Land acquisition and compensation

Types of ZSR

How ZSR can be implemented:

Compensation for expropriation of land should be prompt, adequate and effective.
Processes of expropriation should adequately consider local contexts, such as traditional rights to land and customary land titles.
Procedures for allocation of compensation should ensure that money is paid to individuals and households affected, and not lost to intermediaries.
Individuals and households who receive compensation for expropriated land should receive financial literacy training if required.
Individuals and household members should continue to have access to farm expropriated land, as long at the land remains unused for zone and industrial development.

Overview of the problem:

A recurring issue with SEZ establishment is the accompanying dispossession of agrarian communities from the land. Dispossession causes disruption and loss of livelihoods to farmers, herders, fishers and other groups relying on the agrarian economy. Due to the nature of land acquisition and the presence of overlapping customary land titles and legal regulations, land transfers may bring serious challenges in identifying and adequately compensating the rightful owners and occupiers of land. Although a common outcome of industrial and urban development, dispossession becomes a larger problem where local land governance regimes and weak institutional monitoring mechanisms result in unfavourable outcomes for local communities.

During the process of dispossession and compensation, competing traditional and legal authorities, as well as complex negotiations with communities, middlemen, developers and officials, can create multiple opportunities for corruption at various levels, exacerbating the ill effects for those evicted. Compensation payments may only partially reach individuals and households who have been dispossessed, and in the worst case these funds may not be paid out to the rightful recipients at all.

There is also a risk that individuals and households receiving compensation are overwhelmed by the sudden possession of large amounts of money and/or capital, exceeding what they have previously owned. Since they are likely to have lost their original source of income, compensation funds are critical to sustaining their future livelihoods. However, lack of financial literacy often means that funds are quickly spent or inadequately invested, putting individuals and households at risk of destitution once the funds have been used.

Problems also arise where land is expropriated, but then not utilised for zone development. This can happen if expansion of the zone and industrial development are slower than anticipated. The result is that fertile land is not cultivated, as its previous occupiers are unable or not allowed to access it. The resulting decrease in farming brings disadvantages for food security of the local area as well as negative impacts to local livelihoods, diet, health and beyond (see section on Food security).

Land dispossession and disputes over ownership and compensation can create political volatility and violent protest. Crime and other forms of social disorder may emerge, especially where local populations find it difficult to sustain livelihoods and may take to informal rent-seeking activities to generate incomes, such as extorting money from those passing through their neighbourhoods.

Issues around land acquisition may create hostilities among host communities not only towards SEZ developers, but also towards foreign investors, even though it is typically local or national governments that are responsible for land acquisition, resettlement and compensation. Extortion or violence by dispossessed locals may target foreign firms; zone construction and occupation can be extensively delayed; and local gangs or even local officials may engage in defrauding investors.

Examples:

Eastern Industrial Zone, Ethiopia:

The establishment of Ethiopia’s Eastern Industrial Zone caused the displacement of hundreds of farmers in 2006, and the expansion of the zone through acquisition of an additional 320 hectares of land near Addis Ababa by China’s Huajian Group caused further evictions in 2018 (Giannecchini & Taylor, 2018). Financial compensation rates were deemed too low, and distribution was delayed, sparking localised discontent, while the promised 500m2 resettlement plots for those who lost land had still not materialised 10 years after zone establishment, because of scarcity of land in the region of the capital (Gardner, 2018). Failure to provide adequate compensation – particularly land – in a timely manner during initial setting up of the SEZ meant that substantial opposition could be mobilised during the zone’s expansion 12 years later.

Jin Fei Zone, Mauritius:

The Mauritian government compensated sugarcane farmers for the land acquired for the Jin Fei industrial zone in 2007, but did not compensate for crops which were to be harvested before eviction. Amid compensation disputes, land was set ablaze, leading to uncompensated crop loss, and farmers were ordered to vacate the land (Cowaloosur, 2015). Contestation continued after the failure of the industrial zone: in 2017, remaining residents repeatedly protested the erection of a boundary wall by Chinese developers that encroached on pastoral land and prevented livestock grazing, while those evicted complained over lack of prospects for long-term sustainable livelihoods (Hamuth, 2017).

Khed City, India:

In Khed City, Maharashtra, lengthy agitation from local farming elites led to planned zone boundaries being redrawn, to include rocky lands predominantly owned by a marginalised local tribe, rather than the flat and fertile lands of higher caste landowners (Balakrishnan, 2019). This topography made the zone challenging and expensive to develop and may have influenced the slow growth of the SEZ. Compensation to those dispossessed included shares in the new zone, hailed as a promising form of sustainable livelihoods at the time, but the shareholdings failed to produce dividends, leading to further agitation and eventual cancellation of the zone (Mumbai Mirror, 2018).

Lekki Free Zone, Nigeria:

The resettlement and compensation of affected local communities have been major areas of contention throughout the construction of the Lekki Free Zone near Lagos, Nigeria. Lands owned by 26 villages were forcefully acquired by the Lagos state government from the early 2000s, displacing rural communities from their ancestral land and source of living (Tagliarino et al., 2018). Expropriation expanded with the development of a Chinese-funded SEZ from the mid-2000s, with investors relying on the Lagos state government to provide appropriate recompense to those affected. A memorandum of understanding was signed, promising not only compensation and resettlement but also training and jobs in the new SEZ, scholarships for children and enhanced education, healthcare and recreation facilities (Goodburn, Knoerich, Mishra & Calabrese, 2024). However, little of this proved forthcoming. Compensation was provided through local chiefs and to family heads, many of whom failed to distribute funds appropriately (Adunbi & Stein, 2019). Scholarships and training opportunities were few and seized by children of local leaders; while provision of schools and other social infrastructure was absent in most villages. Most notably, despite the commitment to train and employ dispossessed farmers, few locals have found employment in the Lekki Free Zone (Goodburn, Knoerich, Mishra & Calabrese, 2024).

Village resettlement also proved inadequate, as land provided for resettlement was insufficient and much was already occupied by others. Tensions across the area increased, and disputes led to outbreaks of violence and mass protests around the zone, including the fatal shooting of the zone manager in 2015 (Ugbodaga, 2015). As of 2024, land in at least two quadrants of the zone remains idle and discontent continues to rumble.

Liaoshen Industrial Park, Uganda:

Most unusually, land acquisition has been almost entirely uncontentious in the establishment of Uganda’s Liaoshen Industrial Park from 2015. This is a function of two key features. First, the land on which the park is located is owned by the president’s brother General Salim Saleh (Goodfellow & Huang, 2022). Although parts were occupied by tenant farmers, they had no ownership rights and had been warned that the land would eventually be required for industrial construction. Second, and most critically, the widespread availability of fertile agricultural land in the Kapeeka region meant that it was easy for those displaced by the park to be relocated elsewhere, typically onto an alternative parcel of the General’s land, again with warning that the land might be required for park expansion (Goodburn, Knoerich, Mishra & Calabrese, 2024).

No financial compensation was provided for those resettled, but villagers received new plots that were typically larger than their former land, as well as free maize seed and the promise that maize crops would be purchased at at-least-market rates, to be processed in the new industrial park. Livelihoods were thus maintained, avoiding protests. Liaoshen Industrial Park is not (yet) gated, such that local people can still access the roads and spaces between factories freely, leading to some unofficial agricultural production on as-yet-unused plots (Goodburn, Knoerich, Mishra & Calabrese, 2024).

Luanda-Bengo SEZ, Angola:

Namanve Industrial Park, Uganda:

In Uganda’s flagship Namanve Industrial Park, ongoing land and other issues have caused difficulties for international investors. Reports suggest that local criminal gangs and even officials have taken advantage of the ignorance of Chinese businesses on Ugandan land laws, making false promises to secure free land or offering to expedite fraudulent deals to cut through red tape in exchange for bribes. The defrauded investors have attempted to bring legal cases to recover their losses, but these have been blocked by local officials, leading to the loss of billions of Ugandan shillings (New Vision, 2018). In 2024, disputes over land ownership and corruption led to outbreaks of violence between Chinese investors (Insight Post, 2024).

Ogun-Guangdong Free Zone, Nigeria:

Land for the Ogun-Guangdong Free Zone in Nigeria’s Ogun State was acquired in 2008. Of the 2000 ha of land, nearly 500 ha belonged to members of the Igbesa and Ejila communities, who claimed that zone land was the rightful property of at least 10 local families. The Land Owners Community of Igbesaland supported these claims to the land, and organised protests, whereas the Ogun State Bureau of Land and Surveys claimed that the land had been lawfully acquired (Ayinla, 2019). This dispute resulted in major tensions between local communities and incoming investors, with locals pressuring firms to vacate the land. In 2019, private Chinese developers Zhongshan Fucheng Industrial Investment Company, who had been forced off the land, launched legal action against the Nigerian Federal State, and were awarded USD 70m in arbitration (Onuah & Adetayo, 2024).

Sri City, India:

In Sri City SEZ, in India’s Andhra Pradesh, large scale resettlement and related protest were avoided through acquisition of farmland only and not housing land (Mukherji, 2007). However, despite the zone’s relative success, much of the acquired land lay undeveloped for many years. Internal customs boundaries separating the export-oriented SEZ from domestic production areas (required by India’s 2005 SEZ Act) meant that farmers could no longer access this land, or use traditional routes for grazing and watering cattle, leading to resentment among locals and avoidable damage to agricultural livelihoods, as well as damage caused by cattle grazing in villages.

To mitigate local discontent, a charitable foundation was established by the zone, aided by corporate social responsibility activities from firms based in the SEZ. This offered various forms of training to villagers to increase their employment readiness, including training on using relevant equipment, tools and technologies (Sri City Foundation, 2011). The foundation also promoted financial literacy by educating villagers on how to use money, cash and ATM cards.

The case of China:

Large-scale land expropriation was a feature of China’s urban and SEZ-related development from the 1980s to mid-2010s. Although rural land is collectively owned in China, farmlands were often requisitioned by local governments, becoming state-owned. Housing land was typically not acquired, leading to the emergence of “urban villages” surrounded by residential and/or industrial development. Locals were typically compensated financially, as well as with reserved parcels of land for collective development, guaranteeing at least some form of sustainable livelihood for former farmers.

This collectively-owned land that had not been requisitioned for SEZ development attracted not only residential development but also industrial and commercial investment. Profits generated provided the main income for some of Shenzhen’s newly urban villages, enabling infrastructural development and welfare programmes for inhabitants throughout the 1980s-90s (Wang et al., 2009). Collectively-owned assets were managed through the formation of joint-stock companies in which villagers became shareholders.

More recently, individual or household shares in new developments have been provided where economic development zones are established, again aiming at sustainable livelihoods. Where villagers have been resettled, they have usually been provided with resettlement apartments, including often an additional apartment to let out for the purposes of income generation. Sometimes new healthcare and educational facilities were also provided, including training centres that assist farmers in transitioning to urban work (Kan, 2021; Kan & Chen, 2022).

In China’s early SEZs of the 1980s, such as Shenzhen, local farmers were deprived of access to agricultural land as they were unable to cross the boundaries separating export-oriented from domestic production areas (Bach, 2019; O’Donnell, 2021). Permission to cross the internal boundary was reserved to people working within the SEZ at the start and end of shifts. In Shenzhen, “agricultural gates” were eventually opened by local authorities, allowing villagers to cross the SEZ to sell produce (Ma and Blackwell, 2017). Ultimately, the boundary was completely abolished, and China’s newer economic zones typically do not have an internal border that would prevent the exclusion of locals.

China-associated zones overseas

China has generally had little involvement in processes of land acquisition and compensation in its overseas SEZs or other economic development zones, as these have typically been handled by the host country national or local state. In several China-associated zones, host country governments promised to provide compensation for land acquisition and resettlement, yet these promises were at best only partially fulfilled, hindering the development of the zones and causing friction with the Chinese developer (Zeng, 2015).

Types of ZSR