Land Policies and Farm Performance in Thailand's Forest Reserve Areas

Abstract

Illegal or unregistered occupation and utilization of public lands characterize the practice of large numbers of farmers in many less-developed countries. Economic theory suggests that, because squatters lack secure land ownership, they will have fewer investment incentives than farmers with secure ownership. Further, because squatters cannot legally use the land as loan collateral, their access to institutional credit, especially medium- and long-term credit, is inhibited. This has negative effects on squatters' ability to invest. Squatters also face short-term institutional credit constraints, implying a low use of variable inputs. Consequently, theory suggests that squatters' land is less productive than titled land.1 One policy frequently adopted with the intention of increasing squatters' productivity is the granting of usufruct rights or similar nontradable entitlements. Such policies are viewed by many policymakers as adequate alternatives to the provision of full, unrestricted ownership. Empirical studies of these issues are scant, and no quantitative assessments of the impact of policy measures addressing squatters have been reported. This article presents the results of a quantitative research focusing on Thailand as a case study. In Thailand, an estimated 5.3 million hectares, or about one-fifth of the land officially designated as state-owned forest reserve, is under permanent occupation and cultivation by squatters. This is about 21% of the land under cultivation and involves about 1 million farm households. Much of the encroached area is suitable for permanent agricultural cultivation, and its continued exploitation poses no substantial environmental risks.