstitutional <strong>for</strong>ms recognised by the municipalauthorities, while hanging on to the personalisedand adaptable practices that marked their in<strong>for</strong>malsystem (Assaad 1996). <strong>The</strong> second element ofin<strong>for</strong>mality that concerns Legal Empowerment of thePoor policy implementation is found in the politicalsystem. Similar to what goes on in the economy,in<strong>for</strong>mality here is based on implicit and unwrittenunderstandings. In effect, it is a coping method <strong>for</strong>the poor. <strong>The</strong> terms used to describe this grey governmentzone are ‘patrimonialism’ and ‘clientelism.’Its dimensions are hard to measure, but the in<strong>for</strong>malpatron-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. <strong>The</strong>sebonds are founded on mutual material advantage:the patron furnishes excludable resources (money,jobs) in return <strong>for</strong> 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, in<strong>for</strong>malpatron-client exchanges are expedient means to getthings done.Clientelism evolves and adapts to the <strong>for</strong>malgovernance system, similar to what happens in theeconomic sphere. In fact, individuals who holdthe <strong>for</strong>mal 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. <strong>The</strong>re maybe a religiously or historically derived convention ofdeference to authority that makes poor people lesslikely to stand up <strong>for</strong> their prescribed rights againstthe wishes of traditional patrons.<strong>The</strong> participatory budget process in Porto Alegre,Brazil illustrates how hardy ‘‘clientelism’’ canbe. <strong>The</strong> city has garnered a great deal of attention<strong>for</strong> making public spending more programmematicand universal, and less dependent on individualconnections and friends in high places. When the<strong>Work</strong>ers 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 voted<strong>for</strong> it with the hope of using the programmeme’spopularity to gain votes in the next election. It wasdifficult <strong>for</strong> these legislators to oppose projects thatdirectly benefited their own constituents (Wampler2007). Despite this progress, after the <strong>Work</strong>ersParty 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.In<strong>for</strong>mality 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 in<strong>for</strong>mality and political‘clientelism’, the in<strong>for</strong>mal legal structures existpartly because they are more accessible and ‘userfriendly’ to people of limited means. Sometimes,private or mixed arrangements <strong>for</strong> rule en<strong>for</strong>cementand 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.<strong>The</strong> minibus-taxi industry in South Africa shows howthe in<strong>for</strong>mal economic and governance domainscan coincide in the real world, in this instance withmajor social cost. Minibuses are the major means oftransportation <strong>for</strong> South Africa’s poor, plus a majorsource of employment <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong> 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 Rwanda<strong>The</strong> International Cooperatives Alliance, the InternationalTrade Union Confederation (<strong>for</strong>merly theICFTU) and the International Labour Organisationhave teamed up to develop an approach known asSYNDICOOP. ‘SYNDICOOP promotes trade unions andcooperatives — membership-based organisations <strong>for</strong>workers in the in<strong>for</strong>mal 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 <strong>for</strong> members. <strong>The</strong> 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 <strong>for</strong> overcomingthe industry’s problems. <strong>The</strong> government hastried to reassert its regulatory authority and <strong>for</strong>malizethe 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).<strong>The</strong> effectiveness of these ef<strong>for</strong>ts to supplant thein<strong>for</strong>mal 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 in<strong>for</strong>mality (and, by extension,with decentralised and local institutions generally).<strong>The</strong>re 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 <strong>for</strong> society’s most vulnerable,but it limits their options also, long-establishedrules <strong>for</strong> 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. <strong>The</strong>re is no reason to assume that thein<strong>for</strong>mal institutions, rules and arrangements areeither superior or inferior to their de jure or ‘modern’counterparts. Context is critical. India is a possiblemodel <strong>for</strong> 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. <strong>The</strong> 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 <strong>for</strong>ms of tenure. <strong>The</strong>noteworthy 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 (<strong>for</strong> example, family and group rights). It alsodemonstrates the potential <strong>for</strong> an incremental path togreater security consistent with the way the poor accumulatetheir resources over time. This approach may be asolid foundation <strong>for</strong> achieving consensus on the issue ofland and property rights. It is also a good starting point<strong>for</strong> 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 or<strong>for</strong>mal rightsCustomaryPerceived tenure approaches:• Political statements• Services without legal tenureAnti evictionsOccupancyLeasesGroup tenureAdverse possessionRegisteredfreeholdIllegal orin<strong>for</strong>mal rightscourts. Drawing on traditional norms, the councilsare reported to be seeking out new roles and tobe adapting to the democratic factor in India’s<strong>for</strong>mal political institutions (Pur and Moore 2007).Several West African countries use decentralisedlocal councils to administer land laws. <strong>The</strong>setend 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 <strong>for</strong>mality and in<strong>for</strong>mality mayhelp the poor with land rights generally.In all instances poor people’s perceptions shouldbe kept front and centre. Legal or organisationalre<strong>for</strong>ms 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 <strong>for</strong> 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 re<strong>for</strong>ms. 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 in<strong>for</strong>mality. While a country’s environment <strong>for</strong>re<strong>for</strong>m 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 <strong>for</strong> Legal Empowermentof the Poor re<strong>for</strong>ms, which implementationscenarios seem most probable, what sequencingand timelines <strong>for</strong> re<strong>for</strong>m 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 <strong>for</strong> discord and conflict. <strong>The</strong>secharacteristics are important in all policy arenas butare especially relevant <strong>for</strong> 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 ef<strong>for</strong>t required. On the scale ofcomplexity, Legal Empowerment of the Poor tendsto fall at the far end. As seen by the <strong>Commission</strong>,the paradigm <strong>for</strong> empowerment is holistic and thushighly ambitious. Ideally, the poor should obtainlegal protection <strong>for</strong> 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 <strong>for</strong>wardselectively 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 rein<strong>for</strong>cingelements. 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, <strong>for</strong> 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 re<strong>for</strong>m 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 re<strong>for</strong>m to promote the right to freedom ofassociation and collective bargaining, <strong>for</strong> instance,the ILO (2004: 110-111) has observed that fourto five years is the minimum time that should beallowed be<strong>for</strong>e 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 rein<strong>for</strong>ces 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 re<strong>for</strong>m, which creates a self-fulfilling prophecyof implementation slippage. Thus it is importantto look <strong>for</strong> interventions that promise short-termrewards <strong>for</strong> beneficiaries. Micro-finance, <strong>for</strong> 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). <strong>The</strong>re are manychances <strong>for</strong> 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 <strong>for</strong> 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). <strong>The</strong>se last areoften strong allies of poor people.AmbiguityAmbiguous policies are also more challenging tocarry out than clear policies are. <strong>The</strong>re are severalreasons <strong>for</strong> this, but a principal one is that ambiguitygives bureaucratic stakeholders greater discretionin interpreting or even ignoring the policy.Ambiguity also clouds the ef<strong>for</strong>ts 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 <strong>for</strong> ambiguity. In severalAfrican countries, <strong>for</strong> 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 <strong>for</strong>mal law, however, which tends tofavour large-scale commercial or industrial usersnot pastoralist or subsistence farmers seeking accessto land (Cotula 2007: 36). <strong>The</strong> less clear-cuta policy is, generally the greater is the probabilityof elite capture during implementation.<strong>The</strong> in<strong>for</strong>mal legal arrangements discussed earlierare a source of ambiguity simply because they existside by side with the <strong>for</strong>mal system of civil andcriminal justice. Which one takes precedence? <strong>The</strong>inadvertent result could be a labyrinth of law, inwhich the poor and disadvantaged may lose theirway. Setting aside any possible net advantages ofin<strong>for</strong>mality <strong>for</strong> the poor in a given legal context, theabsence of documentation tends to render in<strong>for</strong>maljustice a less effective plat<strong>for</strong>m <strong>for</strong> implementingempowerment strategies. Consider the phenomenonknown as ‘<strong>for</strong>um shopping’ whereby economicactors navigate among multiple legal orders to seekthe most favourable <strong>for</strong>um 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 <strong>for</strong>um and <strong>for</strong>ce poor people to litigatein <strong>for</strong>ums where they are at a disadvantage. <strong>The</strong>309

flip side of <strong>for</strong>um 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 <strong>for</strong>Legal Empowerment of the Poor. Still, it is a complicatingfactor that makes empowerment policiestrickier to plan and execute.<strong>The</strong>re may be temptation to clarify anambiguous in<strong>for</strong>mal 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. <strong>The</strong> civil war that raged <strong>for</strong> years inthe south of the country was set in motion <strong>for</strong> 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). <strong>The</strong> 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.Discord<strong>The</strong> 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 <strong>for</strong> confrontationbecause important stakeholders believe others’gains come at their expense. <strong>The</strong> 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 <strong>for</strong>mal ownership;the President of Peru, who earned the politicalcredit <strong>for</strong> the programmeme; local mayors, whoshared the political credit, and congressmen, whobacked the legal framework <strong>for</strong> <strong>for</strong>malization. <strong>The</strong>principal 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 <strong>for</strong>mer community leaders, whowere replaced by new leaders elected by the communitiesduring the re<strong>for</strong>ms (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 be<strong>for</strong>e 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, <strong>for</strong> instance,have widely distributed costs because everyonehas to pay the consequent inflated prices <strong>for</strong> goodsand services. Regulations targeting a specificindustry, such as licensing or safety inspections<strong>for</strong> minicab taxis (mentioned earlier), are morefocused and narrowly concentrated and may beperceived as a loss or gain <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>beneficiaries tomobilize; strongincentives <strong>for</strong>victims 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 <strong>for</strong> 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 <strong>for</strong>the 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. <strong>The</strong> 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 implementationef<strong>for</strong>ts might there<strong>for</strong>e be hindered, thepolicies to promote empowerment must be madeas clear-cut and straight<strong>for</strong>ward 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 re<strong>for</strong>m.Policymaking is not an assembly line, and a <strong>for</strong>mulaicapproach 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 <strong>for</strong> policy windows that open up andcreate space <strong>for</strong> moving <strong>for</strong>ward 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). <strong>The</strong> questions are illustrativeand need to be altered to suit different needs andsituations.An approach to implementation <strong>for</strong>Country ‘X’Broadly, Legal Empowerment of the Poor implementationin country ‘X’ might start with an environmentalscan and contextual analysis. <strong>The</strong> 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 in<strong>for</strong>mal institutions have on the poor. <strong>The</strong>full contextual analysis would then <strong>for</strong>m the basis<strong>for</strong> 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.<strong>The</strong> 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. <strong>The</strong> purpose of the stakeholderanalysis would be to get a firmer grasp ofthe probability of moving <strong>for</strong>ward with various LegalEmpowerment of the Poor scenarios, and to beginserious thinking about what it might take to build aminimum winning coalition <strong>for</strong> legal empowermentin country ‘X’.Finally, with possible overlapping chronology, theinternal technical features of the alternative policyscenarios would be reviewed. <strong>The</strong> policy characteristicsanalysis would focus on the complexitiesof the various policies, potential ambiguities thatmight possibly sow discord — all of which wouldserve to hinder implementation. Ef<strong>for</strong>ts 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 <strong>for</strong> 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 re<strong>for</strong>m, 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 <strong>for</strong> 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 re<strong>for</strong>m, 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 <strong>for</strong>ward. Obviously,what <strong>for</strong> works <strong>for</strong> 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.<strong>The</strong> 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 in<strong>for</strong>mation 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 need<strong>for</strong> 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 toImplementationRe<strong>for</strong>ms to legally empower the poor are multi-faceted.Besides technical analysis and prescription,successful implementation of re<strong>for</strong>ms calls <strong>for</strong>consensus building, participation of key stakeholders,compromise, contingency planning, adaptation,and flexibility. <strong>The</strong>se are the ‘how’ or methodissues of implementation. Re<strong>for</strong>ms never proceedin a straight line; change is multi-directional andcalls <strong>for</strong> actions — by donors, government, NGOs,the private sector, and communities — sometimesiteratively, sometimes simultaneously, and sometimessequentially. To guide and track the necessaryactions to achieve re<strong>for</strong>m ends, a roadmap isuseful to identify and to incorporate the technical,institutional, and political and dimensions of there<strong>for</strong>m process.In developing an implementation roadmap <strong>for</strong>re<strong>for</strong>ms <strong>for</strong> Legal Empowerment of the Poor, ourworking group adapted a practical template developedby Brinkerhoff and Crosby (2002), whichdraws on policy re<strong>for</strong>m research from multiplesectors. This template builds on empirical analysisthat identifies a common set of tasks associatedwith successful re<strong>for</strong>m design and implementation.<strong>The</strong>se tasks follow a generalised (but notlockstep) pattern, which can be conceived of as aninteractive cycle comprising the following phases:policy <strong>for</strong>mulation 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 <strong>for</strong>change, developing policy issues, lists of items tobe considered, and making decisions that launchLegal Empowerment of the Poor re<strong>for</strong>ms 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 re<strong>for</strong>mand 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 Poorre<strong>for</strong>ms must identify and create reasons <strong>for</strong> governmentand other entrenched interests to back (orat least not vigorously oppose) the pro-poor policy.Policy Formulation and Legitimisation: Address thetechnical content of re<strong>for</strong>m measures. However, besidestechnical content, re<strong>for</strong>m measures need tobe accepted and seen as necessary and important.<strong>The</strong> poor should, through their representatives, bepart and parcel of the re<strong>for</strong>m design process.Constituency Building: Convince beneficiaries ofthe advantages of re<strong>for</strong>ms, and demonstrate thatlong-term benefits are worth short-term costs.Resource Mobilisation: Ensure flow of adequateresources by addressing incentives, and exercisingleadership in galvanizing constituencies. <strong>The</strong>recommendations of the <strong>Commission</strong> call uponcountries to undertake re<strong>for</strong>ms that will requirefinancial, technical, and human resource commitments.Implementation Design and Organisational Development:Re<strong>for</strong>mers need to create and nurturenetworks and partnerships <strong>for</strong> cooperation and coordination,and provide <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> 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 be<strong>for</strong>ehand,and that even if such <strong>for</strong>eknowledge 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 <strong>Commission</strong>’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, there<strong>for</strong>e,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 recommendations<strong>for</strong> universal application; but it ispossible to put <strong>for</strong>ward 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 ChecklistRe<strong>for</strong>m implementation‘crossroad’Issues, agendas anddecisionsPolicy <strong>for</strong>mulation— legitimisationConstituency buildingResource mobilisationImplementationdesign andorganisationaldevelopmentAction planning andprogress monitoringQuestions to bear in mindContextual analysis and checklist: Are the conditions right <strong>for</strong> a legal empowerment re<strong>for</strong>m 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 <strong>for</strong>mulated?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 re<strong>for</strong>m, what is it expected to accomplish or facilitate?Where did the impetus <strong>for</strong> 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 re<strong>for</strong>m champions been identified, and who are they?Have Legal Empowerment of the Poor re<strong>for</strong>m policies been discussed in public <strong>for</strong>ums and the press?Do key stakeholders see the Legal Empowerment of the Poor re<strong>for</strong>ms as desirable?Do Legal Empowerment of the Poor re<strong>for</strong>m 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 re<strong>for</strong>m policies?Have partnerships been <strong>for</strong>med 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, per<strong>for</strong>mance expectations, timetables and outcomes been developed?Do these plans include provision <strong>for</strong> early success and dissemination of success stories?Have resistance, opposition, and conflict been planned <strong>for</strong>?Are milestones in place to track progress and flag the need <strong>for</strong> adaptation?Are mechanisms established to capture lessons learned?

Table 5.6 Empowerment Domain 1: Access to JusticeFramework of Opportunities and ProtectionsLegal Instruments Problem <strong>for</strong> Poor People Opportunities/Protections• Universal Declaration on HumanRights (UDHR), ICCPR, CESCR• Rights related to access toin<strong>for</strong>mation; 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 re<strong>for</strong>m/legalre<strong>for</strong>m• Capacity-building ofrepresentative organisationsIn the second empowerment domain of assetholdingrights, the major issues <strong>for</strong> the poorinclude insecurity of tenure, <strong>for</strong>ced 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.<strong>The</strong> 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. <strong>The</strong> 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); <strong>for</strong> 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 <strong>for</strong> the poor couldinclude systemic re<strong>for</strong>ms 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 af<strong>for</strong>dable.<strong>The</strong> spectrum of land rights (see Box 5.5) hassome important policy implications that couldin<strong>for</strong>m a practical approach to the follow-up workof the <strong>Commission</strong>, 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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong>ced evictions• Pro-poor land and agrarian re<strong>for</strong>ms• Joint titling and re<strong>for</strong>m 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 <strong>for</strong> all. <strong>The</strong> poor facenon-respect <strong>for</strong> fundamental principles and rightsat work, a lack of legal recognition of workers andtheir organisations in the in<strong>for</strong>mal economy (andto some extent in the <strong>for</strong>mal 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 to<strong>for</strong>ced labour) to those in which they enjoy opportunities<strong>for</strong> full and productive employment, accompaniedby basic security. Unlike land the spectrum<strong>for</strong> 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 <strong>for</strong>mal legal classifications (‘casualwork’, ‘independent contractor’, etc.) which varyacross legal systems. Fundamental principles andrights at work are particularly vital in the market <strong>for</strong>unskilled labour that is the main source of income<strong>for</strong> the poor.In relation to labour issues, protection/security andopportunities could be mapped along an ‘upwardsarrow’ spectrum towards decent work <strong>for</strong> 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 <strong>for</strong>ced labour,child labour and discrimination) involve both319

Box 5.6 Gold Rush in Mongolia: from Herders to ‘Ninjas’Harsh winters in Mongolia have been <strong>for</strong>cing traditionalherder families to eke out a living as in<strong>for</strong>mal miners.<strong>Work</strong>ers laid off from <strong>for</strong>mal mining sites were the firstto mine in<strong>for</strong>mally. 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 in<strong>for</strong>mal mining (the entire populationis only 2.7 million), producing the same level as <strong>for</strong>malmining companies. Exposure to mercury used to extractgold from the ore puts the miners, especially the children,at serious risk.<strong>The</strong> Mongolian Employers Federation (MONEF) has beenseeking a new law to govern in<strong>for</strong>mal mining. At the sametime, it has been raising awareness among the miningcompanies and providing chances <strong>for</strong> 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 in<strong>for</strong>maleconomy and improve protection against the worst <strong>for</strong>msof 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 <strong>for</strong> coherencebetween policies on natural resource use, investment,property ownership, job creation <strong>for</strong> adults and labourprotection.Source: Damdinjav Narmandakh, ‘Extending labour protection to thein<strong>for</strong>mal economy in Mongolia,’ in David Tajgman, ed., ExtendingLabour <strong>Law</strong> to All <strong>Work</strong>ers: Promoting Decent <strong>Work</strong> in the In<strong>for</strong>malEconomy 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 <strong>for</strong>ms 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 <strong>for</strong>mal or in<strong>for</strong>maleconomies. <strong>The</strong> 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 <strong>for</strong> ZambiaIn<strong>for</strong>mal Economy Associations launched a partnershipin 2002. (Another illustration from Mongoliais presented in Box 5.6.) Moreover, the ability toachieve decent work <strong>for</strong> 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 re<strong>for</strong>m agenda (Table 5.9). Withinthe mandate of the <strong>Commission</strong>, the major issues<strong>for</strong> 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 <strong>for</strong>mal economy such as complicated procedures(entry/exit, expansion of business contracts,conflict resolution). <strong>The</strong>re 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 <strong>for</strong> 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 en<strong>for</strong>cement mechanismsand other institutions• Legal framework <strong>for</strong> stronger collectiverepresentation• Minimum package of labour rights <strong>for</strong>in<strong>for</strong>mal economy workers• Innovations in social protection• Measures <strong>for</strong> 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 <strong>for</strong>mal 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.<strong>The</strong>se questions become even more important becausethe <strong>Commission</strong>’s intent is not to push legalTable 5.9 Empowerment Domain 4: Business RightsFramework of Opportunities and ProtectionsLegal Instruments Problem <strong>for</strong> 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 <strong>for</strong>maleconomy: 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

e<strong>for</strong>ms, 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. <strong>The</strong>se are welldescribed and increasingly rely on some <strong>for</strong>m 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. <strong>The</strong>lack 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 en<strong>for</strong>cement oflegal obligations. Special opportunity-measures areoften required <strong>for</strong> women and the more vulnerablegroups, including children and indigenous peoples.to local realities. This section presents a framework<strong>for</strong> 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. <strong>The</strong> <strong>for</strong>mer 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 <strong>Commission</strong>, 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 Levels<strong>The</strong>re is also a need <strong>for</strong> ‘global public goods’ or activitiesundertaken at the global level that will havean important role to play in supporting countrylevelactivities. Moreover, as the <strong>Commission</strong> itselfhas stated, important differences exist betweencountries and even between regions that also call<strong>for</strong> 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 the<strong>Commission</strong>’s report. A key element would be toidentify existing indicators and monitoring ef<strong>for</strong>ts tofurther the Legal Empowerment of the Poor agenda.Similarly, and particularly in the case of the rightsto justice and asset holding, evaluations <strong>for</strong> 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 <strong>for</strong>poverty 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 <strong>for</strong>evaluation (includingfrom gender/indigenousperspectives)• Developing indicatorsand Legal Empowermentof thePoor monitoring• Strengthen statisticalbases <strong>for</strong> 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 <strong>Work</strong> 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 plat<strong>for</strong>mon capacity developmentand evaluativeevidenceIn addition, a range of activities would be undertakento prepare <strong>for</strong> 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. <strong>The</strong>se 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. <strong>The</strong> region and sub-region arecritical <strong>for</strong> the success of the legal empowermentagenda; it is at these levels that global norms canbe adapted to different socio-economic contexts.Building political will <strong>for</strong> 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• <strong>The</strong>matic studies• Who’s doing whatwhere in Legal Empowermentof thePoorPilot Initiatives• Pilot countries step<strong>for</strong>ward/ are identified• Pilot initiativesCapacity Development• Inventory of existingsupport structuresand needs• Collaboration withprofessional orgsand academia totrain grassrootsprofessionals• Set up and activate<strong>for</strong>ums <strong>for</strong> stateinterface with thepoorLocality• Rights awareness• In<strong>for</strong>mation campaigns• Opportunitiesawareness• Identifying grassrootsexperience• Identifying partners• Pilot initiatives inup to four thematicareas• Support to grassroots/communitybasedorganisations• Support to grassrootsprofessionalsand para-professionals• Facilitate communityengagementtechniques and<strong>for</strong>umsregional and sub-regional organisations (e.g.African Union, ASEAN, etc.), U.N. Regional <strong>Commission</strong>s(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 <strong>for</strong>ge 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 <strong>for</strong> the Harmonisation of AfricanBusiness <strong>Law</strong>. In terms of implementation, peerexchangemechanisms can facilitate the sharing ofcountry level experience in policy re<strong>for</strong>m.Activities at National LevelImplementation of empowering policies ideallyExisting ministerial <strong>for</strong>ums 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 establishplat<strong>for</strong>ms <strong>for</strong> aggregating regional demand <strong>for</strong> a ‘legal empowerment programmeme’ as a standever,national re<strong>for</strong>ms. Forums already engaged in law re<strong>for</strong>malone 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. In<strong>for</strong>mationdissemination 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 andIndices<strong>The</strong> 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 techniques<strong>for</strong> manipulating the ‘how’ of policy. For countriespromoting the legal empowerment agenda, identifyingthe appropriate process, picking the righttools and establishing the appropriate benchmarks<strong>for</strong> success are critical.Countries Piloting LegalEmpowerment Re<strong>for</strong>m<strong>The</strong>re has been a tremendous positive responsearound the world to the idea of pro-poor legalempowerment. As the <strong>Commission</strong> moves from theglobal to the country level, a process must be developedto enable, where appropriate, the matchingof the demand <strong>for</strong> re<strong>for</strong>m with the appropriatesupply of in<strong>for</strong>mation, 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: <strong>The</strong> objectives oflegal empowerment aim at achieving systemicchange in the relations between the poor, the stateand the market. <strong>The</strong> 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 <strong>for</strong> success.Political will: As the re<strong>for</strong>m 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 <strong>for</strong> re<strong>for</strong>m 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: <strong>The</strong> quality of governance — theprocesses, rules and organisations supportingdevelopment — will have an important bearingon the likelihood of success in implementing LegalEmpowerment of the Poor. <strong>The</strong> relations betweengovernment, civil society and the professional andprivate sectors will make or break the chances <strong>for</strong>success. Political risk mapping and stakeholderanalysis will be useful tools <strong>for</strong> managing politicalrisk.External support: Legal empowerment processesmust be nationally owned, but outsiders can playan important role in supporting the quality of there<strong>for</strong>m process and in helping to deliver specificoutputs that will build the momentum <strong>for</strong> change.Assessing donor interest and the capacity of externalsupport organisations will be important.Choosing the appropriate country levelprocessA variety of options exist <strong>for</strong> countries, and theorganisations that support them, to drive the legalempowerment agenda. <strong>The</strong> 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 in<strong>for</strong>mationand 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. <strong>The</strong>se 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 re<strong>for</strong>m commissions.• Building on national re<strong>for</strong>m 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 <strong>for</strong> 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.<strong>The</strong> 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. <strong>The</strong> landsector donor group was officially <strong>for</strong>med 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.<strong>The</strong> support of the DPGL is now expanding beyondpolicy development to cover the main activities run bythe Ministry of Land through the Land Re<strong>for</strong>m SupportProgrammeme (LRSP). <strong>The</strong> LRSP incorporates elementsrelating to the finalisation of the land policy process,policy implementation, institutional trans<strong>for</strong>mation, thedevelopment of a pro-poor Land In<strong>for</strong>mation ManagementSystems (LIMS), the implementation of the recommendationsof the Ndungu <strong>Commission</strong> on illegal allocationof public land and the development of Forced EvictionGuidelines in Kenya.<strong>The</strong>se and other activities have collectively supportedthe Government’s economic recovery strategy (i.e.,PRSP) as well as the government’s ef<strong>for</strong>ts 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 re<strong>for</strong>m 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 process<strong>for</strong> managing the re<strong>for</strong>m process. This process willoften include a series of steps as outlined below.<strong>The</strong>se 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 <strong>for</strong>re<strong>for</strong>m;• 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. <strong>The</strong> 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: <strong>The</strong>se 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 practicalre<strong>for</strong>ms in each of the domains, policy analysis(e.g., ‘path to property’ analysis), advocacy andawareness, in<strong>for</strong>mation 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 re<strong>for</strong>msby building on the experiences in the pilot phaseand scaling-up phase to re<strong>for</strong>m the organisationsand rules that shape the institutional context.Tools to support legal empowermentre<strong>for</strong>msAfter deciding on the general approach to be takenwith Legal Empowerment of the Poor, re<strong>for</strong>mersneed to consider numerous applied techniques,developed by anti-poverty workers, communityorganisers and re<strong>for</strong>m advocates around the world<strong>for</strong> carrying out activities analogous to the <strong>Commission</strong>’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. <strong>The</strong>se 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 <strong>for</strong> 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 <strong>for</strong> action planningand monitoring are explained further in Section 5).Readers are also referred to the numerous toolkitsdeveloped by international organisations and NGOs<strong>for</strong> organising communities and implementingnumerous aspects of social and economic developmentpolicy (see the footnote below and Annex 2<strong>for</strong> a comprehensive inventory of toolkits). 10 Manyof these tools can be used individually or in combinationin the implementation of Legal Empowermentof the Poor re<strong>for</strong>ms. On this basis, a set ofLegal Empowerment of the Poor indicators can bedeveloped, tailored to country circumstances.Ready-made Indicators of LegalEmpowermentBoth the <strong>for</strong>mulation 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. <strong>The</strong>re hasbeen a quantitative revolution in recent years ofinternationally comparable data on political andregulatory institutions. <strong>The</strong>re are now at least 150measures of different aspects of governance in thepublic domain. <strong>The</strong>se data series are of variable328

quality and utility in establishing rough baselines<strong>for</strong> 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. <strong>The</strong>y 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. <strong>The</strong>se are based onseveral hundred individual variables measuringperceptions of governance. <strong>The</strong>y 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 <strong>The</strong> World Bank’sdata have their uses but must be applied verycautiously in development work (Arndt and Oman2006). <strong>The</strong> 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 in<strong>for</strong>mationon national or local-level legal empowerment,Legal Empowerment of the Poor programmemesand projects will have to develop and use their ownmetrics <strong>for</strong> 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) put<strong>for</strong>ward indicators that have been tested <strong>for</strong> measuringvarious aspects of decent work. (See Annex3 <strong>for</strong> 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 <strong>for</strong> 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 in<strong>for</strong>mation system based ontargeted indicators endorsed by national stakeholders.2. Stakeholder monitoring to identify the responsesof those that benefited or those that lost fromthe policy re<strong>for</strong>m 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 in<strong>for</strong>mation 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 <strong>for</strong> monitoringpolicy re<strong>for</strong>m implementation, according toBrinkerhoff and Crosby (2002):1. Define a list of steps, processes, targets andmilestone events in the re<strong>for</strong>m 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 <strong>for</strong>mulation 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)<strong>Work</strong>shopsAdvocacy/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 <strong>for</strong> officialsWeb-based supportGender auditImpact evaluationLogical framework approachMISProblem solving studiesStakeholder monitoring (household surveys, key in<strong>for</strong>mant 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 <strong>for</strong> 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 af<strong>for</strong>dablewas 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 procedures<strong>for</strong> 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?<strong>Law</strong>E.g., To whatextent doesthe lawextend labourstandards tothe in<strong>for</strong>maleconomy?E.g., to whatextent doesthe relevantgovernmentagency monitorcompliancewith labourlaws in the<strong>for</strong>mal andin<strong>for</strong>maleconomyGovernmentimplementationef<strong>for</strong>tsE.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 <strong>for</strong>mal orthe in<strong>for</strong>maleconomyable 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 <strong>for</strong> 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. <strong>The</strong>se assessments, when repeatedover time, will show whether and how well LegalEmpowerment of the Poor recommendations arebeing implemented. 12Monitoring of re<strong>for</strong>ms will involve seeking answersto critical questions. Among the questions thatmay need to be posed are the following: Are thepolicy re<strong>for</strong>ms 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 re<strong>for</strong>ms, the pace of implementation willlikely be gradual. <strong>The</strong>re may not even be conspicuousimpact in the short-term. <strong>The</strong>re<strong>for</strong>e, 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 <strong>for</strong>th broad ideasabout how to counter those <strong>for</strong>ces. Change agentsmust put aside preconceived or uni<strong>for</strong>m approachesto Legal Empowerment of the Poor to thinkcreatively about how to make Legal Empowermentof the Poor available, af<strong>for</strong>dable and acceptablein their own specific context. <strong>The</strong>y must be on thelook out <strong>for</strong> unintended consequences, perverseincentives, and hidden agendas. <strong>The</strong>ir initiativesmust be in<strong>for</strong>med 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 re<strong>for</strong>mmust be judged by the extent to which it impartsfreedom and allows poor people to gain morecontrol over their futures and to improve theirwell-being.• <strong>The</strong> peaceful struggle against impoverishmentmust be participatory, based on respect <strong>for</strong> humanrights, and with poor people playing activeroles along the way.• <strong>The</strong> 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.• <strong>The</strong> gains also must include women; there<strong>for</strong>e,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 socialtrans<strong>for</strong>mation — 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 <strong>for</strong> 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 <strong>for</strong>legal 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.<strong>The</strong>re is a rich base of comparative internationalexperience, but no ready-made <strong>for</strong>mulas <strong>for</strong>legal empowerment. Solutions that suit one contextmay be dead wrong in another. Greatcare should be taken to develop interventionsthat are appropriate <strong>for</strong> 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 in<strong>for</strong>mal mechanisms seemsdoomed to failure. Instead, in<strong>for</strong>mal mechanismsmust be gradually integrated with the <strong>for</strong>mal.4.Think long, go short. Justice, labour and landissues are complicated and do not lend themselvesreadily to a traditional two-year project approach.Yet, re<strong>for</strong>mers can never lose sight of thefact that politicians are in office <strong>for</strong> finite terms.<strong>The</strong> implementation process, there<strong>for</strong>e, 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 momentum<strong>for</strong> re<strong>for</strong>m.5.Start from afar, but change from within. Legalempowerment is on the international community’sagenda, as the very existence of this <strong>Commission</strong>proves. Yet, pro-poor policy change hasto be endogenous. Any perception that <strong>for</strong>eigndonors drive re<strong>for</strong>m may prove counter-productive.Re<strong>for</strong>ms 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. <strong>The</strong> incongruity is thatassisting these groups may cause them to becomemore accountable to the external funding agencythan to their membership.7.<strong>Work</strong> 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. <strong>The</strong>yneed to think about how to balance these twoperspectives.8.Decentralise…except when it is better to centralise.A common theme in several <strong>Work</strong>ingGroup reports is the need to decentralise responsibility,resources and accountability <strong>for</strong> 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 <strong>for</strong> change with the capacity toaccommodate change. <strong>The</strong> 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 <strong>for</strong> change coming upwards from thegrassroots.10. Put together in<strong>for</strong>mal and <strong>for</strong>mal institutions.In<strong>for</strong>mal 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 <strong>for</strong> cooperation, but anticipate confrontation.<strong>The</strong>re are Legal Empowerment of thePoor policies where all sides can benefit, <strong>for</strong>instance land readjustment which takes irregularlysub-divided land and reallocates it<strong>for</strong> 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.<strong>The</strong> 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 re<strong>for</strong>ms. Managingpolitical risk throughout the implementationprocess, there<strong>for</strong>e, 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. <strong>The</strong>se actions havebeen selected from materials put <strong>for</strong>ward 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 <strong>for</strong> national ownership is language:dialogue, debate and in<strong>for</strong>mation sharing mustbe conducted in local languages; legal documentsshould be demystified by rendering themin layperson’s terms.3.<strong>Work</strong> 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 <strong>for</strong> 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. Landin<strong>for</strong>mation systems are often expensive, complicated,and bureaucratic and, as a result, quicklybecome outdated. Un<strong>for</strong>tunately, the systemsrequired, <strong>for</strong> example, to integrate innovative<strong>for</strong>ms 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 re<strong>for</strong>m.5.Bring together technical expertise and grassrootsexperience. Technocrats dominate policymakingin Legal Empowerment of the Poor. While validreasons exist <strong>for</strong> some technical requirements,grassroots realities and community solutionsalso need to be understood and incorporated inthe re<strong>for</strong>m 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 <strong>for</strong>participation and coordination mechanisms isoften undervalued and there<strong>for</strong>e under-funded.Other kinds of support, <strong>for</strong> 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 <strong>for</strong> coordination, preparation of researchand options papers, and in<strong>for</strong>mation dissemination.Peer exchanges (both inter-regionaland intra-regional) are another valuable pro-poortool <strong>for</strong> building commitment to re<strong>for</strong>m and <strong>for</strong>maintaining momentum over time.7.Provide effective outreach. Under intense pressuresto deliver, in<strong>for</strong>mation and communicationprogrammemes are often neglected during implementation.Yet without a dedicated outreachcampaign, clients will rarely adopt the proposedre<strong>for</strong>ms. Feedback received from those involvedneeds to be cycled back into the re<strong>for</strong>m process,to keep it homegrown and responsive to demand.8.Provide access to in<strong>for</strong>mation. Two-way communicationbetween governments and the poorwill need to be improved. For example, access toin<strong>for</strong>mation has helped people to secure tenureand to tackle job discrimination through a betterunderstanding of their rights. <strong>The</strong>re are also examplesin post-disaster and post-conflict nationsof the importance of providing access to in<strong>for</strong>mation.Mobilising resources to take advantage ofin<strong>for</strong>mation in support of Legal Empowerment ofthe Poor presents a challenge because in manycountries in<strong>for</strong>mation that is nominally ‘public’is in practice difficult to obtain. In India, <strong>for</strong> example,civil society organisations waged a fiercecampaign to gain access to public budget andexpenditure data using freedom of in<strong>for</strong>mationlaws 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. <strong>The</strong> strategy of bundlingservices is highlighted in several chapters of thisreport; it is seen as a cost-effective strategy <strong>for</strong>delivering 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 rein<strong>for</strong>ce 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 <strong>for</strong> Legal Empowermentof the Poor re<strong>for</strong>ms 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 <strong>for</strong> strategy and tactics, remainingtrue to the core values of the legal empowermentagenda. Where their ef<strong>for</strong>ts prove successful,they will make it possible <strong>for</strong> many more peoplenow mired in poverty to improve their lot in lifewithin the <strong>for</strong>eseeable 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.<strong>The</strong> fundamental challenge is to avoid thecost and expense of <strong>for</strong>mal litigation in return<strong>for</strong> decisions that are made transparently andcan be en<strong>for</strong>ced. 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 re<strong>for</strong>m 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.<strong>The</strong> role of urban planners and local authoritiesalso merits attention. It may be possibleto convert these stakeholders from possibleopponents into allies <strong>for</strong> change.Change agents are invited to consider and then try336

Annex 1: PolicyImplementation ToolsListed below are a variety of tools deemed useful<strong>for</strong> implementing policies that may help toadvance legal empowerment re<strong>for</strong>ms:Advocacy/lobbying: <strong>The</strong>se 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. <strong>The</strong> idea is that with proper processes,checks, and testing, a desired outcome canbe delivered with lessproblems and fewer un<strong>for</strong>eseencomplications.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 re<strong>for</strong>ms.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 in<strong>for</strong>mationis obtained through direct observation. <strong>The</strong> 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 <strong>for</strong> 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, <strong>for</strong> 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 <strong>for</strong>managing 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 <strong>for</strong> 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 <strong>for</strong>eign country to gain practical and comparativeexperience about a policy such as legal empowerment.Focus groups: <strong>The</strong>se are groups selected <strong>for</strong> 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. <strong>The</strong> 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: <strong>The</strong>re are individuals, corporations,foundations, and national and international governmentbodies that may be approached <strong>for</strong> 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 <strong>for</strong> improved accountability, impactevaluations are useful <strong>for</strong> 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 in<strong>for</strong>mation can be gatheredthrough an interview process, <strong>for</strong> 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 a<strong>for</strong>m of staff exchange. For instance, staff of a particularagency would visit a similar institution in a<strong>for</strong>eign country, with the aim of exchanging expertise.Often the exchange is two-way (Ouchi 2004).Internship programmemes: <strong>The</strong>se 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 <strong>for</strong>mat (Örtengren 2004).LFA is an overarching tool that may use other techniqueslisted here, <strong>for</strong> instance situational analysisand stakeholder analysis.338

MIS: A Management In<strong>for</strong>mation System is one offour components that establish an efficient policymonitoring system (see Section 5). MIS is used tocollect, analyse, store, and disseminate in<strong>for</strong>mationuseful <strong>for</strong> decision-making in a project. It trackstargeted indicators that help in<strong>for</strong>m 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 <strong>for</strong> publicizing Legal Empowermentof the Poor or other policies include mediacampaigns, school programmemes, public speakingengagements, publications, public hearings, studycircles. (Study circles, <strong>for</strong> example, are a method ofadult education and social change popular in Scandinavia._Para-professionals: <strong>The</strong>se are people in variousoccupational fields, such as education, healthcare,and law, who have obtained a certificate by passingan exam that enables them to per<strong>for</strong>m a task requiringsignificant knowledge, but without having theoccupational license to per<strong>for</strong>m 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 facilitatein<strong>for</strong>mation sharing, analysis, and action. <strong>The</strong> 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 in<strong>for</strong>mation.This may also involve rendering legal jargoninto everyday terms in the dominant country language.Policy briefings: <strong>The</strong>se are summary reports that re-339

view the current state of practice and methodologiesand summarize critical issues and implications.Policy characteristics analysis: This analysis in<strong>for</strong>msthe understanding of the re<strong>for</strong>mers, 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 means<strong>for</strong> organising in<strong>for</strong>mation 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 <strong>for</strong>the government.Problem Census: <strong>The</strong> Problem Census is usuallyconducted in a small group setting, at the localcommunity level, <strong>for</strong> 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 <strong>for</strong> 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.<strong>The</strong> 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, <strong>for</strong> 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 in<strong>for</strong>mation), economic organisation (e.g. localand regional businesses and commercial structures,infrastructure supporting economic activity, government,and other economic/industrial developmentplans <strong>for</strong> 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 <strong>for</strong>change, 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, keyin<strong>for</strong>mant interviews): Household surveys providedata on spending <strong>for</strong> different kinds of goods as wellas household characteristics, such as age, gender,education and occupation of family members. Dataobtained from household surveys is particularly useful<strong>for</strong> measuring income poverty and relating it tohousehold characteristics. <strong>The</strong>y are the most valuableresource available <strong>for</strong> assessing economic outcomes,as well as some aspects of opportunity, and<strong>for</strong> understanding how those outcomes are associatedwith household characteristics (Stern, Dethierand Rogers 2005). A key in<strong>for</strong>mant interview is a<strong>for</strong>m of in-depth interview often used in the initialphase of a project and again in evaluation. Key in<strong>for</strong>mantsare selected <strong>for</strong> their first-hand knowledgeabout the topic of interest. Some of the people whomight be approached in a key-in<strong>for</strong>mant 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 chapter<strong>for</strong> 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 <strong>for</strong> ‘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 <strong>for</strong> ‘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. <strong>The</strong> 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 in<strong>for</strong>mationthey can use to per<strong>for</strong>m their jobs better.Travel grants/internships <strong>for</strong> officials: <strong>The</strong>se allowmid-career professionals and para-professionals toacquire practical knowledge by visiting or serving inorganisations in <strong>for</strong>eign countries.Web-based support: <strong>The</strong> Internet is an invaluabletool <strong>for</strong> disseminating in<strong>for</strong>mation to change agentsand development practitioners about legal empowermentof the poor.<strong>Work</strong>shops: <strong>The</strong>se 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, in<strong>for</strong>mationsharing, 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 justice<strong>The</strong>re are several access-to-justice toolkits, focusingon different aspects of the justice question. Amongthe major ones are the following:• <strong>The</strong> 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. <strong>The</strong>re are four categories in the TAI toolkit— access to in<strong>for</strong>mation, public participation, accessto justice, and capacity development. Moreimportantly, the indicators are divided into law,ef<strong>for</strong>t and effectiveness. <strong>Law</strong> indicators measurethe presence and scope of the law, its breadthand support <strong>for</strong> access and whether it providessufficient guidance <strong>for</strong> implementation and en<strong>for</strong>cement.Ef<strong>for</strong>t indicators assess governmentaction taken to provide access, including actionto implement laws. Effectiveness indicators assesswhether laws and government ef<strong>for</strong>ts 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, ef<strong>for</strong>t and effectiveness)seems to be the most appropriate.• <strong>The</strong> 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. ‘<strong>The</strong>meaning 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.<strong>The</strong>re<strong>for</strong>e, the potential of <strong>for</strong>mal and in<strong>for</strong>malmechanisms to provide people with a sense of‘justice’ in a particular situation depends on thecontext, and is just one part of a bigger picture.’• <strong>The</strong> 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, <strong>for</strong>ests and intellectual property. Amongthe major ones are the following:• <strong>The</strong> Housing and Land Rights Network (HLRN) ofthe Habitat International Coalition (HIC) has a toolkit<strong>for</strong> 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 <strong>for</strong> 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 ef<strong>for</strong>ts arebeing explored, including land rental market facilitation.<strong>The</strong>re is a parallel USAID toolkit on therelationship between minerals and conflict 19 andyet another one on <strong>for</strong>ests and conflict. 20Labour rights• Core Labour Standards Handbook, co-publishedby ADB (Asian Development Bank) and ILO. 21• <strong>The</strong> 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 <strong>for</strong> policy-makers andpractitioners, especially in countries where thereis an absence of social safety nets.• <strong>The</strong> 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 <strong>for</strong> Legislation and <strong>Law</strong> En<strong>for</strong>cement.24• D. Tajgman has edited, Extending Labour <strong>Law</strong> toAll <strong>Work</strong>ers: Promoting Decent <strong>Work</strong> in the In<strong>for</strong>malEconomy 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]• In<strong>for</strong>mal 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 <strong>Work</strong>ers in Asia/ILO (2006). Raising onevoice: Training manual <strong>for</strong> advocates of the rightsof child domestic workers. 27• ILO’s Gender Mainstreaming Strategy (GEMS) andToolkit <strong>for</strong> Asia and the Pacific includes elementsthat can be applied to law re<strong>for</strong>m processes toensure their gender inclusivity. 28• ILO: Gender Equality and Decent <strong>Work</strong> — SelectedILO Conventions and Recommendationspromoting Gender Equality. 29• <strong>The</strong> ILO Gender, Poverty and Employment (GPE)Programmeme has included law re<strong>for</strong>m 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 <strong>for</strong>thcoming). 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 <strong>for</strong> labour rights.Belgium, Netherlands, India, Mexico, Hungary,Georgia, Kenya and Belarus. 31 Second, there isa parallel and complementary toolkit on goodpractices <strong>for</strong> business inspections 32 that lists outbenchmarks that can be used as guidelines by re<strong>for</strong>mers.Third, there is a guide on the design andimplementation of business registration re<strong>for</strong>msat the national level, with good-practice casesand examples of re<strong>for</strong>m from several countries. 33Fourth, there is a toolkit <strong>for</strong> the simplification ofbusiness regulations at the sub-regional level,with a focus on the municipal level. 34• <strong>The</strong> 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• <strong>The</strong> 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 <strong>for</strong> 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 in<strong>for</strong>mality and corruption. First,the World Bank group has a business licensingre<strong>for</strong>m toolkit, with eight case studies from344

Annex 3: Existing Indicatorsand Indices — An InventoryAccess to justice• Bertelsmann Trans<strong>for</strong>mation Index (BTI), withdata since 2004 <strong>for</strong> 119 developing countries.<strong>The</strong> 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 en<strong>for</strong>ceability 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. <strong>The</strong>re aresix questions on violent crime, organised crime,fairness of the judicial process, en<strong>for</strong>ceability 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. <strong>The</strong> one that can be used readilyis Freedom in the World, in existence since 1978and currently with a database of 192 countries.<strong>The</strong>re is a question in determining the ranking asto whether cultural, ethnic, religious and otherminority groups have reasonable self-determination,self-government, autonomy and participation.<strong>The</strong>re 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 <strong>for</strong> 69 developedand developing countries. <strong>The</strong>re 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 en<strong>for</strong>ceabilityof 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 <strong>for</strong> 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. <strong>The</strong>re is also an additionalquestion on whether justice is fairly administeredin society. 49• Since 1982, Merchant International Group Limitedhas data <strong>for</strong> 155 developed and developing countries.This has a question on legal safeguards. 50• Since 1982, Political Risk Services produces dataon country risks. <strong>The</strong> 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• <strong>The</strong> US State Department has a Trafficking inPeople Report, started in 2001 and covering 149developed and developing countries. 52• <strong>The</strong> 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• <strong>The</strong> 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, af<strong>for</strong>dable courts,consistent/predictability of courts, en<strong>for</strong>cementof 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, en<strong>for</strong>cement of commercialcontracts and use of illegal means to adjudicatedisputes. 55• <strong>The</strong> World Bank’s World Development Indicatorsdatabase can be used <strong>for</strong> female work participationrates, unemployment among women and femalerepresentation in national parliament. Thisgives data on 184 countries. 56• Although developed <strong>for</strong> the environment area, <strong>The</strong>Access Initiative’s (TAI) 148 indicators <strong>for</strong> 40countries can also be selectively used. 57 <strong>The</strong>seindicators are divided under law, ef<strong>for</strong>t and effectiveness.One should probably concentrate onlaw indicators, rather than ef<strong>for</strong>t and effectiveness.<strong>The</strong> last two essentially belong to a tool-kitcategory. <strong>The</strong> law indicators are again divided intoaccess to in<strong>for</strong>mation, 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 in<strong>for</strong>mation on government actionand independence of appellate bodies shouldcertainly be picked up.Property rights• Bertelsmann Trans<strong>for</strong>mation Index (BTI) has datasince 2004 <strong>for</strong> 119 developing countries. <strong>The</strong>status index (SI) of BTI has a question on privateproperty. 58• <strong>The</strong> World Bank’s Country Policy and InstitutionalAssessment (CPIA) database has data on 136 developingcountries. <strong>The</strong> creation of the databasegoes back to the late 1970s. <strong>The</strong>re 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. <strong>The</strong>re are two separate questions onintellectual property rights protection and privateproperty protection. 60• Since 1996, Institute <strong>for</strong> 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 en<strong>for</strong>ced. 61• <strong>The</strong> 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• <strong>The</strong> International Property Rights Index (IPRI) isextremely new, 2007 being the first year whenthe index was constructed <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> monitoringthe ‘Right to Adequate Housing’ which includes asub-index on ‘security of tenure’.• International Land Coalition/CAPRi (Collective Actionon Property Rights) are developing an index<strong>for</strong> common property resources, a crucial issue<strong>for</strong> many rural communities, including indigenousgroups. 67• African Union, the Economic <strong>Commission</strong> <strong>for</strong> Africa,Millennium Challenge Corporation, the UN-HABITAT, and World Bank map land indicators <strong>for</strong>Africa. A joint initiative to develop a comprehensiveset of land indicators <strong>for</strong> 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 <strong>for</strong> the achievementof progress in this target. 68• UN-HABITAT Housing Rights Indicators (HRI)is under development, with the United NationsHigh <strong>Commission</strong>er <strong>for</strong> 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. <strong>The</strong>re 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 <strong>for</strong> a limited numberof countries. <strong>The</strong> one most frequently used isFreedom in the World, in existence since 1978,and now with a database of 192 countries. <strong>The</strong>reis a question on whether there are free tradeunions or peasant organisations or their equivalentsand whether there is effective collective bargaining.<strong>The</strong>re 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 <strong>for</strong> 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 <strong>for</strong>ced andcompulsory labour, freedom of association andcollective bargaining, elimination of all <strong>for</strong>ms ofracial discrimination can be used). 73• <strong>The</strong> ILO database can be extensively used. Indicatorsare broadly of two categories: those thatcontain in<strong>for</strong>mation 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 in<strong>for</strong>mation on ratification is available<strong>for</strong> 180 member countries. 74 Ratification doesn’tsolve the problem of implementation per se, butratification in itself signifies political will. <strong>The</strong>ratified 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 <strong>for</strong>ced 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 <strong>for</strong> agriculture, Convention 144 ontripartite consultation, and Convention 122 onemployment policy.3. Conventions that address situations thatoverlap with poverty, as, <strong>for</strong> example, Convention149 on indigenous and tribal people, 76Conventions 97 and 143 on migration <strong>for</strong>employment 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• <strong>The</strong> World Bank’s Country Policy and InstitutionalAssessment (CPIA) database has data on 136 developingcountries; the creation of the databasegoes back to the late 1970s. <strong>The</strong>re 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. <strong>The</strong>re are three separate questions onorderly transfers, vested interests and accountabilityof public officials. <strong>The</strong>re is a separate questionon excessive bureaucracy/red tape. <strong>The</strong>re 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.<strong>The</strong> one that can be used freely is Freedom in theWorld, in existence since 1978 and now with adatabase of 192 countries. <strong>The</strong>re are two separatequestions on whether there are free professionaland other private organisations and whether thereare free businesses or cooperatives. <strong>The</strong>re is alsoa question on whether there is freedom from extremegovernment indifference, and corruption. 81• Since 2004, Transparency International and Galluphave the Global Barometer Survey <strong>for</strong> 69 developedand developing countries. <strong>The</strong>re 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 <strong>for</strong> 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 <strong>for</strong> 155 developed and developingcountries. This has a question on corruption. 87• Since 1982, Political Risk Services producesdata on country risks. <strong>The</strong> financial and economicrisk categories don’t interest the <strong>Commission</strong>. Butwithin the political risk category (140 developingand developed countries), there is a question oncorruption. 88• <strong>The</strong> 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 <strong>The</strong>se 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 of<strong>for</strong>ced labour, child labour and discrimination; and <strong>for</strong> 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,<strong>for</strong> example, the Overseas Development Institute’s Tools <strong>for</strong> 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 ef<strong>for</strong>ts to get government to createeconomic rents, which can then be captured <strong>for</strong> 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 <strong>for</strong> 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), <strong>for</strong>mal political commitment(if not true political will) already exists to fi ght corruption.6 <strong>The</strong>re are tools that have been used <strong>for</strong> 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 <strong>for</strong> example the work of the ‘Barefoot College’ (Social <strong>Work</strong>and Research Centre) in Vilonia, Rajasthan, India.10 Development practitioners wanting to mix and match toolsmay refer to the following easily found toolkits and handbooks: <strong>The</strong>Access 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 <strong>for</strong> 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 <strong>for</strong> 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 <strong>for</strong> mainstreaming employmentand decent work: http://www.ilo.org/public/english/bureau/dgo/selecdoc/2007/toolkit.pdf; Transparency International’s corruptionfi ghters’ toolkits <strong>for</strong> 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 <strong>for</strong> a comprehensive inventory oftoolkits.11 Available at http://go.worldbank.org/KUDGZ5E6P0.12 <strong>The</strong> World Resources Institute is one organisation that hasdeveloped participatory monitoring and evaluation techniques. <strong>The</strong>semay be adapted <strong>for</strong> use in Legal Empowerment of the Poor activitiesto help countries track progress (and lost ground), and allow themensure that re<strong>for</strong>ms actually do lead to empowerment of the poor. Alsosee the Participatory Methods Toolkit prepared by the King BaudouinFoundation and the Flemish Institute <strong>for</strong> 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 <strong>for</strong> Justice: Access <strong>for</strong> All, UNDP, 2005, www.undp.org/governance/guidelines-toolkits.htm, especially Chapter 2.16 Gender, <strong>Law</strong>, and Policy in ADB Operations: A Tool Kit, 2006,www.adb.org/Documents/Manuals/Gender-Toolkit/Gender-<strong>Law</strong>-Policy-Toolkit.asp17 <strong>The</strong> Housing and Land Rights monitoring ‘Toolkit’, 2005, www.toolkit.hlrn.org/English/start.htm18 Land & Confl ict, A Toolkit <strong>for</strong> 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 <strong>for</strong> Intervention, USAID, 2004,www.iisd.org/pdf/2004/envsec_minerals_confl ict.pdf20 Forests & Confl ict, A Toolkit <strong>for</strong> 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 Re<strong>for</strong>m: 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 Re<strong>for</strong>m: A Toolkit <strong>for</strong> DevelopmentPractitioners, <strong>The</strong> World Bank Group, 2006, available at www.businessenvironment.org/dyn/be/docs/137/LicensingRe<strong>for</strong>m32 Good Practices <strong>for</strong> Business Inspections, Guidelines <strong>for</strong>Re<strong>for</strong>mers, Small and Medium Enterprises Department, <strong>The</strong>World Bank Group, 2006, available at www.ifc.org/ifcext/sme.nsf/AttachmentsByTitle/BEEGood+Practices+<strong>for</strong>+Business+Inspection/$FILE/Bus+Inspect+Book.pdf33 Re<strong>for</strong>ming Business Registration Regulatory Procedures atthe National Level, A Re<strong>for</strong>m Toolkit <strong>for</strong> Project Teams, Small andMedium Enterprises Department, <strong>The</strong> World Bank Group, 2006,available at www.ifc.org/ifcext/sme.nsf/AttachmentsByTitle/BEERe<strong>for</strong>mBusRegNational/$File/Bus+Reg+book.pdf34 Simplifi cation of Business Regulations at the Sub-NationalLevel, A Re<strong>for</strong>m Implementation Toolkit <strong>for</strong> Project Teams, InternationalFinance Corporation, <strong>The</strong> World Bank Group, 2006, available at www.ifc.org/ifcext/sme.nsf/AttachmentsByTitle/BEESubnational/$File/BeeToolkit05_full.pdf35 <strong>The</strong> 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-trans<strong>for</strong>mation-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.we<strong>for</strong>um.org56 http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS57 http://research.accessinitiative.org/?module=research.methodology58 http://www.bertelsmann-trans<strong>for</strong>mation-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.we<strong>for</strong>um.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 in<strong>for</strong>mal economy,child labour statistics, decent work indicators, <strong>for</strong>ced 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.we<strong>for</strong>um.org351

Chapter 5 BibliographyAbdul-Jalil, Musa Adam. 2005. ‘Land Tenure and Inter-EthnicConfl ict in Darfur,’ in Report of the Conference on LandTenure and Confl ict in Africa: Prevention, Mitigation andReconstruction. Nairobi: ACTS Press.Alsop, Ruth, and Nina Heinsohn. 2005. Measuring Empowerment inPractice: Structuring Analysis and Framework Indicators,World Bank Policy Research <strong>Work</strong>ing Paper No. 3510.Arndt, Christiane, and Charles Oman. 2006. Uses and Abuses ofGovernance Indicators, OECD Development Centre Study.Assaad, Ragui. 1996. Formalizing the In<strong>for</strong>mal? <strong>The</strong> Trans<strong>for</strong>mationof Cairo’s Refuse Collection System, Journal of PlanningEducation and Research 16 (2), 115-126.Aursnes, Ingunn Sofi e, and Conor Foley. 2005. (April) PropertyRestitution in Practice: <strong>The</strong> Norwegian Refugee Councils’Experience, Norwegian Refugee Council.Barrett, Jane. 2003. Organising in the In<strong>for</strong>mal Economy: A Case Studyof the Minibus Taxi Industry in South Africa, SEED <strong>Work</strong>ingPaper No.39, ILO.Berg, Janine, and Sandrine Cazes. 2007. <strong>The</strong> Doing BusinessIndicators: Measurement Issues and Political Implications,ILO Economic and Labour Market Papers 2007/6, Geneva.Bianchi, Robert R. and Sherrie A. Kossoudji. 2001. Interest Groupsand Organisations as Stakeholders, World Bank, SocialDevelopment Papers No. 35.Brinkerhoff, Derick W. 2000. ‘Assessing Political Will <strong>for</strong> Anti-Corruption Ef<strong>for</strong>ts: An Analytic Framework.’ PublicAdministration and Development 20 (3), 239-252.Brinkerhoff, Derick W., and Benjamin L. Crosby. 2002. ManagingPolicy Re<strong>for</strong>m, Concepts and Tools <strong>for</strong> Decision-Makersin Developing and Transition Countries, Bloomfi eld, CT,Kumarian Press.Brinkerhoff, Derick W., and Arthur A. Goldsmith. 2004. ‘GoodGovernance, Clientelism and Patrimonialism: NewPerspectives on Old Problems.’International PublicManagement Journal 7 (2), 163-185._______. 2005. ‘Institutional Dualism and InternationalDevelopment: A Revisionist Interpretation of GoodGovernance.’ Administration and Society 37 (2), 199-224.Bruce, John W. et al. 1996. Country Profi les of Land Tenure: Africa,University of Wisconsin, Land Tenure Center.Cook, Maria L. 2005. ‘International Labor Standards and DomesticLabor Advocates: <strong>The</strong> Politics of Labor Rights in LatinAmerica.’ Paper presented at the annual meeting of theAmerican Political Science Association .Washington, DC.Cotula, Lorenzo. 2007. Legal Empowerment <strong>for</strong> Local Resource Control.International Institute <strong>for</strong> Environment and Development.Cousins, Ben et al. 2005. ‘Will Formalizing Property Rights ReducePoverty in South Africa’s ‘Second Economy’? ‘ <strong>for</strong> Land andAgrarian Studies. School of Government. University of theWestern Cape, South Africa.Decker, Klaus, Caroline Sage, and Milena Stefanova. 2005. <strong>Law</strong> orJustice: Building Equitable Legal Institutions. World Bank,WDR 2006 Background Paper.Eurostat/UNDP. 2004. Governance Indicators: A Users’ Guide.Luxembourg and New York.Fung, Archon, and Erik O. Wright 2003. ‘Countervailing Power inEmpowered Participatory Governance.’ In Fung and Wright,eds. Deepening Democracy: Institutional Innovations inEmpowered Participatory Governance. Fung and Wright,eds., London: Verso.Golub, Stephen. 2003. Beyond Rule of <strong>Law</strong> Orthodoxy: <strong>The</strong> LegalEmpowerment Alternative, Rule of <strong>Law</strong> Series No. 41,Carnegie Endowment <strong>for</strong> International Peace.Grindle, Merilee. 2007. Good Enough Governance Revisited,Development Policy Review 25 (5), 533-574.Hart, Stuart L. 2005. Capitalism at the Crossroads: <strong>The</strong> UnlimitedBusiness Opportunities in Solving the World’s Most Diffi cultProblems, Upper Saddle River, NJ, Wharton School.He, Xin. 2005. ‘Why Do <strong>The</strong>y Not Comply with the <strong>Law</strong>? Illegality andSemi-Legality among Rural-Urban Migrant Entrepreneursin Beijing.’ <strong>Law</strong> and Society Review 39 (3), 527-562.ILO. 2001. Stopping Forced Labour, Geneva, available at http://www.ilo.org/dyn/declaris/DECLARATIONWEB.DOWNLOAD_BLOB?Var_DocumentID=1578._______. 2003. <strong>Work</strong>ing out of Poverty, Geneva, available athttp://www.ilo.org/global/About_the_ILO/Mainpillars/<strong>Work</strong>ingoutofpoverty/lang--en/docName--KD00116/index.htm._______. 2004. Organising <strong>for</strong> Social Justice, Geneva, availableat http://www.ilo.org/public/english/employment/strat/analysis/poverty.htm._______. 2007. Equality at <strong>Work</strong>: Tackling the Challenges. Geneva.Available at http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---webdev/documents/publication/wcms_082607.pdfICMM, the World Bank and ESMAP. 2005. Community DevelopmentToolkit. Available at http://www.icmm.com/publications/1342CDT.pdf.Kamunyori, Sheila Wanjiru. 2007. ‘A Growing Space <strong>for</strong> Dialogue:<strong>The</strong> Case of Street Vending in Nairobi’s Central BusinessDistrict,’ unpublished Masters <strong>The</strong>sis. MassachusettsInstitute of Technology.Kucera, David, ed. 2007. Qualitative Indicators of Labour Standards:Comparative Methods and Applications. Dordrecht:Springer.Le Sage, Andre. 2005. Stateless Justice in Somalia: Formal andIn<strong>for</strong>mal Rule of <strong>Law</strong> Initiatives. Geneva, Centre <strong>for</strong>Humanitarian Dialogue.Lindenberg, Marc, and Shantayanan Devarajan. 1993. ‘PrescribingStrong Economic Medicine: Revisiting the Myths aboutStructural Adjustment, Democracy, and EconomicPer<strong>for</strong>mance in Developing Countries.’ Comparative Politics25 (2), 169-182.Moser, Caroline. 2005. An Introduction to Gender Audit Methodology.London: Overseas Development Institute.Örtengren, Kari. 2004. <strong>The</strong> Logical Framework Approach: A Summary ofthe <strong>The</strong>ory behind the LFA Method, SIDA, available at www.sida.se/publications.352

Ouchi, Fumika. 2004. Twinning as a Method <strong>for</strong> InstitutionalDevelopment: A Desk Review, WBI Evaluation Studies EG04-85. Available at http://info.worldbank.org/etools/docs/library/80333/EG04-85.pdfPalacio, Ana. 2006. Legal Empowerment of the Poor: An Action Agenda<strong>for</strong> the World Bank. Available at http://rru.worldbank.org/Documents/PSDForum/2006/background/legal_empowerment_of_poor.pdf.Patel, Sheela. 2007. Towards the Legal Empowerment of the Poor.Available at http://www.undp.org/LegalEmpowerment/docs/SheelaPatel_towards_Legal Empowerment of the Poor.doc.Perry, Guillermo E. 2007. In<strong>for</strong>mality: Exit and Exclusion. Washington,DC: World Bank.Platteau, Jean-Philippe. 2004. ‘Monitoring Elite Capture in Community-Driven Development.’ Development and Change. 35 (2),223—246.Pozzoni, Barbara, and Nalini Kumar. 2005. A Review of the Literatureon Participatory Approaches to Local Development <strong>for</strong> anEvaluation of the Effectiveness of World Bank Support <strong>for</strong>Community-Based and Driven Development Approaches.Washington, DC: World Bank. Operations EvaluationDepartment <strong>Work</strong>ing Paper.Pur, Kripa Ananth, and Mick Moore. 2007. Ambiguous Institutions:Traditional Governance and Local Democracy in Rural India.IDS <strong>Work</strong>ing Paper 282.Radel, Claudia. 2005. ‘Women’s Community-Based Organisations,Conservation Projects, and Effective Land Control inSouthern Mexico.’ Journal of Latin American Geography 4,(2), 7-34.Ramirez, Ricardo. 1999. ‘Stakeholder Analysis and Confl ictManagement.’ In: Cultivating Peace: Confl ict andCollaboration in Natural Resource Management. ed. DanielBuckles. Ottawa: International Development ResearchCentre.Ribot, Jesse C. 1999. Decentralisation, Participation and Accountabilityin Sahelian Forestry: Legal Instruments of Political-Administrative Control, Africa: Journal of the InternationalAfrican Institute, 69 (1), 23-65.Robb, C. M. 2000. How the Poor Can Have a Voice in Government Policy,Finance & Development 37 (4). Available at http://www.fao.org/Participation/ft_more.jsp?ID=2163.Ross, Michael. 2006. ‘Is Democracy Good <strong>for</strong> the Poor?’ AmericanJournal of Political Science. 50 (4), 860-874.Samuels, Kirsti. 2006. Rule of <strong>Law</strong> Re<strong>for</strong>m in Post-Confl ict Countries:Operational Initiatives and Lessons Learnt. World Bank.Confl ict Prevention and Reconstruction Paper No. 37.Schneider, Friedrich. 2002. Size and Measurement of the In<strong>for</strong>malEconomy in 110 Countries around the World. DoingBusiness project. World Bank working paper. July.Shatkin, Gavin. 2000. Obstacles to Empowerment: Local Politics andCivil Society in Metropolitan Manila, <strong>The</strong> Philippines, UrbanStudies. 37 (12), 2357-2375.Start, Daniel, and Ingie Hovland. 2004. Tools <strong>for</strong> Policy Impact: AHandbook <strong>for</strong> Researchers, London, Overseas DevelopmentInstitute.Stern, Nicholas, Jean-Jacques Dethier, and F. Halsey Rogers. 2005.Growth and Empowerment. Cambridge, MA: MIT Press.Tendler, Judith. 2002. ‘Small Firms, the In<strong>for</strong>mal Sector, and the Devil’sDeal.’ IDS Bulletin 33 (3), 98-104.UN Global Compact Offi ce. 2007. UN Global Compact Annual Review.New York.UNEP. 2004. Women and the Environment. Nairobi.USAID. 1998. Handbook of Democracy and Governance ProgrammeIndicators, Center <strong>for</strong> Democracy and Governance,Washington.van der Merwe, Susan. 2007. ‘A Policy Perspective from South Africa.’In In<strong>for</strong>mal Institutions: How Social Norms Help or HinderDevelopment. Paris: OECD Development Centre.Varshney, Ashutosh. 2005. ‘Democracy and Poverty.’ In MeasuringEmpowerment. ed., Deepa Narayan-Parker. New York:Ox<strong>for</strong>d University Press.Viswanathan, Sujatha, and Ravi Srivastava 2007. Learning from thePoor, Manila, Asian Development Bank.Wampler, Brian. 2007. Participatory Budgeting in Brazil: Contestation,Cooperation, and Accountability. University Park:Pennsylvania State University Press.Wells, A., et al. 2004. Rural Livelihoods, Forest <strong>Law</strong> and the IllegalTimber Trade in Honduras and Nicaragua, Research paper<strong>for</strong> CIFOR, Bogor Barat.Wilson, James Q.1973. Political Organisations, New York: Basic Books.World Bank. 1996. Participation Sourcebook, Appendix 1: Methods andTools <strong>for</strong> Social Analysis. Available at www.worldbank.org/wbi/sourcebook/sbpdf.htm353

<strong>The</strong> <strong>Commission</strong> 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 <strong>Commission</strong> will focus ona unique and overlooked aspect of the problem:the inextricable link between pervasive povertyand the absence of legal protections <strong>for</strong>the poor.– Madeleine K. Albright<strong>The</strong> 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