MALAYSIA'S LAND POLICY PROFILE

BY SARAH IZZATI BINTI ABDUL MONIR 11083356@brookes.ac.uk

For P38168 : Urban Land Policy And Urban Management

Msc. Urban Planning: Developing Countries & Transitional Regions Faculty Of Technology, Design And Environment

Oxford Brookes University

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TABLE OF CONTENTS |

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

OWNERSHIP PATTERNS AND TENURE CHARACTERISTIC . . . . . . . . . . . . 4

LAND MARKET EXCHANGE MECHANISMS . . . . . . . . . . . . . . . . . . . . . . . . . 7

PUBLIC SECTOR ROLE IN LAND PROVISION . . . . . . . . . . . . . . . . . . . . . . . 8

PUBLIC SECTOR TOOLS TO MANAGE LAND MARKETS.. . . . . . . . . . . . . . . 13

FINANCING OF PRIVATE SECTOR LAND DEVELOPMENT . . . . . . . . . . . . . 15

FINANCIAL PROCESSES OF LAND MARKET ACTIVITY . . . . . . . . . . . . . . .16

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

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INTRODUCTION | Malaysia is one of the eleven countries located in South-East Asia. Malaysia is a federal

constitutional monarchy and consisted thirteen states and three federal territories. Malaysia

became subject to British Empire in 18th century, and gained independence in 1957. Since then,

Malaysia has improved drastically in its economy and became one of the developing countries that

underwent rapid development with total GDP of $414.4 billion (2011 est.).

"Malaysia boasts one of south-east Asia's most vibrant economies, the fruit of decades of industrial growth and political stability" (BBC, 2012)

The country is multi-ethnic, multi-cultural and multi-religious society encompassed a majority of

Muslim population in most states with 60% of total Malaysia population. Chinese constitutes around

16% and being the most economically-powerful community, followed by Indians and indigenous

peoples make up for the rest. The vast urbanisation occurred mostly in the main cities of Malaysia,

especially in the Kuala Lumpur with increasing rate of 2.4% annually.

Even though Malaysia's economic record has been one of Asia's best, but the country still facing

disparities in income distribution. The Chinese controlled the economic power and are the

wealthiest communities, even though the Malays are the dominant player in Malaysia's economy.

Malaysia also facing the challenges of encountering urban poverty, like any other developing

countries. Although Malaysia has implemented a successful poverty alleviation programs through

years, but many problems and challenges still exist especially in the urban areas. The rise of new

forms of poverty, which include single female headed households, the rural elderly, unskilled

workers and migrant workers in the country as a result of rapid economic growth and the

development process itself (Musalmah, 2005).

The pressure from the booming urbanisation has affected the use of land and leading to mushroom

growth of squatters settlement, traffic congestion and increased land values. The shortage of urban

land and the extravagant land value has flicked conflict between landlords and squatters, as rural-

urban migrants are competing with each other to take part in the higher income opportunities in the

city. In essence the poor are shifted around and relocated through the dynamics of urban property

development (Ismail, 2010).

. The Government came up New Economic Policy (NEP) and National Development Policy (NDP) that

emphasized in reducing absolute poverty and socio-economic imbalances among races in Malaysia.

One of the key elements in NEP is imposition and restriction in interest under the National Land

Code (NLC), which ensure that land resources are utilised on a sustainable basis for the continued

progress of socio-economic development of the nation. However, there are no proper documented

national land use planning policy and this resulted in diversity of land use planning. This is perhaps

due to the fact that land is a state matter, each state has the privilege of constituting its own land

policy.

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OWNERSHIP PATTERNS AND TENURE CHARACTERISTICS The ownership of urban land and the access to business opportunities have become a major issue in South East Asia’s pluralistic society (Evers, 1984). In addition, Singh (1995) noted that Malaysia has over-regulated the land use, land market and institutional structure which making planning strategies are fully controlled by plethora. National Land Code 1965 (NLC) is based on the Australian Torrens System, where the name of the title is the evidence of ownership and legalise all dealings on land (Section 340). It has been in forced since January 1966, and created a uniform system of land tenure for the nation. There are two types of land ownership in Malaysia - "freehold" land is when state land is disposed off by the state authority to an individual in perpetuity for an unlimited period, and "leasehold" land when the land is held for terms of years, by virtual of law until 99 years. Upon expiry or no renewal of the title, the land should be returned back to the state authority. Table 1 summarize the difference between the two types of ownership.

ISSUES LEASEHOLD FREEHOLD COMMENT

Land Use Lease duration usually 30, 60, 99 or 999 years Limited by purpose of lease and land legislation Stocking levels, cultivation, etc may be restricted by lease conditions Limited by environmental and town planning controls

Limited by environmental and town planning controls

Leases are subject to a higher level of control

Duty of Care High level of duty of care defined in land legislation May be responsible for developing and maintaining improvements May be required to engage in property planning

Duty of care following common law and as required by some Environment Protection Acts or its equivalent

Leases are subject to a higher level of control

Transferability, Aggregation and Subdivision

Lease transfers require State or its equivalent's approval

Few limitations on Transfer

Leases are subject to a higher level of control

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Unlimited right to subdivide and aggregate subject to town planning controls

Retrieval/resumption Powers to acquire leasehold interest or withhold land when lease expires

Some powers to acquire land for public works

Leases are subject to a higher level of control

Security of tenure Varies according to lease type but forfeiture for non-performance may be possible

Very high level of security

In general, leases are less secure than freehold Perpetual leases approach the level of security of free-hold

Table 1 : Differences between leasehold and freehold tenure in Malaysia

source from National House Buyers Association, Malaysia, 2012 NLC ensure uniformity of land laws and protected the land ownership that guaranteed by the constitution. A person who is registered owner of a piece of land has a "indefeasible" title/interest. "Indefeasibility" is defined as the ownership cannot be "challenged or questioned", unless there has been fraud or misrepresentation when the ownership is requisite. Occupying somebody's land without the owner permission is considered as "squatter" and according to law, a squatter "has no rights in law or in equity" no matter how long the illegal occupation might have been. Squatting on a state land is a crime and will be sending behind the bars while squatting on a private land only gives rise to the tort of trespass - and will be fined. But in the past, squatters on the state land has been "rewarded" by the authority - either by "temporary occupation license" (TOLs) or to even more fortunate they were given the land title. The generosity actions by the State probably influenced by political agendas or humanitarian reasons. The NLC is a general law applicable to all alienated land in Peninsular Malaysia. The Borneo (Sabah and Sarawak) governed their own land law (The Sabah Land Ordinance Chapter 68 and The Sarawk Land Code Chapter 81), which the prime of the law is defending the rights of the Natives. Besides, the NLC, there is a specific law protecting the indigenous Malay holdings known as the Malay Reservation Enactment (one uniform legislation covering Perak, Pahang, Selangor and Negeri Sembilan and five separate legislations covering the remaining five states of Johor, Terengganu, Kelantan, Kedah and Perlis). There are also specific law that focusing on Customary Land (Melaka and Negeri Sembilan). In Melaka, the Customary Land is only subject for agriculture purposes and can only be transferred to a Malay who was born in Melaka or whose descendents were born in the State. While in Negeri Sembilan, the Customary Tenure Enactment stated that law dealings in respect of the land can be effected only in the favour of female members of the same tribe and on the death land is to be transmitted to the female heirs - as Negeri Sembilan is the only State that authoritative to Minangkabau culture.

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In NLC, not only land on the ground can be considered for land title, but title are also given to vertical subdivided buildings and subdivided lands in respect of Gated Community living. The State Strata Titles Rules control the administration of strata titles and outline the obligations of the property developer to ensure that strata schemes are properly managed before the management corporation is formed (Ismail, 2010).

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LAND MARKET EXCHANGE MECHANISM There are three routes to ownership - through transaction, inheritance and the acquisition of land through alienation by state authority. The first method is by transaction, starting by a purchase then followed by transfer with a prescribed form by registration at the relevant land registry. The second is inheritance, which simply means from one's parents or ancestors, and the third is through "alienation", which state land is disposed by way of alienation. According to state policy, one person can only be allowed to own one low-cost housing but NLC is not limiting the number of land titles or the size of land area a person can own. However, some people manage to own more than one unit of low-cost housing by using their children's or relative's name. Every state has very own state land policy, and every land ownership carries with it certain duties: (a) paying the annual quit rent to the State Authority (b) complying with all the express and implied conditions affecting the land Fail to comply with the "express conditions", if not remedied in time can result in forfeiture. "express conditions" are those specially endorsed on the land title with the implied conditions in the law. The land also can be subject to certain "restriction in interest", example like the land cannot be sold/transferred without the consent in writing of the relevant authority. In other words, the landowner has no absolute rights on the land as they are subject to the various conditions and restrictions imposed by the State (Awang, 1997). The State may required to alienate a land, but it must acquired in accordance with the procedures written in the law and "adequate compensation" has been paid (Land Acquisition Act 1960). However, the law allows the government to take possession to the land even though the compensation is still being appealed in court to speed up public projects.

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PUBLIC SECTOR ROLE IN LAND PROVISION As mentioned above, Malaysia has formed development and economic strategies through years for Malaysia society to fully developed in all dimensions, not only on the base of economy but also united, socially cohesive and politically stable, enjoys high quality of life, abundance in social and spiritual values and to be proud and dynamic. To achieve these goals, Malaysia Government strive hard to balance the socio-economy of the population and alleviate poverty, in urban and rural areas. The main issues in Malaysia regarding land provision is occurred in the urban areas, essentially and the target group is the lower-income group. Squatters, accessibility to the low-income group to affordable and quality housing, planning vacuum by the authorities, and high land values. The Federal Government alongside with the State Authorities has sought various strategies to improve the quality of life of the poor - focusing on squatter resettlement and low-cost housing programme.

SQUATTERS RESETTLEMENT AND LAND READJUSTMENT Parallel with Vision 2020 goal, which is to provide necessary physical and social infrastructure for the implementation of Habitat Agenda, Malaysia has introduced her own programs focused at providing shelter for all classes of society. This includes the Zero Squatter Policy and Integrated People’s Housing Program for Squatter Resettlement, where a total of 51,800 units of Low Cost Flats are to be built by the year 2005 in the main cities. A low-monthly rate, three-bedroom housing units are to be rented, including social facilities like hall and library. Consultations with target group are held to ensure that their needs are met adequately (Ezeanya, A.C., 2004).

Land readjustment (also known as land consolidation or land pooling) is an alternative method of land development, where a group of land parcels that were isolated from their rapid surrounding development are being rearranged to provide adequate basic amenities and public facilities through the cooperation and agreement of landowners (Department Town and Country Planning Peninsular, 2012). By land adjustment, not only it lower the cost of squatter upgrading, it also picture a more realistic approach to the provision of housing for the low-income households. It gives a sense of security and freedom towards their house yet is closely tied to the availability of financial resources of the households (Linden, 1981). Pembangunan Tanah Bersepakat (Land Readjustment System) in Malaysia has been endorsed by Cabinet in 1999, as another alternative method of development and squatter resettlement programme in Malaysia. Land readjustment programme benefits all party - the Government, the landlords and also the squatters. It increased land value and guaranteed the ownership rights as well as fulfil social and development responsibilities. Figure 3 and 4 explain how land readjustment is executed, and figure 5 shows the difference between land readjustment and land acquisition.

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Figure 3: Land readjustment process (source from Department of Town and Country Planning Peninsular, 2012)

Figure 4: Pembangunan Tanah Bersepakat (PTB System) - Land Readjustment System (source from Department of Town and Country Planning Peninsular, 2012)

Before

Without PTB System With PTB System

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Figure 5: Comparison between land readjustment and land acquisition (source from Department of Town and Country Planning Peninsular, 2012)

Land Acquisition

Land Readjustment

PROVIDING DECENT AND AFFORDABLE HOUSING FOR THE LOWER INCOME GROUP Under the 9th Malaysia Plan, target has been set in providing housing for all income level, particularly for the lower-income group. By year 2010, the Government are to build 709,400 houses for PPRT (flats), Low Cost, and Low Medium Cost which form about 32.8% of the total package (9th Malaysia Plan, 2006). The private sector will be encouraged to build more low-to-medium cost houses, blending in their mixed development projects. The Government also emphasizing the importance of more systematic and organized urban service programmes on sustainability and community participation to elevate the quality of life of urban population (Asiah, 2009). Soft-housing loans are offered, to encourage the poor to apply for Home Ownership for Low-Income Groups. Government also subsidizing house prices in supplementing private sector efforts - as one of the recognition for private sectors in development plan is providing "Low-Medium Cost" houses at affordable prices (Ezeanya, A.C., 2004). Table 6 summarizes the Malaysia Housing Policy.

BEFORE AFTER

BEFORE AFTER

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Table 6: Summary of Malaysia Housing Policy (source from Idrus, N., and Ho, C.S., (2008), originally from Various Malaysia Plan)

National Development Plan

Vision Development Plan

Period 1991-2000

2001-2010

Focus of Attention Continue implementation of NEP policies and strategies Human Settlement Concept with emphasis on sustainable development To ensure all people regardless of their income to live in decent house Private sector continue to responsible in housing provision for the people

Emphasis on sustainable urban development and adequate housing for all income groups Housing development will be integrate with other type of development such as industry and Commercial Emphasis on ICT Government as key player in low cost housing provision and private sector for medium and high cost housing

Strategies To build more affordable housing especially low and low medium cost housing Low medium cost as major component in housing provision since Seventh Malaysia Plan (1996-2000) Emphasis on squatters elimination by year 2005 Government created new laws and guidelines to control private sector

Continue effort to provide the guidelines and inculcate the citizen understanding towards sustainable development and encourage citizen to participate in housing development in line with Local Agenda 21 Encourage more private developers to constructs low medium cost house Setting up Human Settlement Research Institute (MAHSURI) to encourage research and development in housing

Key Documents National Development Plan, 1991 Sixth and Seventh Malaysia Plan (1991-2000) Agenda 21 (UNCHS), 1994 The Habitat Agenda 1996

Vision Development Plan 2001 Eight Malaysia Plan 2001-2005

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Policy Analysis Private sector still play as key player in housing provision but government created many new laws and guidelines to ensure quality housing

Government as key player in provision of low cost housing provision

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PUBLIC SECTOR TOOLS TO MANAGE LAND MARKETS National Land Council has been established, compromising the State representatives with Federal Minister as Chairman. The main function of this council is to formulate national policy for the promotion and control of the utilization of land throughout the country for mining, agriculture, forestry of any other purposes of consultation with the Federal and State Governments and the National Finance Council. The Council has in the past formulated broad based policies on squatters, land speculation and use of land for industries. The adoption of the land policy framework could be envisages as shown in Diagram 7 below:

Diagram 7 : Architecture Framework for the National Land Policy

(source from Ismail, 2010 - envisaged by the Federal Constitution & The NLC)

NATIONAL LAND POLICY FRAMEWORK

Facilitation

SUSTAINABLE DEVELOPMENT

Economic, Social, Environmental, Governance, Quality of life

LAND DEVELOPMENT

* Land use conversion * Sub-division of land * Partitioning of land

* Amalgamation of land * Surrender of land

* Realination of land *Abandones title

LAND VALUE

& TAXATION

* Quit Rent * Premium

* Assessment

COUNTRY CONTEXT

(FEDERAL-STATELEVELS)

* Instituitional Arrangements

* Capacity Building

* Education & Reserach

* Services to business and citizens

* Coordinated land information & management systems

LAND USE

* Agricultural * Building *Industry

LAND TENURE

* Disposal of land rights

* Indefeasibility of Titles

* Registration of dealings/non-

dealings

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Town and Country Planning Act 1976 were enacted to overcome the inadequacy of land use planning for Malaysia. It stipulates that every local planning authority shall be the local planning authority for the area of the local authority (Town and Country Planning Act, 1976). So, local authorities were given the primary physical planning responsibility with a consolidated legal framework. Diagram 8 illustrates the hierarchy of development plans in Malaysia :

Diagram 8: Hierarchy and function of development plans in Malaysia (source from Mukhtar, W.M., 2004)

Annual text known as 'Quit Rent' is subjugated to all land in Malaysia and collected by the State Government. It is based on the State Land Rules and is determined by the size, location and use of land. This is to encourage the development on vacant land as tax on vacant land is low. If there is development on the land, the land is subjected to 'Assessment Tax', which is a form of tax levy on property within a local authority. It is a form of revenue to the local authority to provide public services and utilities. The amount of the tax depended on the built up of the property. All profits made from the sale of land are taxed to prevent property speculation and it is not designed to tax unearned increment in land values or to increase the supply of land for development (Real Property Gains Tax Act, 1976).

NATIONAL LEVEL

National Physical Plan (NPP)

STATE LEVEL

State Structure Plan (SSP)

LOCAL LEVEL

Local Plan (LP)

Special Area Plan (SAP)

Formulate planning strategies and policies at the National level to guide the planning activities at State and local levels.

Formulate planning policies and general proposals related to development and use of land in the particular State.

Formulate comprehensive development plan in the form of future land use zoning and implementation measures in the LPA areas.

Special plan to carry out a detailed treatment for development, redevelopment, improvement, conservation or for the purpose of management of certain areas.

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FINANCING OF PRIVATE SECTOR LAND DEVELOPMENT Malaysia has drawing up policies to encourage public-private partnership to finance and undertake infrastructure development such as tolled roads, power plants, ports, airports and urban transportation and now extends the use of PPP for social infrastructure projects including health and education. The Government used to finance low-cost dwellings until global recession badly hit Malaysian economy and admitted that the responsibility was financially too burdening too continued. The housing policy has been readjusted which the responsibility of low-cost housing finance been transferred to private financial institutions. In accordance to this policy, the Central Bank has lowered the base lending rate by 1%, extended the repayment periods for the banks' housing loans, and directed the private financial institutions for the purchase of 50,000 units annually (Hassan, M.Z.M., 1988). Concisely, the main intention of these manipulations by the Government are to ensure adequate funds available for low-cost housing finance and more affordable to low-income households. Private developers, co-operative societies and groups of individuals are actively involved in the production of high, medium and low-cost housing. According to legislation, the developer are required to obtain licences, advertising and sales permits from the Ministry of Housing and Local Government before undertaking any housing projects. Private institutions are also involved in provision of housing in Malaysia - even though is more in favour of private developer. The Government had given private developers the responsibility of catering housing for the middle-and-high income groups, but they are obliged to build at least 30% low cost housing in development projects. This also helps the government achieve its home-owning democracy objectives (Idrus, N., and Ho, C.S., 2008). In consonant with the Ninth Malaysia Plan (2006-2010), UNDP engages business directly through CSR (Corporate Social Responsibilities) and public-private partnership in support of national development aim. CSR can support numerous development initiatives - empowering poor women; responding to HIV/AIDS; anti-corruption; e-learning and eco-management, and so on (UNDP, 2012).

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FINANCIAL PROCESS OF LAND MARKET ACTIVITY The locals who owned a piece of land either by inheritance or purchased from property market, are very particulate and concern about their own title - as land is considered an valuable asset and also as a show of wealth. Land/property also are subject to collateral from the bank. In Borneo, the indigenous people are protecting their native lands and the customary land rights, as land and forests are considered as a holy and sacred. The Sabah and Sarawak Customary Land Rights protect the land and prohibit from any transaction. The rich and elites are traditionally investing in land banking. Malaysia property prices are rising substantially for the past 20 years, and it is a no wonder why land banking is so popular among the individual elites and private developers.

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CONCLUSION It is not overrated to consider Malaysia land planning policies as over-regulated. All the legislations are specifically met the needs on both sides and compliance with national development objectives. The environment for the implementation of land use planning strategies is controlled by a plethora and it cleared that the Government has put an effort to improve the economic base of the Malays and to secure the native land of the Borneo indigenous. As stated above, legislative development procedures are clear and convenient as it is based on well documented and easily digestible law. As per contra, property experts viewed the restrictions imposed by regulations as discouraging factor which delays the process of development. The diversity in land use planning of every States has resulted in ambiguity and confusion and this may turn away the investment on the land. It is believed that the restriction were not ruled by any law but merely depended on socio-economic and political consideration prevalent at the time of the individual state. Squatters and insufficiency of low-cost housing problems has been emphasized in the national development plan and the Government has came up with various housing schemes, especially to cater for the lower income group. Nevertheless, there is a loophole in the development plan as some aspects such as elements of quality housing, sufficient facilities, comfortableness and affordable housing has not been addressed considerably and squatters are hesitate to move out. High rental fees and no adequate funds are also among the reasons that cause squatters to bail out the offer made by the government. To ensure that all issues are addressed seriously, government agencies and private bodies should come together and present a comprehensive approach. An effective participation of various groups in society needed to improve the quality of living environment.

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REFERENCES Awang, A., (1997). Land Conversion, Subdivision and Amalgamation. Buletin Geoinformasi. Volume 1, No 1. pp. 37-44. Buang, S., (2002). A Primer On Land Ownership. News Strait Times. 11th May. Department of Town and Country Planning Peninsular Malaysia, (2012). Land readjustment. [online] Available at http://www.townplan.gov.my/english/service_ptb.php. Accessed 27th February 2012. Development Planning in Malaysia 2004. Second Edition. Malaysia: Economic Planning Unit, Prime Minister's Department, Putrajaya. Dunhill, J., (2011). Malaysia Property - A Robust Boom Ahead. [online] Available at http://www.estate123.com/reviews_articles/article_review_detail.aspx?a_id=A. Accessed 27th February 2012. Economy News, (2012). Malaysia Ahead In Public-Private Partnership For Infrastructure Development. StarBiz, 17th February 2012. [online] Available at http://www.mida.gov.my/env3/index.php?mact=News,cntnt01,print,0&cntnt01articleid=15 27&cntnt01showtemplate=false&cntnt01returnid=107. Accessed 17th February 2012. Ganason, A., and Maidin, A.J., (2010). Land Administration System In Malaysia: Building Institutional And Organisational Capacity For Coordinating Land Administration Between The Federal And State Authorities. KKTNELAS Consultation. Paper No. 2. pp. 1-15. Hassan, M.Z.M., (1988). Low Cost Housing Finance: An Evaluation of Current Malaysian Policy. Master. University of Wales. Idrus, N., and Ho, C.S., (2008). Affordable And Quality Housing Through The Low Cost Housing Provision In Malaysia. Universiti Teknologi Malaysia. Ismail, M.S., (2009). Review of the National Land Code 1965. Research & Development Section, Department of Director General of Land and Mines, Putrajaya. Ismail, M.S., (2010). Malaysia's Land Policy Framework. Land Resource Management Post- Graduate Programme. Universiti Putra Malaysia. Unpublished. Ismail, M.S., and Ganason, A., (2010). Land Development Issues And Latest Initiatives Undertaken By JKPTG To Improve Service Delivery System Of Land Administration. Land Law & Property Development Conference. Malaysia. M Kasim, M.N., (2011). National Land Code 1965 (Act56) : Statutory Law and Regulation In Practise For Architects. PAM CPD Seminar. Kuala Lumpur, Malaysia. 16th July 2011. Malaysia.

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Ministry of Housing and Local Government, (1999). Housing in the New Millennium - Malaysian Perspective. Article 3. Kuala Lumpur, Ministry of Housing and Local Government. Ng, A., (2010). Prime Govt Land To Be Tendered Out For Private Development. The Star, 31st March 2010. [online] Available at http://www.starproperty.my/PropertyScene/ TheStarOnlineHighlightBox/3571/0/0. Accessed 29th February 2012. Omar, I., and Yusof, A.M., (2002). Indigenous Land Rights And Dynamics Of The Land Market In Kuala Lumpur, Malaysia. Habitat International. 26. pp.507-521. Rinker Sr., M.E., (2008). Affordable Housing Issues. Shimberg Centre for Affordable Housing. Issue 19, Number 5. pp. 1-4. Sufian, A. and Mohamad, N. A., (2009). Squatters And Affordable Houses In Urban Areas: Law And Policy In Malaysia. Theoretical and Empirical Researches in Urban Management. CCSAP TERUM. No 4 (13). pp. 108-124. UNDP, (2012). Why Do We Engage With the Private Sector? [online] Available at http:// www.undp.org.my/page.php?pid=114&menu=sub2&title=Partnership_with_Private_ Sector. Accessed 27th February 2012. Yusoff, N., and Saidi, N.S.S., (1998). The Supply of Affordable Urban Housing, Squatter Upgrading and Land Readjustment. Jurnal Alam Bina. Volume 1, No 1. pp 28-32.