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REVITALIZING THE LAW AND DEVELOPMENT MOVEMENT
A Case Study on Land Law In Thailand

Feder argues that the "Certificate of Use" is valid security for a mortgage whereas Kemp states that it either is not valid security or at most limits the total amount of credit available to 60% of the value of the land.⁽¹²⁾ We cannot resolve this debate but can suggest two possible explanations for the discrepancy. The first is that regional practices of commercial lenders may vary depending on the relative proportion of the type of "ownership" rights in the area. Such variations would account for the different observations of these authors. Adding support to this argument is that Feder's study was done in the Northeast, where full title is extremely rare (none were reported in their study areas), and Kemp's and Lin and Esposito's study seems to be based on data from the Central Plains where more agricultural land has full title. In areas where both types of documents are prevalent, banks may prefer to lend to fully titled farmers rather than those with "Certificates of Use." Another possibility is that commercial and institutional lenders have only recently accepted the "Certificate of Use" as collateral. Kemp's study rests on data from 1970 and Lin and Espisito's from data collected in 1971, while Feder's study was based on data from the mid-1980s. Our sense is that a "Certificate of Use" is probably valid security but for identical land is worth less than a "Full Title" because of the added time and difficulty that the posting requirement adds to the foreclosure process for the former type of "ownership" right.

The "Preemption Certificate" (NS-2) or bai jong merely authorizes temporary occupation of the land. The land described by a certificate is in theory not transferable except by inheritance. All of the commentators agree that the land held under a "Preemption Certificate" is not accepted as legal collateral for a commercial loan. The "Preemption Certificate" was created by the 1936 Land Code. In theory, the document is merely a transitional status, which the holder will eventually transform into full title ownership or a "Certificate of Use" when a proper survey is completed. The certificate is distributed on the basis of a metes and bound description.

The "Claim Certificate" (SK-1) or sor-ko 1 was created by the 1954 Land Code. It was designed, like the "Preemption Certificate," to grant to the holder a transitional status, permitting farmers who merely occupied their land--for at least six months--to obtain some documentation for their tract which would later, subsequent to a proper survey, be upgraded into a "Land Title" document or "Certificate of Use." The "Claim Certificate" was also distributed on the basis of a metes and bounds description of the property. Land owned under a "Claim Certificate" is not acceptable collateral for a commercial bank loan.

The "Certificate of Occupation" or bai yiab yam is a relic of the Land Act of 1906. In some parts of Thailand this document still exists, although in theory it may be converted to a "Certificate of Use."⁽¹³⁾ Commercial lenders do not accept land held under a "Certificate of Occupation" as collateral.

The final type of land document is called a "Usufruct Document" (STK). Except for the "Certificate of Use," the STK is probably the most prevalent type of "ownership" right in Thailand. In 1964, the Thai government passed the Forest Reserve Act which designated large areas (166 million rai) of Thailand as forest reserves.⁽¹⁴⁾ In many instances this land was already occupied by squatters who had followed the traditional practice of simply clearing new land and farming it. Since 1964, substantially more individuals have entered the forest reserves as population pressure has grown. Roughly 30 million rai (5.3 million hectares) of this land is now occupied by squatters.⁽¹⁵⁾ These areas are indistinguishable from privately held land and major roads, villages, schools and government offices are found on this land. Prior to 1981 this land was undocumented, except for tax documents. Since 1981, the Royal Forestry Department has issued STK's or usufruct documents to land in the Forest Reserves. STK documents are only given for plots up to 15 rai (2.4 hectares). Conversion of the document to any of the documents that cover privately owned land is prohibited. Nor are these plots in theory transferable except by inheritance.⁽¹⁶⁾ As a result, they are not accepted by commercial or institutional lenders as collateral.

The percentage or relative importance of each type of "ownership right" in Thailand's agricultural sector is difficult to asses precisely. Kemp, relying on a 1970 Annual Report of the Department of Lands, which gives a figure of 84.8 million rai (13.3 million hectares) of arable land in Thailand, divides the various "ownership rights" in Thailand as a whole as follows:

Fully titled land covering 14.7 million rai (2.4 million hectares) or 17.3% of the total arable land;

"Certificate of Use" covering 18.2 million rai (2.9 million hectares) or 21.4% of the total arable land;

The "Preemption Certificate" covering 4.5 million rai (0.7 million hectares) or 5.3% of the total arable land;

The "Certificate of Occupation" covering 4.4 million rai (0.7 million hectares) or 5.1% of the total arable land;

The "Claim Certificate" covering 43.0 million rai (6.9 million hectares) or 50.7% of the total.

Kemp's figures ignore the substantial amount of land occupied by squatters in the forest reserves. The Feder study indicates roughly how many rai of land are occupied in forest reserves by farmers (33.1 million rai or 5.3 million hectares) but gives no figure for the total arable land in Thailand.⁽¹⁷⁾ Instead the study divides ownership rights on the basis of privately owned land which includes urban as well as rural property. The study uses Department of Land figures to estimate that the total privately owned land is 121.3 million rai (19.4 million hectares). If we add the privately occupied but government owned land figure to the privately owned land, the data indicate that 154.4 million rai (24.7 million hectares) are privately utilized in Thailand. If we estimate that roughly 15 percent of the privately utilized land is urban or simply non-agricultural, then the total arable land in Thailand is 131.2 million rai (21.0 million hectares).⁽¹⁸⁾

A more difficult problem is determining which type of ownership rights are overstated and by how much in the Feder study because its calculations are based on all privately owned land instead of on arable land. No precise figures are available; however, urban land, because of its greater value, is probably more likely to be registered under a "Land Title" deed or a "Certificate of Use" than rural land. As a result, reliance on the Feder study to asses the relative proportion of each type of "ownership" in rural areas would probably overstate the proportion of privately owned arable land that has either a "Land Title" deed or a "Certificate of Use." Nonetheless, the Feder study does provide useful information on the overall amount of land in each category and the proportional amount of growth in each category. The study's data indicate the following proportion of "ownership" documents based on 154.4 million rai (24.7 million hectares) of privately utilized land:⁽¹⁹⁾

Title deeds account for 18.4 million rai (2.9 million hectares) or 11.9% of all privately utilized land in Thailand;

"Certificates of Use" account for 64.0 million rai (10.2 million hectares) or 41.5% of all privately utilized land.

The "Preemption and Claim Certificates" account for 38.9 million rai (6.2 million hectares) or 25.2% of all privately utilized land.

Land occupied in forest reserves account for 33.1 million rai (5.3 million hectares) or 21.5% of the privately utilized land. Of this total an undisclosed amount is covered by the STK certificates described above.

In comparing these data with Kemp's, several conclusions are possible about the changes over time in the relative importance of various types of "ownership" rights in Thailand. The first is that the amount of land accounted for by full scale title is growing at a very slow pace. Less than four million rai was registered in the interim between Kemp's and Feder's surveys. The second is that the "Certificate of Use" has grown from 18.2 million rai to 64.0 million rai. This growth mirrors the decline in the importance of the "Claim Certificate," the "Preemption Certificate" and the "Certificate of Occupation." They have declined in importance from a total of 52.9 million rai to only 38.9 million rai.

Yet, despite progress in upgrading ownership rights, fully 60.4% of the privately utilized land (land occupied in forest reserves and land privately "owned" but without at least a Certificate of Use) in Thailand is still unacceptable as collateral for commercial loans.⁽²⁰⁾ This figure is probably even higher for arable land given that urban land would tend to have a higher proportion of either full title deeds or Certificates of Use. We now turn to an analysis of the relationship between secure ownership and the commercialization of agriculture.

Part 11

Endnotes:

(12) Id. at 16. Kemp, supra note 8, at 9. Lin and Espisito, supra note 8, at 426, agree with Kemp.

(13) Kemp, supra note 8, at 8.

(14) G. Feder, supra note 7, at 17-18.

(15) Id. at 17.

(16) Id. at 16.

(17) Id. at 16.

(18) The 131.2 million rai is not completely out of proportion with Kemp's figure of 84.8 million rai. If we add to Kemp's figures the 33 million rai for land occupied by squatters and permit some expansion of privately owned land placed under cultivation (13 million rai) since Kemp's study, we arrive at roughly the same figure for total arable land in Thailand under the adjusted figures in the Feder study.

(19) G. Feder, supra note 7, at 16. Although no date is given for the data used in the study, the figures must be from sometime in the mid 1980's.

(20) See supra, at pp. 44-45, for a discussion on the acceptability of "Certificates of Use" as collateral to commercial and institutional lenders.