Journal Issue

Issues in Settlement of New Lands: Lessons from the World Bank’s project experience

International Monetary Fund. External Relations Dept.
Published Date:
March 1987
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Gottfried Ablasser

Historically, an important dimension of socioeconomic development the world over has been the settlement of new lands. As most of the globe’s hospitable open spaces have been settled, much of the area remaining has infertile soils, inadequate water, inhospitable climates, and endemic diseases. Because of difficult environmental conditions, the development of new land settlements is becoming particularly complex, and costs are rising. But despite formidable obstacles and hardships associated with land settlement, there continues to be much interest in opening up new lands by private individuals and governments alike. Individual settlers, of course, envisage a better life than in their place of origin. Governments’ motives are varied, and include primarily alleviation of population pressures elsewhere in the country, increases in agricultural production for domestic use and export, and generation of additional employment and incomes. Other reasons may be famine relief, relocation of people as a result of natural disasters or displacement through development projects (e.g., dams), avoiding land reform in settled parts of the country, and consolidation of national boundaries.

The world’s potentially arable land area is estimated to be above 2,500 million hectares, of which some 1,500 million hectares are currently under crop; the majority of the lands with development potential are either virgin territory or sparsely populated areas in Latin America and tropical Africa. While the new areas of 4-5 million hectares brought under cultivation annually are only a small fraction of potentially arable lands worldwide, land development activities often represent major transformations for the countries in which they occur. Some of these have caught the public’s eye and generated controversy—generally out of concern for the environment.

The Bank’s Operations Evaluation Department (OED) in 1985 reviewed 34 completed projects approved over 1961-78 and completed over 1969-84 (including 14 projects completed over 1980-84) which had support of land settlement as one of their major objectives. The 34 projects had an estimated aggregate cost at appraisal of $1.2 billion of which Bank Group lending totaled $597.5 million. The following observations are largely based on the findings of this OED study.

Issues and obstacles

The settlement process generally follows a distinct pattern from the time of arrival of settlers to full maturity of the new community when dependency upon official assistance ends and surplus production and sustainable commercial transactions emerge. From the perspective of the settler, relocating permanently to a new area is challenging and laden with hardship, but it also offers the prospect of a higher standard of living. The characteristics of settlement beneficiaries thus are of crucial importance. Some individuals and families move on their own, while others are chosen by development agencies and often given incentives.

Among development agencies’ principal concerns, after attracting a desirable settler population, is the establishment of appropriate farming systems. The areas being settled often are ecologically fragile, and care must be exercised in their utilization and development. Land use patterns to be introduced in settlement areas not only must be environmentally sound but also must be acceptable to the settlers. Native populations, where some exist, have to be integrated in the settlement process or at least protected against adverse effects of the influx of newcomers.

The Bank’s experience

Lending by the World Bank for land settlement has been a relatively small part of lending for agriculture. Lending data for settlement are not separately compiled, but one estimate for the 1962-75 period shows that lending for settlement projects averaged about 5 percent of total agricultural lending and appears to have increased somewhat after 1975.

The Bank intends to continue funding of land settlement projects and projects which contain settlement-related components. It is a major lender for the latter type of projects. Examples include rehabilitation of large-scale irrigation projects, which initially involved the opening up of unirrigated lands by settler populations; and power, irrigation and other types of projects which require compulsory relocation of populations from project areas. It is estimated that 400-450,000 people will have to be resettled as a result of projects financed during fiscal years 1979-83.

In the course of its lending operations, the Bank has increased its awareness of land settlement issues. Practical knowledge gained has benefited new lending, and efforts to improve feedback are continuing. Operational policies have been modified to reflect the increased experience and awareness (see box on policy statements). The Bank is convinced that a systematic application—by the Bank and other supporters of land settlement projects—of the principles embodied in those policies will adequately safeguard against the potential adverse human consequences of land settlement and ensure environmentally sound development to the benefit of settler individuals and countries.

Settlement projects in three countries

• In Malaysia, the Federal Land Development Authority (FELDA) was created in 1956 for the purpose of establishing new settlements to grow oil palm and rubber. FELDA clears the land with contract labor and plants the treecrops before settler families, selected from among the landless poor, are brought in. Settlers initially receive a guaranteed minimum income from FELDA which, together with a loan for the plot, is to be repaid over a period of 20 years. By the end of 1984, 367 FELDA schemes covered more than 600,000 hectares and involved about 89,000 settler families. Bank support to FELDA was provided for five projects (three in Jengka plus projects in Johore and Keratong). The results to date in terms of production, farm incomes, and sustainable community development have been judged as encouraging by the Bank.

• Most of Indonesia’s population lives on the fertile islands of Java, Madura, Bali, and Lombok. It has been government policy since 1905 to resettle part of the population from these crowded islands to the much less populated but ecologically less favorable outer islands of Sumatra, Kalimantan, Sulawesi, and Irian Jaya under what came to be known as the transmigration program. Between 1905 and 1979 about one million people, mostly landless, moved under the program. Since 1970, transmigration has been given priority in the country’s development plans, and as a result about 1.5 million people were moved between 1979 and 1984. Many others have moved without government assistance. Despite these seemingly large numbers, transmigrants represent only about 1.5 percent of Java’s population and account for only a fraction of the population growth on the inner islands. The earlier transmigration settlement schemes were based on irrigated agriculture (rice) and estate plantations (rubber), an approach which turned out to be too costly for the government. Subsequently, low-cost settlements based on rainfed agriculture were attempted on low-fertility soils, with generally poor results. New development strategies for transmigration thus had to be developed, leading the government to seek outside assistance, including from the Bank since 1976. The Bank’s assistance for resettlement to date includes five transmigration and two swamp reclamation projects and is intended, particularly through improved site selection, to assure sustainable and environmentally and socially sound development in the new areas. Only one transmigration project has been completed to date, and OED’s evaluation shows a satisfactory outcome. The Bank’s 1986 transmigration review documents the program’s contributions to the country’s economy as well as its weaknesses, and makes numerous recommendations for improvement.

• Brazil also is experiencing a marked imbalance in the geographical distribution of its population, with the vast majority concentrated in the relatively developed south and the predominantly poor northeast. For a variety of reasons—rapid population growth and poverty in traditional areas, and relative abundance of some natural resources in the Amazon region among them—spontaneous migration to the center and northwest of the country has been accelerating over the past decade. It soon became apparent that unplanned settlement activities can have devastating effects on the fragile Amazonian environment, and government had to take steps toward fostering more orderly and conservational development. These now are manifested in the Development Program for Integrated Areas of Amazonia (POLAMAZONIA), the Development Program for the Integrated Central Areas (POLOCENTRO), and the Northwest Region Integrated Development Program (POLONOROESTE). Of the many loans approved for Brazil by the Bank, several were to benefit specifically frontier areas, such as the Alto Turi Land Settlement Project, the Amazonas Agricultural Development Project, and POLONOROESTE. Only Alto Turi has been completed, and evaluated as a qualified success because of its high costs. The POLONOROESTE program, which has been the source of much controversy in the press, was designed to promote orderly settlement and development, with due regard to environmental considerations, in the states of Rondonia and Mato Grasso. Public attention, largely international, generated by reports of rapid deforestation and the bringing into cultivation of some unsuitable soils, as well as constraints in the implementation capacity of program agencies, has slowed progress with the program, and may possibly reduce its scope.

Development agencies also need to pay attention to nonagricultural economic development and to the phasing of public infrastructure development of the region, while minimizing the budgetary burden on the government. They also need to make sure that there is no undue delay in the withdrawal of settlement agencies once a settlement has taken root. Toward that end, these agencies must help develop adequate self-management skills in settlers, and assist in the formation of settler organizations.

Settlers’ issues and solutions

Settlers may include, besides government-sponsored settlers, spontaneous settlers, and the host populations. Spontaneous settlers, the vast majority of whom have nothing to do with government schemes or Bank-sponsored projects, dominate settlement areas throughout the tropics and subtropics. In some areas, more than 80 percent of all settler households are spontaneous. The selection of sponsored settlers should seek to ensure that they include persons with similar backgrounds who wish to become full-time settlers, and who have the appropriate skills for rural life. Selecting settlers by rounding up reluctant youths and the urban unemployed can only produce disappointing results.

Immigrants in the settlement area must not only adapt to a new environment but also to new farming systems, new neighbors, and management by project officials. Their first years in the settlement area tend to be characterized by hard work and great stress, with their welfare depending on the productivity of the recommended farming system, the efficient maintenance of government-provided facilities, the availability of a wide range of inputs and services, and access to markets and service centers. During that period, usually lasting not less than five years, settlers are not inclined to take risks but prefer to cling to familiar aspects of production and social life.

However, as a certain level of subsistence is reached, settler farmers assume a risk-taking stance and are inclined to enter into aspects of commercial agriculture. Settlements can be considered as having fully matured when schemes are handed over to a second generation of settlers, and to line departments, local government, and settler organizations.

Settlers’ status on the land they are occupying should be clear. The rapid handing over of titles for land from the government tends to serve as an incentive for settlers to develop it rapidly and efficiently. Communal forms of land holding and production, attempted, for example, in Peru (San Lorenzo), have not been very successful and were considered uncertain at completion of the Panuco project in Mexico. Another key factor in settlement projects is settler participation in management—which requires detailed preparation. Lack of such participation tends to perpetuate project management. But, if they are properly organized, settler communities are better able to compete for development resources with other regions by influencing the formulation and implementation of development policies.

Spontaneous settlers often move into a settlement area after the initiation of an official settlement scheme. Sometimes, they may be the basis for such a scheme. In some areas more than 80 percent of all settler households are spontaneous. They have played a significant role in settlement schemes in Colombia, Indonesia, and Senegal, migrating at their own initiative and at their own expense. But this does not mean that their participation in settlement activities should be entirely unguided. Spontaneous settlers, while still relatively poor, tend to have more resources than government-sponsored settlers and come from somewhat higher income categories. They may, therefore, take command of a disproportionate share of area and facilities. Where their participation can be balanced by poorer families, within a master plan in which sponsored settlers provide the nucleus surrounded by spontaneous settlers and host populations, new land development offers a better chance for poverty alleviation. The most desirable ratio between various types of settlers often becomes an important planning issue.

A native or “host” population in settlement areas often claims some sort of jurisdiction over whatever land and water resources are available in a settlement area. More often than not the host population is weaker both politically and numerically than the settler population. As a result it not only requires special consideration, but also needs to be protected from both development agencies and immigrant settlers. This problem is being increasingly recognized, and the Bank supports attempts by governments to extend benefits of land settlement to native people living in the area. More than one third of the projects in the OED study afforded major benefits to host populations.

Environmental issues

Insufficient attention to the ecological implications of different settlement strategies was evident in some projects reviewed by the OED study. Ex post assessments of the projects’ environmental impact are incomplete. Some assessments have revealed environmental damage in the project area, leaving little room for complacency in current and future projects of this kind. The Bank has recently tightened its guidelines on resettlement and environmental issues and its processes for reviewing compliance with these guidelines.

Of utmost concern is irreversible environmental damage, such as species extinction. For this reason, the environmental and economic impact of replacing existing land and water use systems with new ones, for example through the development of extensive ranching in what were formerly forests, needs to be anticipated and measured carefully. At the project level, site selection, among other things, has to take the environment into account. Inadequate soil surveys, often because of difficult access to the area, can be a major cause not only of poor project performance but also of adverse environmental effects (e.g., erosion, salinity) when inappropriate farming methods are employed. There is also a tendency to underemphasize the need for hydrological surveys, and to overly rely on aerial photographs, topographical maps, and so on, rather than combining their use with ground surveys. Mechanized land clearing and farming in ecologically fragile areas can damage the soil, making it essential to promote the use of manual methods wherever feasible.

Government-sponsored settlement projects can and should serve as pilot efforts to test new production systems and approaches for land settlement areas, as is the case with upland rainfed and swamp reclamation farming systems in the transmigration areas of Indonesia.

Other key issues

Agricultural production and farm income. The review of settlement projects by OED indicated that too little emphasis tends to be placed in settlement schemes on issues relating to agricultural production in comparison to physical infrastructure, some notable exceptions being the Malaysia FELDA projects (see box) and oil palm production in projects in Papua New Guinea. Yields, especially of annual crops, have been disappointing in many settlement projects for many reasons, including ecological constraints and the behavior of settler households. Corrective measures to improve soil fertility tend to be less effective in a tropical environment and often are not economical. Settlers may also be disinclined to follow recommended farming systems because of unfavorable pricing policies, especially where wages provide a better financial return than farming. Where feasible, it makes sense to diversify farming systems to provide food for nonfarm labor and produce for agroindustry.

Research and extension functions have tended to be weak in settlement schemes. Credit also is essential and generally has been provided, mainly for productive purposes. Credit to alleviate hardship apparently has been unavailable. Experience suggests that grants be kept to a minimum provided credit is available from the time of settlers’ arrival. More attention also needs to be paid to fostering marketing institutions.

Farm incomes, therefore, have generally not reached their potential. Data on settler incomes are notoriously weak, but indications are that the majority of settlers, nevertheless, have been achieving incomes above their country’s average for rural areas. Where poverty occurs, this may be as a result of harsh pioneering conditions and household misfortunes as well as failure on the part of the settlement agency to perform as expected. Incomes can be improved by paying greater attention to aspects of production during project implementation and by strengthening agricultural services. Incomes are also affected by project design. Diversification of farm production, for example, as well as working for wages and other off-farm activities, offer settlers opportunities to cope with poverty, and to move beyond subsistence through a more productive allocation of family labor. One risk is the possibility of settlers slipping back into poverty after several years of farming because of declining soil fertility. In some instances, plots are abandoned for this reason.

Phasing of investments. Investments should be phased, with the first phase viewed as a pilot project that should be carefully monitored and evaluated to improve subsequent phases. The installation of some types of infrastructure, for example, can be delayed, while that of others cannot. The costs of delays have been demonstrated by inadequate road links in the Nepal Settlement project and problems with potable water supply in some Malaysia FELDA projects. Proper phasing of investments not only makes management of settlement projects easier, but it also can help to reduce costs. Phasing can and should be designed to stimulate settler initiative. For example, loans for capital items such as draft animals, and even provision of additional land, might be made dependent on successful accomplishment of initial development objectives. Phasing also affects settlers’ incomes. Adequate infrastructure provided at the right time tends to accelerate the development of settlement schemes, thus shortening the initial lean years and lifting households above subsistence levels sooner than with ill-timed or unbalanced infrastructure investments.

Excerpts from Bank policy statements on settlement issues

Social Issues Associated With Involuntary Resettlement in Bank-financed Projects

When development projects require people to be relocated, the Bank’s general policy is to help the borrowers to ensure that … the displaced people regain at least their previous standard of living. The Bank recognizes the human suffering and hardships caused by involuntary resettlement, and therefore tries to avoid or minimize such resettlement whenever feasible. All large construction projects such as dams, irrigation schemes, ports, new towns, airports, and highways should be examined by Bank staff at the time of identification and appraisal to determine whether people must be displaced, and. if displacement is unavoidable, to reduce it to a minimum compatible with the purpose of the project.

Tribal People in Bank-financed Projects

As a general policy, the Bank will not assist development projects that knowingly involve encroachment on traditional territories being used or occupied by tribal people, unless adequate safeguards are provided. In those cases where environmental and/or social changes promoted through development projects may create undesired effects for tribal people, the project should be designed so as to prevent or mitigate such effects. The Bank will assist projects only when satisfied that the Borrower or relevant government agency supports and can implement measures that will effectively safeguard the integrity and well-being of the tribal people.

Environmental Aspects of Bank Work

The Bank interprets environmental concerns broadly as those pertaining to the natural and social conditions surrounding all organisms, particularly mankind, and including future generations…. Environmental effects take a long time before they become identifiable. Therefore, the Bank considers environmental aspects of projects in a longer time frame than is relevant for most other aspects of cost-benefit analysis…. Bank policy emphasizes the need for prudence when assessing environmental effects, especially when these are potentially irreversible. Rather than adopting environmental standards, the Bank’s approach is tailored to local circumstances and respects the vast differences among its developing member countries.

Wildlands: Their Protection and Management in Economic Development

The Bank’s general policy regarding wildlands is to seek to avoid their elimination and rather to assist in their preservation. Specifically, the Bank normally declines to finance projects involving conversion of wildlands of special concern…. When wildlands other than those of special concern may become involved, the Bank prefers to site projects on lands already converted…. Where development of wildlands is justified, then less valuable wildlands should be converted rather than more valuable ones. When significant conversion of wildlands is justified, the loss should be compensated by inclusion of wildland management components in the project concerned….

Cost reduction and recovery. Land settlement projects tend to be capital intensive, rarely costing governments less than $10,000 per household. Ways to reduce these costs include choosing locations closer to towns, rehabilitating existing market and regional towns rather than building new towns, and reducing housing provided by projects. After road construction, housing is the next most expensive item. Project-designed and financed housing frequently has proven socially inappropriate. An alternative to project-built housing is some combination of project assistance and settler labor. Costs can also be cut through greater coordination and involvement of the private sector.

Cost recovery is a major problem with land settlement projects. In order to achieve better cost recovery, explicit policies need to be made known to settlers at the time of recruitment, and charges should actually be collected. Even where settler households are able to pay land development and water charges, they may refuse to do so because of what they perceive to be poor operation and maintenance of facilities. Payments should be seen as being used to operate and maintain settlement infrastructure. Therefore, a portion of the funds collected should be handed over to settler organizations. The marketing of farm output through the project or settler cooperatives and arranging group liability through settler organizations also can improve collection of charges. But more important, the emphasis on cost recovery must be carefully implemented according to the ability of settlers to pay.

Management. One of the main issues related to project success and replicability in land settlement is management. Sound management involves not just adequate planning and efficient operation and execution of development responsibilities but also the ability to work with and eventually hand over a settlement scheme to other essential agencies during the latter stages of scheme development. Both highly centralized parastatal organizations and autonomous project management units have been successfully employed in settlement schemes. However, while parastatals appear to have the advantage during the early stages of the settlement process, they are apt to resist handing over management responsibilities at a later stage. Another problem arises when line agencies refuse to take over responsibilities for infrastructure and services which they did not create, suggesting the need to involve such agencies at an early stage of settlement planning and possibly implementation.

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