Commercial development and natural resource management on the indigenous estate: a profit-related investment proposal

Economic Papers (Economic Society of Australia), Sept, 2005 by Jon Altman, Michael Dillon

Additional risks associated with Indigenous land are the generalised social and political risks deriving from the substantial absence of economic development activity and the concomitant costs of dependency and social dysfunction. On top of this is a range of contingent risks related to 'opportunity benefits' or missed opportunities. These opportunities involve both private (Indigenous) and public benefits. An obvious example relates to the potential for carbon abatement and trading regimes relating to Indigenous fire management in the savannas (Altman, 2005). Other contingent risks arise from poorly defined institutional arrangements and property rights, especially where there are intersections between customary rights recognised in statute or common law and commercial rights vested in third parties. (2)

Altman (2004a) has argued that part of the reason for policy and state failure in relation to Indigenous development relates to inadequate analysis and conceptual understanding of the particular form that Indigenous economies take in remote and very remote situations--these are not standard two-sector economies, but have a third and distinct customary sector. The hybrid economy framework highlights the existence of customary, market, and state sectors and a high degree of articulation (or overlap) between them. A failure to recognise the contemporary interplay of kin-based and market-based economies in many situations results in inappropriate policy frameworks.

Overall, the risks associated with the Indigenous land investment deficit involve significant potential costs to the nation, and deserve policy attention by governments at all levels. Notwithstanding the existence of market failure, it is also clear that Indigenous landowners stand to benefit from public sector intervention to underwrite or facilitate improved management of their land and resources; and they can expect to maintain links to traditional sites and estates, with the concomitant cultural and social health benefits this might bring. They might also expect greater autonomy and economic independence, increased commercial leverage and political influence (3) and, in some cases, economic benefits in terms of increased income, employment, and profits. It follows that there is a case for Indigenous contributions to any public sector funded economic development or NCRM initiatives, including sharing the commercial risks involved at the corporate level.

Devising means whereby Indigenous landowners might share these risks is not altogether straightforward. Indigenous land is generally held communally (reflecting the underlying group-based nature of Indigenous land ownership systems), yet the corporations set up to hold land are rarely financially robust and are often subject to internal politicking. (4) Such market failure presents a formidable barrier to accessing capital markets for finance. Individual landowners do not have authority to act unilaterally and mostly do not have the financial resources to make significant investment contributions in development projects--individuals have limited capacity to invest.