Tsukuba Economics Working Papers
No. 2015-001

Does Land Lease Tenure Insecurity Cause Decreased Productivity and Investment in the
Sugar Industry? Evidence from Fijiby
Reshmi Kumari and Yuko Nakano
March 2015

UNIVERSITY OF TSUKUBA
Department of Economics
1-1-1 Tennodai
Tsukuba, Ibaraki 305-8571
JAPAN

Does Land Lease Tenure Insecurity Cause Decreased Productivity andInvestment in the Sugar Industry? Evidence from Fiji*
Reshmi Kumari, Yuko Nakano†

Does land lease tenure insecurity cause decreased productivity and investment in thesugar industry? To answer this question, the present study examined the impact of weak
formal tenure lease arrangements on tenants’ investment and the productivity ofsugarcane in Ba province, Fiji. After controlling for potential endogeneity in the choiceof lease tenure using instrumental variables (IV), it was shown that tenants under
insecure lease tenure (expiring in 0–5 years) achieve significantly lower yields ofsugarcane, by 9–11 tonnes per hectare, and plant smaller areas of new sugarcane, by
0.19–0.25 hectares on average, than do tenants under secure lease tenure. Insecure leasetenure also negatively affects chemical fertilizer use, although this impact is notstatistically significant. An intervention to improve tenure security would likely enhance
the production efficiency of and investment in the Fijian sugarcane industry.

Key words: Fiji, Investment, Land, Sugarcane, Tenure Insecurity* The authors would like to thank the seminar participants at the University of Tsukuba for their constructive
comments and the Fiji Sugar Cooperation and Ministry of Agriculture of Fiji for allowing the use of their dataand providing advice. This research was conducted with financial support from the Asian Development Bank.
†
Reshmi Kumari (email: rshm_kumari@yahoo.com.au) is at the Economic Planning Office, Ministry ofAgriculture, Republic of Fiji. Yuko Nakano is at the Faculty of Humanities and Social Sciences, University ofTsukuba, Ibaraki, Japan.

1. Introduction
Land tenure security is often considered essential for poverty reduction, improvement ineconomic growth, and development (World Bank, 2014). Empirical evidence from sub-Saharanand Asian countries suggests that informal tenure arrangements undermine farmers’ incentives toundertake land-specific investment and cause great losses in productivity (Gavian andFafchamps, 1996; Place and Otsuka, 2001; Jacoby et al., 2002; Deininger and Ali, 2008;
Goldstein and Udry, 2008). To improve tenure security, international organizations such as theWorld Bank, International Monetary Fund (IMF), and European Union (EU) often promote theformalization of tenure through titling, registration, and formal lease agreements (see Besley,
1995; Jacoby and Minten, 2007; Ali et al., 2012).
While many previous studies have explored the impacts of formal ownership tenurearrangements, their results are ambiguous. Several studies have found that attempts to formalize
tenure through land certification and registration programs significantly increase tenure security,land-related investment, and supply of land to the rental market (Banerjee et al., 2002; Deininger
at el., 2011). Conversely, others have shown that formal land titling has no significant effects on
plot-specific investment compared to plots without titles (Jacoby and Minten, 2007; Deininger
and Ali, 2008; Suyanto et al., 2002). Furthermore, despite the emphasis placed on formal
ownership tenure agreements, relatively little evidence exists regarding the quantitative impact oflease tenure insecurity. Relevant studies include those of Gavian and Ehui (1999), Jacoby andMansuri (2008), and Abdulai et al., (2011), who showed that tenants under informal fixed-rentlease contracts achieved lower investment levels and productivity compared to owners ofcultivated plots because of landlords’ failure to commit to future lease contracts, thus not
rewarding tenants for their investment.
1Several studies have also indicated that results on the impacts of both informal andformal land tenure on investment and productivity may be biased because of reverse causality or
potential endogeneity in tenure choice. Hence, recent research has considered the endogeneity oftenure arrangements to examine the true impacts of tenure insecurity and formal land tenuresystems (Besley, 1995; Brasselle et al., 2002; Deininger and Jin, 2006; Jacoby and Mansuri,
2008; Abdulai et al., 2011; Ali et al., 2012).
In this study, we investigate the impact of lease tenure insecurity under formal leasearrangements on tenant investment and sugarcane productivity in Fiji by controlling for theendogeneity in tenure choice. The sugar industry is important to Fiji’s economy because it
contributes to the country’s GDP and provides income to approximately 200,000 people in rural
areas (IMF, 2011). Sugarcane production, however, has continually declined over the past
decade. Previous studies from Fiji have identified that weak tenure arrangements under formal
leasing systems reduce investment and sugarcane yield, although these analyses have generally
been descriptive (Lal et al., 2001; Naidu and Reddy, 2002; Narayan and Prasad, 2005; Prasad
and Tisdell, 2006)1.
We investigate the economic implications of tenure insecurity on yield (tonnes per
hectare), chemical fertilizer use (kilograms per hectare), and newly planted cane (hectares) using
household data from Ba province, Fiji. The three major land tenure systems in Fiji are Freehold(privately owned), State (government owned), and iTaukei land (communally owned)2. Land1

The only exception is Prasad and Tisdell (2006), who used the ordinary least squares (OLS) method to showthat tenants whose leases expired within ten years achieved significantly lower yield and were less likely toinvest in capital and maintain soil conservation than were tenants under secured leases. Although Prasad andTisdell (2006) contributed to the literature by examining tenure insecurity under formal leasing systems, they
did not consider possible endogeneity bias in tenure choice.
2
The iTaukei lease was previously known as the native lease, while the State lease was previously referred toas the Crown lease.
2

cannot be sold permanently (except for Freehold land), and individuals can only obtain usufruct
rights to land by leasing it under formal lease agreements. The Agricultural Landlord andTenants Act of 1977 (ALTA) allows for land leases of 30 years under both the State and iTaukei
arrangements. Although ALTA protects tenants during the lease period, iTaukei lease tenants areless secure than are State tenants. ITaukei tenants lack a provision for lease extension or renewal
when leases are expiring, while State tenants are able to review their lease contracts.
Consequently, weak lease arrangements under the iTaukei tenure leasing system may discourageland-specific investments and create production inefficiency, especially when leases are expiring.
We hypothesized that farmers under iTaukei tenure would decrease their long-term investment,
thereby achieving lower sugarcane productivity; when their leases were due to expire within 5
years. We controlled for endogeneity in tenure choice using an instrumental variable (IV)method.
The structure of the paper is as follows. Section 2 describes the background of the land
tenure system and sugar industry in Fiji. Section 3 explains the data and study site. Section 4
provides descriptive analysis. Section 5 presents the empirical model and estimates the impactsof tenure insecurity on yield, fertilizer use, and newly planted cane area. Finally section 6
concludes the paper.

2. Background
2.1

Sugar Industry in Fiji

The sugarcane industry in Fiji was developed by the Colonial Sugar Refining Company (CSR),
which owned and managed four sugar mills from 1879 to 1972 (Lal et al., 2001, Naidu andReddy, 2002). The CSR initially grew its own sugarcane on state-owned land and employed3

Indian laborers, who were brought to Fiji from India by the British. Between 1879 and 1916,
over 60,000 Indians worked on the plantations under contracts (indenture system). Theselaborers were later settled as independent smallholder farmers on an average of 4 hectares ofState land after the indenture system was abolished in 1916 (Moynagh, 1978). In 1973, the CSR
sold its interest to the Fiji Sugar Corporation (FSC), which is fully owned by the government.
The FSC buys sugarcane from farmers, processes it into raw sugar, and sells it to the UK in
European market under the Economic Partnership Agreement (EPA). Of the proceeds from thesesugar sales, 70% is distributed to farmers as sugarcane payments (FSC, 2010).
Sugarcane became a priority industry for Fiji’s economy during the 1970s after thecountry’s independence (Narayan and Prasad, 2005). Relatively high sugar export earnings (70%of total exports) were recorded during that period (IMF, 2011). The number of farmers increased
gradually from 16,995 in 1975 to over 22,000 by 1995 (FSC, 2000). As shown in Figure 1, the
FSC achieved its highest sugar production (over 0.5 million tonnes) in 1995.

However,

production has recently declined. Harvested area dropped from 66,000 hectares in 1999 to
49,000 hectares in 2009. This setback is believed to be a consequence of the uncertainty and nonrenewal of iTaukei leases that had begun to expire in 19973 (Lal et al., 2001; Naidu and Reddy,
2002; Prasad and Tisdell, 2006). Although successive governments have attempted to boost
sugarcane production, these efforts have been futile. The EU, as the major player in Fiji’s sugar
industry, has called for land lease reforms to increase productivity from the current yield of 46
tonnes per hectare to 65 tonnes per hectare (EU, 2013).

3

Note that tenants who were issued a ten-year lease before ALTA came into effect in 1977 were granted asingle extension of 20 years upon lease expiry (Government of the Republic of Fiji, 1978, Cap.270:13.1).
Therefore, the first lease expiry was experienced by iTaukei tenants in 1997.
4

2.2

Land Tenure System in Fiji

Fiji’s current land tenure system was established under British colonial rule between 1874 and19404. As previously mentioned, three types of land tenure exist in Fiji: Freehold, iTaukei, andState. Freehold land comprises 8% of the total land and is privately owned, mainly by Europeans.
Only 2% of Freehold land is owned by Indians and used for agricultural purposes. These Indianspurchased Freehold land from Europeans in the 1930s after the Europeans divested fromsugarcane farming (Gillion, 1977). Freehold land follows the formal tenure system and can beeasily bought and sold (Rakai et al., 1995).
However, other land cannot be sold permanently, either by sale, grant, transfer 5 , orexchange, as stipulated in the 1970, 1991, 1997, and 2013 constitutions of Fiji, respectively.
Individuals must rent State or iTaukei land for commercial, industrial, residential, or agricultural
purposes on lease agreements under legal contracts. Over 87% of total land, now known as
iTaukei land, was awarded to indigenous Fijians under the Deed of Cession agreements of 1974.
This land is owned communally by several landowning units referred to as clans or mataqali6.
This iTaukei land follows the formal lease system and is available for leasing to nonindigenous
and indigenous people outside the mataqali. The iTaukei Land Trust Board (TLTB) is a statutory
body responsible for administering the land, issuing leases, and collecting and distributing rents
to the beneficiaries on behalf of the iTaukei land owners.7 The remaining 5% of total land isState land and is owned by the government. State land is also offered for leasing under formal
4

Fiji was a British colony from 1874 to 1970Ward, 1969).
Although transfer of lease may be allowed, the ownership of State land remains with the government and thatof iTaukei land remains with landowners.
6
A total of 788 clans exist in Ba Province (Singh and Reddy, 2007), and the number of members in each clanvaries from several hundred to over a thousand (Lal et al, 2001).
7
Although iTaukei land is owned by indigenous Fijians, administration, lease issuing, and rent collection is
managed by the TLTB. The TLTB deducts 20% of rent income as administrative costs (Prasad and Tisdell,2006).
55

lease agreements. The Ministry of Lands office is the statutory body responsible for issuing Stateleases and collecting rent (Government of the Republic of Fiji, 1978, Cap.132).
Since 1977, both State and iTaukei leases for sugarcane cultivation have been issued for
30 years under ALTA. ALTA was introduced to rationalize the leasing of all agricultural land
(Lal et al., 2001). All tenants are charged a fixed rent, up to 6% of the unimproved capital value,according to ALTA provisions. The most important difference between iTaukei and State land isthat leases are renewed automatically only for State tenants, although the lease period is sameunder both tenure systems8.

3. Data and Study Site
This paper uses cross-sectional data for Ba province from the National Agriculture Survey(NAS), conducted by the Ministry of Agriculture of Fiji from October to November 2009. Ba
province is the most important sugarcane area in Fiji and contains two mills, called Lautoka andRarawai. Over 65% of the total sugarcane produced in Fiji comes from this province (Gillion,
1977; FSC, 2010). The main crop grown in Ba is sugarcane because of lease restrictions,although small areas are allotted for growing other crops, such as root crops and vegetables, andraising livestock for subsistence use. All three tenure systems exist in Ba province, and sufficientvariation in tenure duration exists to test the hypothesis regarding differences in tenure insecurity
between iTaukei and State leases.
The area covered by the NAS was stratified into 76 segments of 1 km2 using ageographical information system (GIS). A special segment was created for large farms and for
those under Freehold tenure. Households were selected randomly from each segment. From a8State tenants reapply for lease renewal, while iTaukei tenants apply for a new lease upon lease expiry(Government of the Republic of Fiji, 1978, Cap270; personal communication with Ministry of Lands, 2014).
6

total of 1687 selected households, only 719 households cultivated sugarcane. After excluding
those with missing values, we were left with 658 households from 58 segments that could be
used for analysis. The NAS surveyed the general characteristics of households and theiragricultural activities. Additional information on the distances to land offices and mills, tenure
and lease expiry, land holdings, fertilizer use, and sugarcane production for 2009 was obtained
from the FSC and matched with the NAS households by each farmer’s sugarcane contract
numbers. Each household cultivated sugarcane under only one tenure type. Households rarely
possess land under two or more tenure types because tenure is determined geographically basedon a historical process we will discuss later.
Table 1 displays the distribution of plots by the share of owner and tenant cultivators bytenure type in our data set. Of the total cultivators, 87% are tenants, while 13% are owners.
Under iTaukei tenure, 95% of the cultivators are tenants. Among iTaukei tenants, 80% are
Indians, while 20% are Fijians. Freehold land under sugarcane cultivation is mainly owned byIndians, although some landowners have rented out their land. We found that 11% of cultivators
under Freehold tenure are tenants, while 89% are owner-cultivators. All State lands are leased
out, and 98% of their tenants are Indians.

4. Descriptive Analysis
To provide better insights on the impacts of tenure insecurity, we summarize theproductivity of sugarcane and investment in Table 2. Sugarcane is a long-term crop that maturesin 12–14 months after planting and can be harvested for 5–7 consecutive years. On average, theyield from newly planted cane is 70 tonnes per hectare, while that from “ratoon” (roots left
underground) cane is 53 tonnes per hectare; however, productivity declines as ratoon ages (Lal et7

al., 2001). Thus, to test our hypotheses, we first divided the iTaukei and State leases into three
categories based on years of lease expiry (0–5, 6–10, and over 10 years) and considered theoverall average (0-30 years). Then, we conducted t-tests on the mean differences for yield,
chemical fertilizer use9, and newly planted cane area between iTaukei and State leases, that is,the differences between columns (a) and (a1), (b) and (b1), (c) and (c1), and (d) and (d1). The ttests showed significant differences between the iTaukei and State tenants in yield and chemicalfertilizer use when leases expired in 0–5 years and for the overall average (columns a and d), butwhen leases expired in 6–10 or over 10 years. On average, for leases expiring in 0–5 years,
iTaukei tenants achieved a yield of 40.00 tonnes per hectare and applied 504.50 kilograms offertilizer per hectare, while State tenants achieved a yield of 50.70 tonnes and used 627.60
kilograms of fertilizer per hectare. State tenants achieved higher productivity and fertilizer use,
probably because of their assurance of lease renewals. However, we did not observe a
statistically significant difference between iTaukei and State tenants for the size of newly planted
cane area. Based on these observations, we developed the following testable hypothesis:

Hypothesis: Yield, chemical fertilizer use, and newly planted cane area of iTaukei tenants will
be lower when leases expire within 0–5 years compared to those of State tenants.

5. Empirical Analysis
5.1

Empirical Model

We also conducted regression analyses to investigate the impacts of weak tenure on productivity
and investment. The dependent variables are yield of sugarcane (tons per hectare), chemical

9

Chemical fertilizer is the only source of nutrients applied to sugarcane farms to maintain soil fertility.
8

fertilizer use (kg per hectare), and newly planted cane area (ha). The two main independent
variables of interest are a dummy for iTaukei lease, which takes a value of 1 if the tenure is
iTaukei, and a dummy variable for iTaukei lease that expires in 0–5 years, which also takes avalue of 1 if the tenure is under iTaukei and the lease expires in 0–5 years. To control for labourand human capital endowment, we included a dummy for the secondary education of thehousehold head (1 if the household head had acquired up to secondary school or higher
education, 0 for primary school or no education), age of the household head, and number ofhousehold members by age groups. A dummy for tractor ownership (1 if the household owned awheeled tractor) and total land holdings (hectares) were included to assess any wealth effects(e.g., Gavian and Fafchamps, 1996; Goldstein and Udry, 2008; Ali et al., 2012). A total of 18
sector (subdistrict) dummies were included to capture other unobservable sector-level
characteristics such as soil quality, slope, and rainfall 10 . Detailed descriptive statistics arepresented in appendix Table A1.
Although households have limited options in tenure selection, other unobserved tenantand owner heterogeneities such as risk aversion, farm implements, or management skills of thecultivator may result in endogeneity of tenure choice (Jacoby and Mansuri, 2008; Abdulai et al.,2011). In the presence of endogeneity, where tenure choice is correlated with the error term,
OLS estimates become biased in estimating tenure’s true impacts on investment and productivity.
Essentially, we controlled for the endogeneity of two endogenous variables (iTaukei leasing and
iTaukei tenure expiring within 0–5 years) using instrumental variables (IV) and estimated theresults using both OLS and IV methods for robustness checks.

10

The 19 sectors are Drasa (control), Drumasi, Yaladro, Tagitagi, Varavu, Veisaru, Koronubu, Moto, Rarawai,
Naloto, Varoko, Lovu, Lautoka, Saweni, Natova, Legalega, Meigunyah, Malolo, and Qeleloa.
9A suitable IV is a variable that strongly influences tenure choice but is unrelated tounobserved plot characteristics (Jacoby and Mansuri, 2008). Distance from the plot to the land
office in kilometers is a suitable candidate for an IV for iTaukei tenure because of historicalcircumstances. Land boundaries were physically marked by the land office after its establishment
during colonial days (France, 1969, Gillion, 1977); thus, the majority of State land is found nearland offices. Regarding exclusion restriction, the question arises whether the IV explains any
differences in plot quality or factors such as market access. On average, the quality of land does
not differ significantly among tenure types because over 90% of land under sugarcane cultivationis Class III11 (Lal et al, 2001), suggesting that the soil quality in remote areas is similar to thatnear land offices. Farmers deliver harvested cane to the mills via trucks, tractor-trailers, or arailway network owned by the FSC that is accessible to most sugarcane areas12. FSC delivers
fertilizer to the farmers free of cost from the factory located near Lautoka mill. In fact, the two
mills and land offices are located in different districts geographically. Thus, we used distance tothe mill as a proxy of market access, while we used distance to the land office as an IV for tenurechoice.
To construct an additional IV for iTaukei tenure expiring in 0–5 years, the dummy oflease expiry in 0–5 years was interacted with distance to the land office. Note that we treat theyears of expiry for tenure as an exogenous variable. Although tenants may terminate their leases,
they are not compensated for any improvements made on the land during the lease term13. More

11

Class III plots are shallow, moderately fertile, and require soil erosion control measures and fertilizer
application (Lal et al., 2001).
12
Farmers using trucks to deliver cane receive a subsidy for the cartage cost per kilometer travelled beyond thenearest “pass-out point” (railway station). Those using railways pay a cartage cost up to the pass-out point(FSC, 2010).
13
ITaukei tenants may be allowed an additional year to harvest any unharvested crops upon lease expiry if
approved by the TLTB; however, this clause rarely applies (Prasad and Tisdell, 2006).
10

desirably, tenants may transfer their leases to an immediate family member or an unrelated
individual under the provisions of ALTA. However, the preconditions of lease transfer, which
require the plot to be dispute- and mortgage-free, as well as high search and relocation costs foralternative land, reduce the probability of transfer (Government of Fiji, 1978, Cap.131; Naidu
and Reddy, 2002). Short-term leases are insecure and do not encourage tenants to invest in longterm investments or use them as collateral (Lal et al., 2001). In addition, the market for iTaukei
leases expiring in 0–5 years is very small because the lease term is not extended even in theevent of transfer according to the ALTA. In fact, as shown in Table 2, over 80% households
under iTaukei have inherited land. Although leases are renewed for State tenants upon lease
expiry, the transfer rate of State leases is also low because finding alternative State land is almost
impossible given its limited availability. Note also that the years of expiry are not be extended
after a family member inherits the land. Thus, lease expiry in 0–5 years is treated as an
exogenous variable.

5.2

Empirical Results

Table 3 shows the first-stage estimation results on determinants of leasing tenure choice. The
dependent variable is iTaukei tenure in columns (1) to (3) and iTaukei tenure expiry in 0–5 years
in columns (4) to (6). To confirm the credibility of our results, we conducted our analysis withfull sample and sub-group analysis. Columns (1) and (4) include the full sample, for which thebase categories included Freehold and State tenants. For models (2) and (5), we dropped theFreehold and iTaukei owners, keeping the State tenants as the reference category. Finally, in11columns (3) and (6), we excluded all Fijian 14 tenants to exclude the impact of ethnicity andcompare Indian iTaukei tenants with the control group of Indian tenants under State lease tenure.
The 18 sector-level dummies were included as additional controls, and standard errors wereclustered at the segment level in all models.
The results demonstrate that distance to land office strongly influences tenure choice. The
positive coefficient of this variable in all models suggests that land located far from an office ismore likely to be leased under iTaukei, as was expected. Except for distance to mills, which has asignificant positive correlation with iTaukei tenure, other household characteristics did not affecttenure choice.
Table 4 reports the estimation results for the impact of tenure insecurity on sugarcane
yield. We show the results for both OLS, in columns (1) to (3), and 2SLS, in columns (4) to(6)15. The base categories in the columns are the same as those in Table 3. The most importantresult is that sugarcane yield decreases significantly under iTaukei tenure when leases expire in
0–5 years compared to the reference categories, even after controlling for endogeneity in tenurechoice, in columns (4) to (6); this finding is consistent with descriptive evidence. According tothese estimates, yield is 9–11 tonnes per hectare lower on average under iTaukei tenure whenleases expire in 0–5 years than under State tenure. This result supports our hypothesis that tenure
insecurity significantly reduces productivity for iTaukei tenants when the lease is expiring.
The number of household members between 15–65 years positively impacts productivity
in models (1), (2), (4), and (5), implying that high labor inputs increase sugarcane yield.

14

Fijian and Indians are two ethnicities involved in sugarcane cultivation. Differences in productivity may exist
because of farming skills, acquisition of farm implements, and input use (Lal et al., 2001; Naidu and Reddy, 2002)
15
Although we found that endogeneity tests were not significant, we obtained largely consistent results with OLS
and 2SLS, and thus it has little impact on our interpretation. The results for the first-stage F and endogeneity tests
are reported in the tables.

12Household heads with higher education generally achieve higher yields than those with primaryschool or no education. In addition, households who own tractors generally achieve higher yields
than those who do not, suggesting the importance of machinery to productivity. Total landholdings have a significantly positive impact on yield. Farmers with large land holdings may
have better credit access and use more chemical fertilizer, thus achieving higher yields.
Table 5 presents the estimation results for the impact of tenure insecurity on chemicalfertilizer use. All controls and specifications are the same as those reported in previous tables.
Because soil quality is maintained only for a single cropping season (Jacoby et al., 2002), we
consider chemical fertilizer use as a measure of short-term investment. The results show thatboth iTaukei tenure and expiry in 0–5 years have significant negative effects on fertilizer use in
the OLS estimations. However, these coefficients become insignificant once we control for
endogeneity and adjust the standard errors. This finding is consistent with the literature, whichshows that tenure insecurity or expropriation risks do not affect the use of chemical fertilizer,
which has only short-term impact on soil quality (Jacoby et al., 2002; Jacoby and Mansuri, 2008).
Except for total land holdings, which have a significant positive effect, other variables havestatistically insignificant impacts on fertilizer use.
In Table 6, we present the estimation results for newly planted cane area with the same
specifications and control variables as discussed above. While iTaukei tenure has no effect,
iTaukei lease expiry in 0–5 years has significantly negative impacts on newly planted cane areain all models. The estimated coefficients suggest that insecure tenants significantly reduce theirinvestment in newly planted cane area, by 0.19–0.25 hectares on average, compared to Statetenants. This result supports our hypothesis that tenure insecurity significantly reduces the longterm investment in planting new cane area for iTaukei tenants when their leases are expiring.
13

While total land holdings have a significant positive effect, the coefficients of other variables are
generally insignificant.

6. Conclusion
In view of declining sugarcane production and increasing poverty in sugarcane belt areas, we
examined the impact of weak tenure leases on sugarcane yield, chemical fertilizer use, and newly
planted cane area using micro-level data from Ba Province, Fiji. We compared tenure security
between three tenure types under the formal land lease system. After controlling for endogeneity
in tenure choice, the results reveal that lease tenure insecurity has a significant and negative
impact on productivity and investment in newly planted cane. On average, iTaukei tenants withleases expiring in 0–5 years achieve lower productivity, by 9–11 tonnes per hectare, and makeless investment in newly planted cane, by 0.19–0.25 hectares, compared to State tenants.
Tenure insecurity also has negative impacts on chemical fertilizer use for iTaukei tenantswith leases expiring in 0–5 years compared to State tenants, although the coefficients are
statistically insignificant. Because chemical fertilizer is likely a short-term investment, weaktenure security may not significantly affect fertilizer use (Li et al., 1998; Jacoby et al., 2002;
Jacoby and Mansuri, 2008; Abdulai et al., 2011).
Overall, the study found that simply issuing leases under formal agreements did not affectinvestment and productivity. However, tenure security becomes a concern for iTaukei tenants
when their leases are expiring, impacting productivity and long-term investment. Insecurity
arises because of a lack of protection for tenants against the threat of eviction as leases expire.
Given that land cannot be sold permanently under current Fijian law, tenants likely do not havethe rights to be granted full ownership. However, tenure security may be strengthened through14alternative measures such as providing legal protection to long-term occupants and offering leaseextensions; these practices will enhance investments and improve the production efficiency ofthe sugarcane industry in Fiji.

15

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Singh, R. and Reddy, M. (2007). Corporate Governance in Fiji’s Native Land Trust Board.
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18

Suyanto, S., Tomich, T., and Otsuka, K. (2002). Land Tenure and Farm Management Efficiency:
the Case of Paddy and Cinnamon Production in Customary Land Areas of Sumatra. The
Australian Journal of Agricultural and Resource Economics 45(3), 411-436.
Ward, R. (1969). Land Use and Land Alienation in Fiji to 1885. The Journal of Pacific History
4(1), 3–25.
World Bank (2014). Land Policy: Sector Results Profile, Securing Land Tenure Rights to
Reduce Poverty and Promote Growth. http://www.worldbank.org/en/results/2013/04/15/landpolicy-results-profile

19

Table 1. Land tenure distribution by tenure type
Variable Description
Share of Owner Cultivators (%)
Share of Indians among owners (%)
Share of Fijians among owners (%)
Share of Tenant Cultivators (%)
Share of Indians among tenants (%)
Share of Fijian among tenants (%)
Observations

Full Sample
12.6
80.7
19.3
87.4
88.2
11.8
658

Freehold
89.0
100
0.0
11.0
100
0.0
75

State
0.0
0.0
0.0
100
98.4
1.6
246

iTaukei
4.8
0.0
100
95.2
80.0
20.0
337

20

Table 2. Mean differences for productivity, investment, and land acquisition between tenure by years of expiry
iTaukeiYears of Lease Expiry

Variable Description

State
Years of Lease Expiry

Freehold

Yield (tonnes/ha)

0–5 yrs(a)40.0***

6–10
yrs
(b)
48.0*

>10
yrs
(c)
50.3

Average(d)48.0**

0–5
yrs
(a)¹
51.4

6–10
yrs
(b)²
54.0

>10
yrs
(c)³
53.1

Average(d)⁴
53.0

Average(e)54.8

Chemical fertilizer use (kg/ha)

504.5**

598.5

610.9

587.7***

627.6

641.3

655.5

647.0

660.3

Newly planted cane (ha)

0.20

0.45

0.35

0.32

0.24

0.38

0.33

0.33

0.25

0.82

0.86

0.80

0.81*

0.80

0.81

0.90

0.86

0.88

71

22

244

337

46

57

143

246

75

Household land status (1 if inherited, 0 if
purchased)
Observations

Notes: *, **, and *** indicate significance of the t-statistic at 10%, 5%, and 1%, respectively, for mean differences between (a) and (a)¹, (b) and(b)², (c) and (c)³, and (d) and (d)⁴. (T-test results for mean differences between (d) and (e) and between (d)¹ and (e) are not shown.)

21

Table 3. First stage estimation of iTaukei and iTaukei tenure expiring within 0–5 years
Variable Description
Distance to land office from plot (km)

(1)
0.03
[3.09]***

iTaukei(2)
0.03[3.23]***(3)

iTaukei expiring in 0–5 years
(4)
(5)
(6)

0.03
[2.91]***

Distance to land office* leases expiring in 0–5 years

0.09
0.09
0.07
[4.06]***[4.05]***[3.99]***
Distance to mill (km)
0.03
0.03
0.03
0.01
0.01
0.01
[3.85]***[4.09]***[4.57]***[2.05]**[2.02]**[3.26]***
Age of household head
0.00
0.00
0.00
0.00
0.00
0.00
[0.01][0.02][0.22][0.29][0.26][0.83]
Household members <15 years
0.02
0.01
0.00
0.00
0.00
0.00
[1.39][0.68][0.35][0.21][0.27][0.19]
Household members 15–65 years
0.01
0.00
0.00
0.00
0.00
0.00
[0.60][0.30][0.02][0.02][0.33][0.23]
Household members >65 years
-0.04
-0.04
-0.04
0.00
0.00
-0.01
[1.40][1.16][1.30][0.13][0.20][0.82]
Household head with secondary/higher education
-0.01
-0.01
-0.01
-0.01
-0.01
-0.01
[0.39][0.36][0.41][0.52][0.49][0.50]
Household owns tractor
0.00
0.02
0.04
0.00
0.00
-0.01
[0.04][0.56][1.15][0.18][0.15][0.29]
Total land holding (Ha)
-0.01
-0.01
-0.01
0.01
0.01
0.00
[0.73][0.48][0.80][1.25][1.29][0.91]
Constant
-0.41
-0.37
-0.45
-0.17
-0.17
-0.27
[2.93]***[2.56]**[3.02]***[1.72]*[1.61][2.41]**
Sector level dummy included
YES
YES
YES
YES
YES
YES
F statistic (p-value)
47.59 (0.00) 32.81 (0.00) 77.57 (0.00) 9.90 (0.00) 8.16 (0.00) 9.43 (0.00)
R-squared
0.44
0.47
0.51
0.44
0.45
0.45
Observations
658
569
499
658
569
499
Notes: *, **, and *** indicate significance of the t-statistics in brackets at 10%, 5%, and 1%, respectively. Columns 1 and 4 include the full sample(Freehold and State are controls), 2 and 5 exclude all Freehold and iTaukei owners (control category is State), and 3 and 6 compare Indian tenants under
iTaukei and State leases (base category is State). All models include 18 sector dummies, and SE is adjusted at the segment level.

22

Table 4. Impact of iTaukei and iTaukei tenure expiring within 0–5 years on yield per hectare (tonnes)
Variable Description

OLS

(4)
(5)
(6)
-11.12-7.65
0.94[1.33][0.98][0.13]
iTaukei expiring in 0–5 years
-8.78
-9.85
-11.19[1.93]*[2.19]**[2.18]**
Distance to mill (km)
-0.40
-0.59
-0.57
[1.16][1.78]*[1.89]*
Age of household head
-0.05
-0.02
-0.01
[0.71][0.33][0.16]
Household members 15–65 years
0.74
0.72
0.31
[1.93]*[1.83]*[0.82]
Household head with secondary/higher education
2.03
1.61
2.68
[1.54][1.12][1.69]*
Household owns tractor
3.22
3.20
1.76
[2.53]**[2.32]**[1.30]
Total land holding (Ha)
0.70
0.70
1.03
[2.08]**[1.99]*[2.84]***
Constant
57.03
56.56
56.79
[10.81]***[10.29]***[11.39]***
Sector level dummy included
YES
YES
YES
Kleibergen-Paap Wald F-statistic
4.64
5.04
4.00
Endogeniety test (chi-sq)
1.70
1.13
0.65
( p-value)(0.43)(0.57)(0.72)
R-squared
0.21
0.21
0.22
0.18
0.19
0.22
Observations
658
569
499
658
569
499
Notes: *, **, and *** indicate significance of the t-statistics at 10%, 5%, and 1% respectively [t-statistics in brackets]. Columns 1–3 and 4–6
represent OLS and 2SLS estimations, respectively. The base categories are the same as those employed in Table 3. All models include 18 sector
dummies, and SE is adjusted at the segment level.

iTaukei(1)-3.92[2.10]**-6.50[2.27]**-0.65[2.87]***-0.04[0.57]
0.66[1.81]*
2.24[1.72]*
3.34[2.58]**
0.75[2.31]**
58.88[12.82]***
YES

(2)
-2.93
[1.48]-7.16[2.46]**-0.76[3.27]***-0.02[0.28]
0.70[1.79]*
1.77[1.22]
3.22[2.30]**
0.72[2.07]**
57.66[11.13]***
YES

2SLS
(3)
-0.39
[0.19]-8.04[2.75]***-0.58[3.58]***-0.02[0.24]
0.29[0.78]
2.70[1.67]
1.81[1.32]
1.01[2.90]***
57.41[12.60]***
YES

23

Table 5. Impact of iTaukei and iTaukei tenure expiring within 0–5 Years on chemical fertilizer use (kilograms/hectare)
2SLS
(1)
(2)
(3)
(4)
(5)
(6)
iTaukei-37.83-34.62-23.30-47.71-42.2924.81[2.07]**[1.87]*[1.16][0.60][0.56][0.32]
iTaukei expiring in 0–5 years-59.84-65.89-64.20-81.41-87.93-100.63[1.61][1.77]*[1.76]*[1.23][1.29][1.29]
Distance to mill (km)
-5.02
-5.42
-2.20
-4.46
-4.93
-3.20
[1.50][1.60][0.86][1.04][1.21][0.78]
Age of household head
-0.23
0.18
0.00
-0.23
0.20
0.10
[0.34][0.30][0.00][0.31][0.31][0.16]
Household members 15–65 years
3.73
3.51
-1.74
3.96
3.59
-1.65
[0.83][0.71][0.40][0.86][0.72][0.39]
Household head with secondary/higher education
14.89
7.20
12.89
14.34
6.69
13.51
[1.13][0.51][0.84][1.02][0.46][0.86]
Household owns tractor
17.38
16.02
-0.13
17.16
15.91
-1.20
[1.09][0.93][0.01][1.07][0.92][0.07]
Total land holding (Ha)
13.68
11.33
12.33
13.64
11.34
12.90
[3.19]***[2.87]***[2.85]***[3.25]***[2.90]***[2.78]***
Constant
660.08651.15649.66653.70646.00650.00[10.91]***[9.81]***[10.25]***[10.69]***[9.63]***[9.65]***
Sector level dummy included
YES
YES
YES
YES
YES
YES
Kleibergen-Paap Wald F-statistic
4.64
5.04
4.00
Endogeniety test (chi-sq)
0.19
0.18
1.16
( p-value)(0.91)(0.91)(0.56)
R-squared
0.17
0.16
0.19
0.17
0.16
0.18
Observations
658
569
499
658
569
499
Notes: *, **, and *** indicate significance of the t-statistics at 10%, 5%, and 1% respectively [t-statistics in brackets]. Columns 1–3 and 4–6
represent OLS and 2SLS estimations, respectively. The base categories are the same as those employed in Table 3. All models include 18 sector
dummies, and SE is adjusted at the segment level.
Variable Description

OLS

24

Table 6. Impact of iTaukei and iTaukei tenure expiring within 0–5 Years on newly planted cane (ha)
OLS
2SLS
(1)
(2)
(3)
(4)
(5)
(6)
iTaukei
0.01
0.00
0.06
0.03
0.03
0.13
[0.19][0.03][1.04][0.14][0.17][0.68]
iTaukei lease expiring in 0–5 years
-0.14
-0.15
-0.18
-0.19
-0.20
-0.25
[2.65]**[2.86]***[2.97]***[2.04]**[2.22]**[2.05]**
Distance to mill (km)
0.00
0.00
0.00
0.00
0.00
0.00
[0.06][0.18][0.80][0.02][0.09][0.40]
Age of household head
0.00
0.00
0.00
0.00
0.00
0.00
[0.02][0.13][0.24][0.01][0.17][0.30]
Household members 15–65 years
0.01
0.01
0.01
0.01
0.01
0.01
[0.49][0.53][0.67][0.48][0.53][0.67]
Household head with secondary/higher education
0.06
0.07
0.09
0.06
0.07
0.09
[1.53][1.53][1.80]*[1.47][1.48][1.77]*
Household owns tractor
0.07
0.06
0.04
0.07
0.06
0.04
[1.30][1.04][0.75][1.30][1.04][0.72]
Total land holding (Ha)
0.04
0.03
0.05
0.04
0.03
0.05
[2.19]**[1.99]*[2.29]**[2.17]**[1.98]*[2.25]**
Constant
-0.12
-0.15
-0.26
-0.13
-0.16
-0.27
[0.69][0.79][1.27][0.74][0.84][1.35]
Sector level dummy included
YES
YES
YES
YES
YES
YES
Kleibergen-Paap Wald F-statistic
4.64
5.04
4.00
Endogeniety test (chi-sq)
0.42
0.49
0.47
( p-value)(0.81)(0.78)(0.79)
R-squared
0.13
0.12
0.14
0.13
0.12
0.14
Observations
658
569
499
658
569
499
Notes: *, **, and *** indicate significance of the t-statistics at 10%, 5%, and 1% respectively [t-statistics in brackets]. Columns 1–3 and 4–6
represent OLS and 2SLS estimations, respectively. The base categories are the same as those employed in Table 3. All models include 18 sector
dummies, and SE is adjusted at the segment level.
Variable Description

25

Figure 1. Area harvested and production of sugarcane and

5,000,000

80,0004,500,000

70,0004,000,000
60,00050,000tonnes3,000,000

2,500,000

40,0002,000,000

30,000Hectares3,500,000

1,500,000
20,0001,000,000
10,000500,000
0

0

Sugarecane (tonnes)

Sugar (tonnes)

Area Harvested (Ha)

Source: Fiji Bureau of Statistics (2014).Note: Fiji experienced severe drought in 1998.

26

Appendix - Table A1: Descriptive statistics of variables used in analysis
Variable
1 if iTaukei tenure
1 if State tenure
1 if Freehold tenure
Age of household head
Household members <15 years
Household members 15–65 years
Household members >65
1 if Household head acquired ≥ High School Edu (0 if no or primary school)
1 if Household inherited land (0 if purchased)
1 if Household owns tractor (0 if hired and/or not owned)
Total land holdings (Ha)Area under sugarcane cultivation (ha)Area harvested (ha)Ratoon over 1 year old (Ha)Ratoon over 2 years old (Ha)Ratoon 3 years and over (Ha)Total production (tonnes)

Mean
0.51
0.37
0.11
51.29
0.97
3.58
0.31
0.46
0.84
0.27
4.54
3.46
3.33
0.20
0.16
2.73
175.29Std. Dev.
0.50
0.48
0.32
11.84
1.22
1.58
0.59
0.50
0.37
0.44
2.32
1.80
1.81
0.59
0.39
1.58
122.0027