Not allowing conversion of Native Title to Country Lease – what are the implications? Reviewed by Momizat on . YB Syed Abas (Assemblyman for Balung, Tawau) proposed that the applications to change Native Title to Country Leases to be frozen. The basic questions here are YB Syed Abas (Assemblyman for Balung, Tawau) proposed that the applications to change Native Title to Country Leases to be frozen. The basic questions here are Rating: 0
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Not allowing conversion of Native Title to Country Lease – what are the implications?

YB Syed Abas (Assemblyman for Balung, Tawau) proposed that the applications to change Native Title to Country Leases to be frozen. The basic questions here are – who approves the applications for converting NT to CL titles?

If the said suggestion were to be implemented, would the buying and selling of NT lands come to halt as YB Abas argued?  And will it diminish the real value of the existing NT lands like what the Sabah Housing and Real Estate Developers Association’s (SHAREDA) President speculated? To answer these questions, we need to carefully examine the facts and figures of NT and CL titles.

Out of 19,461 square kilometers (or 1,946,086 hectares) alienated land in Sabah in 2010, there were 171,669 Native titles (433,583 ha), more than the 127,166 CL titles (1,268,356 ha).  The trend were similar back in 2006, there were 163,728 NT titles (401,129 ha) as compared to 113,858 CL titles (1,178,829ha).  The obvious fact is this; in four years, increase in CL titles (13,308) was doubled the increase in NT titles (7,941).  That additional 13,308 CL titles cannot be all newly approved application for state land in accordance to direct alienation – section 9 (1) or continuation of title- section 92 (4). One thing for sure, it must have been the approvals to the conversion of NT into CL titles.

Similar trend can be observed at the urban and suburban centers of six districts where land prices are expecting to increase, that if the real estate or properties continue to boom.

Table 1- Native Titles and Country Leases 2006-2010 (compiled and calculated by author from Yearbook of Statistics)

    2006                2010
Kota Kinabalu NT=4,370(6,723ha) 

CL=22,751 (11,998ha)

NT=4,543 (7,190.8ha)+173 NT

CL=28,126 (12,553ha)

+5,375 CL


Papar NT=18,467(32,183ha) 


NT=18,846 (36,274ha)+379NT

CL=5,724 (16,078ha)

+1,588 CL


Penampang NT= 11,182 (10,012ha) 

CL=9,430 (2,659)

NT=11,354(9,797.5ha)+ 172 NT

CL=11,274 (2,739.4ha)

+1,844 CL

Sandakan NT= 4,365 (15,274ha) 


NT=4,834(16,694.8ha)+469 NT

CL=17,003 (117,663ha)

+1,306 CL


Tawau NT= 2,578(7,929ha) 

CL=19,444 (174,776ha)

NT=2,803(9,055.9ha)+225 NT

CL=21,070 (180,960ha)

+1,626 CL

Semporna NT= 2,047 (11,833ha) 

CL=1,987 (31,517)

NT=2,261(17,017ha)+214 NT

CL=2,457 (25,788ha)

+470 CL


As shown in table 1, Kota Kinabalu (5,375 additional CL) recorded the highest increase in CL titles, followed by Penampang, Tawau, Papar, Sandakan and Semporna (470 additional CL). In these four years, Sandakan recorded the highest increase in NT ownerships (469), followed by Papar, Tawau, Semporna, Kota Kinabalu and Penampang(172).

What are these figures telling us? First of all, there is an increase in size and number of NT, although not substantial, contrary to the common held belief. Except for Penampang (in 2010 less 215ha), the natives is granted more not less NT. The substantial increase in CL implied the “official” approving the conversion of NT to CL is working extra fast. And that is really amazing when we consider how lengthy, cumbersome and snail pace the approval for land applications is.

In 2006, Land and Survey Department (LSD) received 2,403 new applications but were able to deal only with 4,438 cases with 20,099 backlog cases. Likewise in 2010, LSD received 3,852 new applications but was able to process 2,915 cases with a backlog 14,666 cases at the end of the year.

High rate of NT conversion to CL is the unintended consequences of land use restriction by the Land Ordinance section 70 (2);

Land which is to be or has been alienated under this part or under similar part of any previous LO shall not be used for other than for agricultural purposes except with the permission of the Minister who may impose additional premium or rent or add or substitute such terms and conditions as he may think fit.

Who is the “Minister” stated in section 70(2), the “speedy Gonzales” I mentioned in the preceding paragraph? You will find out after I explain the economics behind the conversion of NT to CL.

The law of economics to NT land is what the immutable law of gravity to earth, it applies everywhere, every time and to everybody regardless whether you like it or not. Land is scarce in the urban centre, it does not matter what you call it, NT or Field Register or Communal Title, and the limited resources will always find it ways to the most productive producers.

Today, almost all NT land owners in the urban areas, even if they want to, are not be able to do labor intensive agriculture like what his or her parents or grandparents have done in the past. Inherited NT lands usually are subdivided into tiny individual plot barely enough to built a simple house and plants few fruit trees. As the families get bigger through time, inherited NT land will become source of family conflict.

To prevent or to diffuse ugly quarrels in the families, aging parents will sell the land to another richer native. If and when a second generation native inherited a workable land size, given his skill or education level, his best choice is to do capital intensive agriculture.

Capital is what ordinary native does not usually have. Without the capital he has no choice but to mortgage NT. Then again, how many banks willing to accept NT as collateral for lending money to finance agriculture business which is known to have very long payback period and a very high risk of failure? In a worst case scenario, at least from the eyes of politicians, he will sell NT land and become a nouveau riche.

But who would buy an exorbitant priced land in urban areas with land use restricted to agriculture? As section 17(1) of SLO clearly stated NT cannot be sold to a non-native. The NT land in urban areas will be sold to the highest bidder in a transaction mutually agreed by seller and buyer, regardless whether their native or not. Exactly what SLO has to say about these dealings?

Section 17 (1) of SLO stated that

Except with the written permission of the minister, all dealings in land between non-natives on the one hand, and natives on the other hand, are hereby expressly forbidden and no such dealing shall be valid or shall be recognized in any court of law unless they shall have been entered into and concluded before the 16 day of January, 1883 or in the terms of the next following clause.  

17 (5)  Notwithstanding the provisions of this section and section 64 it shall be lawful for the owner of land held under the provisions of part IV, to grant a sublease of such land to a non-native for a term not exceeding thirty years.

Notice that SLO section 17 (1) and (5) is a prohibition with the Ministerial Exception or in other words, a conversion of NT to CL is allowable. How so? Refer back to section 17(2) cited earlier, it roughly said that if a non-native (is so happen that all real estate developers are non-native including Molukun Holdings) wishes to purchase NT land, then an application must be made to Hasil Bumi (HB) to convert that non-native land to CL, subject to the surrender of title, conversion premium and calculated rent at which the land is to be sub-leased (to non-native, part II and III) not exceeding 30 years.

The Hasil Bumi role is specified in standard procedure for granting land ownership stated in section 9(1) chapter 68, the “setiausaha” for HB is none other than Chief Minister. To understand how it is done, we look at the case of Borneo Housing Mortgage Finance Limited versus Bank Bumiputra Malaysia Limited.

The Native trustee holding a NT land was declared non-dealing as stated in section 17(1). Judges held that dealing referred to registrable dealings under section 4 and contracts and trusts between Natives and Non-Natives related to NT are permissible as long as it does not fall within section 17. All documents show that the land will eventually be converted to CL pending development plan approval and S&P with the end buyers. The conversion premium was paid and the title was ready for sub-division.

To illustrate further, we take another case – Malayan Banking limited versus Neway Development (2010) 2 CLJ 501. A Native wanted to develop (not for agriculture) his NT land (sales and purchases contract with NT seller) and he agreed to serve as Trustee while Neway obtained loan from Maybank to partially finance purchased of that NT. Unfortunately the development was not completed, so lender sued for outstanding interest on the loan.

The judgment was that Nominee (trustee) has no beneficial interest in the land because he did not pay the original owner of NT land. Trustee was seen as an instrument to regularize a transaction that is otherwise illegal under section 17(1). What interesting about this case is this; there is no evidence of fraud in the creation of trust (Trustee and Neway), it is in accordance with law of trusts that said, “Trustees must never profit from trust property”.

There is nothing wrong with Neway to help to finance purchase of NT by a Native in lieu of the right to develop it. Beside the loan was permissible under section 17. If only the Native purchaser able to keep silent about the trust over the NT land.

The former case demonstrates beyond what would happen if there an unnecessary delays in the conversion. The latter shows what would happen if the application to convert NT to CL were frozen either temporary or indefinitely. Not allowing conversion of NT to CL will not stop the selling and buying of NT land.  It will not diminish the real value of NT land at the urban areas because there is always a demand for it from the richer native.  I am not sure whether having more Native landlord is a good thing. Is this is what YB Abas had in mind?

Most landless natives in rural areas end up squatters within their own country not because they sold their NT land but because the State was not serious in recognizing claim on native customary land rights.

As I mentioned earlier, the Setiausaha for Hasil Bumi, if he want, can expedite the NCR land approval.  If the “Have Nots” natives in a suburban or rural area, forced by circumstances, sold the NT land to the “Haves” natives, will it be politically acceptable?

We all agreed that NT is all about safeguarding entitlement for the native; a right to land is Sui Generis, fundamentally imbedded or sourced in native laws and customs. Natives will not have incentive to keep the NT land unless they are allowed to change it land use.

- James M. Alin



James AlinThis is my personal opinion and it does not reflect the official position of my generous employer- School of Business and Economics, Universiti Malaysia Sabah. I welcome all comments,, or twitter @literati43



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