The rural land market in developing countries is observed to be mainly fragmented, highly localised and thin. The poor seldom sell land unless they are driven by distress. As land is very scarce to rural people, its opportunity cost or implicit rental rate stands very high. But just the opposite holds in the case of large land owners who have abundant supply of land to keep the opportunity cost or the implicit rental rate relatively low. In fact, in an integrated and competitive market, it is the large landowning class who should have the incentive to sell land to smaller ones; as the latter class can obtain a relatively higher return and, hence, pay more for the same piece of land. But, seemingly, the reality on the ground is quite different. Large land owners hardly sell land, since a control over land ultimately translates into a monopolistic power over the local labour market. The land market in Bangladesh, possibly, is quite in consort with the theoretical expectations.
It needs to be mentioned here that the present land tenure system in Bangladesh traces its origin to the operation of the State Acquisition and Tenancy Act 1950. The Act abolished the Zamindari system created by Lord Cornwallis, and vested the ownership of lands in the hands of actual cultivators. The provisions of the Act postulated that the state would acquire all intermediary rent-receiving interests and provide ownership to actual cultivators of land. To this effect, the Act also prohibited subletting of land. Thus, it created a large number of landowners with small holdings.
Basically, rural land market is very narrow and got narrower over time. For example, only one per cent of privately owned land is reported to be transacted in the market in recent years as opposed to about 2.0 per cent in the distant past. This implies that, and as said before, rural households hardly part with their land unless driven by the distress. Our observations then apparently contradict the conventional wisdom that small farmers would face marginalisation by selling land to large farmers.
To explain this fully, we can draw upon some additional information. The proportion of land accumulated through purchases and sales is reported to be (-) 5.5 per cent for the marginal land owners, zero for the small owners, and 1.7 per cent for the medium and the large land owners. In a survey on land market in Punjab (India), it could be observed that land prices rapidly soared during the green revolution period but, surprisingly, annual sales of land drastically dropped.
Apparently, it is not only in Bangladesh but also in India that land market is not as vibrant as it is generally presumed to be. Even then the situation here is a bit different from what had happened in India. We can possibly attribute two reasons to the apparent thinness of the land market. First, those who usually make distress sales had overcome the periodic distress by adopting new technologies. Or else, to deal with the distress by increased income, many of them have moved to non-agricultural activities. Such a situation should shift the supply curve of land to the left and, thus, bring down the supply further. Second, since the price of land remains relatively high, it becomes easy to confront calamities by selling smaller amount of land at the same price. At this stage, we can invoke the insights on incidence of land transactions during distress as presented by researcher Dr S.R Osmani. The researcher has shown that, during distress periods, the slope of the supply curve of land could be negative. However, despite the tiny transaction of land in rural Bangladesh, the higher incidence of purchase than sales reminds us that rural-urban migration plays an important part in land transactions.
Besides direct purchases and sales, land transactions or exchanges also pass through two other channels -- credit market and tenancy market. Transactions through credit market are in evidence mostly with credit-constrained farmers who are deprived of access to the formal channel of credit. In this case, desperation drives them to knock at the doors of the 'lender of last resort' in the village - the 'mohajons' (money lenders) and large farmers. They engage in the struggle for livelihoods by placing the meagre amount of land as collateral in exchange for loans at an exorbitant interest rate.
It should be noted that such land mortgaging practices also prevail in formal markets, but there is a difference between the two. For example, the informal lender cultivates the land till the borrower repays the whole money. And, in the case of a failure to repay the loan after specified years, the lender reserves the unwritten right to purchase the land. It is being alleged that such kind of transaction takes place often at a price below the market price. This is called dai-shudi system and assumes as one of the main land transfer systems in Bangladesh.
We also notice a change in labour contractual arrangements. The importance of permanent type of labour has diminished over time in rural Bangladesh. For example, 16 per cent of households had tied labour in the 1980s; now only eight per cent of them have so. The average number of attached worker per household also came down from 0.17 to 0.14. Thus, the number of hiring households as well as the number of workers is on a decline. Again, the small and medium households do not hire such labour anymore. But this does not seem to be the case with large land owners. Three-fourths of the farms hired attached workers in the 1980s; the proportion rose to four-fifths in recent years. Causal workers - known as dinmajur or kamla -under this system also declined over time. Contract workers -- also called chukti or thika mujur -- are hired to complete a specific task for a piece-rated wage.
The rate depends on the size of the land on which the work has to be done. This type of labour contract has been gaining importance over causal labour in rural Bangladesh over time for two reasons -- shortage of labour and increased costs of supervision and monitoring for the works. For example, a causal worker is supposed to receive the stipulated amount at the end of the day, no matter what happens to the amount of the work. Hence, unless a family worker works along with them or someone from the owner's side supervises the work sitting on the aisle of the land, there remains an incentive on the part of the hired labour to shirk labour.
On the other hand, the piece-rated workers can increase earning by intensifying work efforts, working at any time of convenience and finishing the work early. Thus, 'more work, more pay' principle could create a win-win condition for both the parties. By and large, our discussions during the visits to sample villages tend to show that the system of contract labour has been spreading all over rural Bangladesh, but may be more in areas with better technology and infrastructure. Special mention may made of contract labour used in transplantation: about 36 per cent compared to nine per cent in the 1980s, and for post harvest threshing from 58 per cent compared to only 4 per cent during the same period of time.
The writer is Professor
of Economics at
Jahangirnagar University.
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