US aid scheme sparks debate in Sri Lanka
The Millennium Challenge Corporation (MCC) is a US government entity established by Congress in November 2002 (then referred to as the Millennium Challenge Account). It is a component of the George W Bush administration’s US National Security Strategy introduced after the terrorist attacks of September 11, 2001, linking economic development with defense and diplomacy. The MCC states its mission as “reducing poverty through growth” and chooses countries to receive funding based on MCC criteria on economic freedom, good governance, and social investment. Eligible countries must apply to the MCC with specific proposals showing their “ownership” of the compacts they propose.
However, critics claim that there is little deviation of country proposals from the MCC “blueprint”: “every single country independently identified agribusiness, rural entrepreneurial development, and transport infrastructure as their key priorities.” They argue that the MCC’s primary commitment is not to poverty reduction but to “reshape the legal, institutional, infrastructural and financial contexts of poorer countries to better suit US economic interests.” Thus the MCC is seen as an instrument of the “new imperialism” pursuing “economic hegemony through the extension and ever-deepening penetration of neoliberal capitalism.”
Sri Lanka was selected to develop an MCC compact in December 2016 and the MCC board approved a five-year Compact for Sri Lanka on April 25, 2019. A November 2017 “Constraints Analysis” completed by the Center for International Development at Harvard University for the compact identified policy uncertainty; poor transportation and inadequate access to land, especially “the difficulty of the private sector in accessing stateowned land for commercial purposes” as the major constraints to ‘private investment and entrepreneurship” in Sri Lanka. According to the Harvard Constraints Analysis:
“Access to land is a binding constraint to growth and economic transformation as well. The state reportedly owns approximately 80% of the land in the country and it is held by multiple ministries. Government coordination is poor and the process of acquiring rights to develop land is slow and unclear, resulting in an inability of the government to meet the demand for land needed for new private-sector investment, including for export-oriented FDI [foreign direct investment]…. Problems with land use and titling are prevalent throughout the country and affect manufacturing, agriculture, construction, residential and commercial development, and tourism. Restrictions on land parcel size, the absence of land titles, and longstanding laws affecting rural land use all reduce agricultural productivity and rural well-being.”
The MCC Compact would offer US$480 million to Sri Lanka to undertake transportation and land management. Article 1 of the draft compact states the objective of the Transport Project as to “facilitate the flow of passengers and goods between the central region of the country and ports and markets’ and the objective of The Land Project as to ‘increase the availability of information on private land and under-utilized State Lands in order to increase land market activity.'”
MCC funding is to be used to change Sri Lanka’s land policy through the creation of a state land inventory based on a “Parcel Fabric Map,” the conversion of paper deeds into electronic titles and a “computerized mass appraisal system” for land valuation. MCC funding would support “the creation of a digital folio for each land parcel that includes the legal records on land transactions and a linkage to spatial data that identifies the location of each land parcel where possible.” The goal is to speed up land privatization and commoditization giving easy digital access to investors including foreign corporations.
According to the draft agreement between the MCC and Sri Lanka’s Ministry of Finance, MCC funding would be used to provide titles to state-owned land held by individuals, mostly smallholder farmers, thereby sale of their lands to any buyer.
“Conversion of state lands to the private domain, creating a marketable and bankable title to this land in the name of the land holder. The Government shall register the absolute land grants in the title registration system, allowing the use of land as collateral for loans and the free transfer of this land without excessive government restrictions. The Land Special Provisions Act (LSPA) is expected to define the process the Government shall use for this conversion of land rights. The availability of MCC Funding for this Activity is dependent on the enactment of the LSPA.”
The MCC compact brings to mind the early stage of capitalist development in Sri Lanka when the British colonial state introduced legislation, infrastructure and other measures to establish the plantation economy. Those measures opened up the hitherto isolated Kandyan Highlands, bringing a fundamental social and economic transformation that benefited the colonizers and a small stratum of local entrepreneurs and administrators. The infamous “Ordinance No 12 of 1840: to Prevent Encroachments upon Crown Lands” was introduced to provide the juridical and administrative framework to expropriate land from local people who had customary rights but could not prove ‘ownership’ and titles to their land as required by the British.
As noted by this author in Colonialism in Sri Lanka, Appendix 4, the ordinance stated: “Whereas divers persons, without any probable claim or pretense of title, have taken possession of lands in this Colony belonging to Her Majesty, and it is necessary that provision be made for the prevention of such encroachments.”
facilitating the