Download land policy the turn point to the renovation in vietnam

LAND POLICY
THE TURN POINT TO THE RENOVATION IN VIETNAM
Prof. Dr.Sc. Dang Hung Vo
M.Sc. Do Duc Doi
Ministry of Natural Resources & Environment of Vietnam
I. OVERVIEW (1)
Before 1986:
Vietnam’s economy was State-subsidized, directed all the
economic activities based on “ask-give” mechanism (the
administrative system directly managed state-owned enterprises as
well as community-owned economic organizations).
The major labour force in agriculture was agricultural
cooperatives, and in industry and services it was stated-owned
enterprises.
The State allocated land free to individuals and organizations
after considering their requests and recovered this land if they
could not use their lands properly. land had no price.
The land administration system had only function of surveying
agricultural land areas for calculation of agricultural land tax (major
income of the State budget from land).
I. OVERVIEW (2)
After 1975 (after wars in Vietnam):
Economic development became the main task of the State.
The State-subsidized mechanism had no motive power for
economic development: agricultural cooperatives poorly operated,
agricultural production dramatically decreased and foodless
happened in rural areas; stated-owned enterprises in industry and
service sectors had also no effects.
In 1986:
The State of Vietnam decided to start the economy renovation
policy (Doi Moi), based on the operation of the market economy
under the state management (the market economy system is
recognized as the major driving force for economic development).
In 1994:
The State of Vietnam decided to start the industrialization and
modernization of country based on the construction of Vietnam to
become a industrial country in about 2015.
I. OVERVIEW (3)
From 1986 to now:
Land becomes the important input for economic development in
the market economy mechanism.
Land policies are the turn points in the renovation process: the
renovated policies for agriculture land has made Vietnam to
become one of the three leading countries in rice export, the
renovated policies for non-agriculture land has facilitated the
industrialization process and set up the active real estate market to
ensure the stability of annual economic growth.
The legal system on land was established: the first Land Law
issued in 1987, the second Land Law issued in 1993 (with the first
amendment in 1998 and the second amendment in 2002), the
third Land Law issued in 2003 (will be amended in 2008), and a
Land Code will be issued in the period 2011 - 2015 as planned.
The land administration system was reconstructed in all the
administrative levels (governmental, provincial, district, communal).
II. THE RENOVATED POLICY OF LAND FOR
AGRICULTURE DEVELOPMENT (1)
During 1975-1980: the average food production of Vietnam was
only about 13.5 million tons/year.
During 1981-1985: the food production slightly increased to 16.5
million tons/year.
In 1986: The State of Vietnam carried out the country renovation
process - 'Doi Moi' with the breakthrough in land policies agricultural cooperatives’ lands were allocated to households for
stable permanent uses, creating a new motive for agriculture
production.
The first Land Law (1987) was focused on the process of land
allocation to households as stable land users and issued the land
use right certificate (LURC) to land users as the legal basis for land
use. The agriculture land users started to enjoy land use rights and
made the better investment for own land parcels. The new policy
had a profound effect in raising agricultural production and
productivity, mostly rice production.
II. THE RENOVATED POLICY OF LAND FOR
AGRICULTURE DEVELOPMENT (2)
The second Land Law (1993) showed 3 typical renovated as follows:
1. The State concedes the price of land, and it was defined by the State;
2. The Land Use Rights could be legally transferred, exchanged, leased,
mortgaged and inherited.
Some typical successes of Land Law 1993 implementation were:
1. The agriculture land consolidation process implemented very well (the
land users had a smaller number of land parcels with larger area of each);
2. Many farms built by household or multi-household on agriculture,
aquaculture, forestry with agricultural products processing;
3. A part of agricultural labour force in rural areas moved to non-agricultural
sectors such as mechanical services, irrigation, electrical supply,
transportation, pesticides supply, etc.;
4. The most of households got money to invest into agricultural production by
mortgaging their land use right to borrow money from banks.
5. Land use right has been legally accepted on the market transaction.
II. THE RENOVATED POLICY OF LAND FOR
AGRICULTURE DEVELOPMENT (3)
The Land Law 1993 showed 3 main shortcomings as
follows:
1.The land price assigned by the State is usually much lower
than the market price, making the land price “ask-give”
mechanism continue to persist.
2. More than 50% of agricultural farms are established by rich
people in urban areas through the land transfer from poor
households in rural areas; the number of poor people that
have no production land increases more and more in rural
areas.
3.Vietnam started its industrialization process since 1994,
but Land Law 1993 did not focus on managing nonagricultural lands and land conversion process from the
agriculture sector to non-agriculture sector.
II. THE RENOVATED POLICY OF LAND FOR
AGRICULTURE DEVELOPMENT (4)
The renovated policies for agriculture land has become the main force
to improve agricultural production and productivity. in 1990, Vietnam
has become one of the 3 biggest rice exporting countries in the world,
and to date, it is amongst the top countries in exporting agricultural
products such as coffee bean, peppercorn, shrimp, fish, etc.
Rice production/productivity of Vietnam in comparison with Thailand:
Year
1991
1992
1993
1994
1995
1996
1997
Rice Production (million tons)
Vietnam
19.6
21.5
22.8
23.5
24.9
26.4
27.6
Thailand
19.8
20.2
19.1
19.7
19.0
20.0
19.8
Rice Productivity (100kg/ha)
Vietnam
31.1
33.3
34.8
35.6
36.8
37.7
39.0
Thailand
20.52
19.58
21.28
21.1
21.3
21.2
21.0
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (1)
One year after the birth of the Land Law 1993, Vietnam set
out a roadmap of country’s industrialization and
modernization to the year 2000.
This induced a series of land issues such as:
1.How to make more land available for the projects of basic
infrastructure development, industrial zones building, and
new urban areas construction?
2.How to satisfactorily compensate, resettle and create new
jobs for the farmers whose lands were recovered to
implement non-agricultural development projects?
3.How to settle land disputes and complaints?
4.How to deal with environmental pollution caused by nonagricultural projects?
5.How to develop the real estate market properly?
Meanwhile, land management authorities lacked of a legal
corridor to deal with these issues in practice.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (2)
To set up the legal tools for land administration, the
land management authorities made the following
activities:
1.The Government promulgated a number of decrees to
managed non-agricultural land uses.
2.The Standing Committee of National Assembly also
promulgated two ordinances on rights and obligations of
domestic organizations using land and of foreign
organizations and individuals renting land in Vietnam.
3. The National Assembly amended and supplemented
the Land Law in 1998 based on these ordinances and
decrees, and in 2001 respecting to decentralization of
land administration.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (3)
During ten years 1993 - 2003 of implementation, the land legislation
exerted positive impacts promoting the country’s industrialization, but these
land policies still have several shortcomings as the follows:
1. Land prices defined by the State were much lower than that on the
market (normally around 1/10 of market prices). Virtually, the State has
continued to subsidize land prices, thus intensified the corruption in land
management and speculation in land use.
2. Real estate market could not develop since economic organizations were
kept out of land transaction, because, enterprises had only land leasehold
right from the State (land leased by the State), but did not have land
freehold right from the State (land allocated by the State). Up to 1998,
enterprises have been allocated with land in an indefinite period of use time
either to construct dwelling house for sale/lease, and to get back their
investment in infrastructure.
3. The State gave its enterprises excessive favours such as allowing these
enterprises to used land leased by the State as their own properties for
capital contribution in joint venture with foreign investors.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (4)
The State allowed implementing 'exchanging land for infrastructure'
mechanism based on the mechanism that investors have to invest in
technical infrastructure, and the State will allocate land parcels for
residential or production use with value equal to the invested infrastructure.
This mechanism supported to use land as the capital for investment but
unfortunately, the State caused huge loss to itself by setting a very low price
of land, and helped investors to gain 'super' benefits from land.
4.
There were big obstacles in practice when the State recovered lands to
lease or allocate to investment projects: (i) land prices stipulated by the
State were much lower than the market prices, making users of recovered
land to protest against value of land compensation and raising land
complaints; (ii) many investors unfairly made benefits from this mechanism
by setting up 'fake' projects to arrogate lands from other people; and (iii)
many managers made corrupt use of their authorized competence
recovering land to use for their own.
5.
Administrative procedures for land recovery, land allocation, land lease
were not clear, complicated, burdensome and inappropriate with land use in
practice.
6.
7.
Land corruption, by this way, became more and more serious.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (5)
In 2001, the State started to implement the project 'Summarizing 10
years implementing land legislation and land policies' to put forward new
land policies thus creating new dynamics for the country’s
industrialization and modernization. As a result, the third Land Law was
adopted by the National Assembly at the end of 2003 and came into
force on July 1st 2004.
The Land Law (2003) puts forward a number of new policies on land as
the follows:
1.It clearly defines a legal framework for people’s ownership regime on
land, and specifies the State’s decision making authority on land use
planning (the State determines land use purpose), on land recovery,
allocation and lease for the projects using land which aimed at
preserving national interests, community interests, national defense,
security and some kinds of projects for economic development; the
State gives land users the rights of land exchange, transfer, donation,
inherit, mortgage, and land contribution as capital.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (6)
2.It provides specific regulations to solve complicated, historical
induced land issues, principally by no reconsideration of all the preexistent administrative decisions but reviewing civilian relationships
on land such as land lend, land lease, house care offer, etc. to make
proper judgment in accordance with the Civil Code.
3.It fully renovates land financial systems based on 'one price of land'
principle (State-defined price of land is equal to the market price of
land).
4.It eliminates land favours given to State-owned enterprises, makes
up equality on land use between the domestic enterprises from
different economic sectors, and makes up also economical equality
between the domestic investors and foreign investors.
5.Land parcels are put under the direct management of local
authorities, the central authority is in charge of the land legislation
construction and land use planning of whole country & provinces.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (7)
6.Land mortgage is encouraged, and land mortgage registration
procedure is simplified (however, land users can not mortgage land
to foreign banking organizations).
7.Land use planning is improved to be more appropriate with the
market mechanism and to assure social, economic and
environmental benefits (however, it is lack of feasibility).
8.It restricts the State’s authority in land recovery for economic
development projects. The State has the right to recover land only for
the development projects of urban area, industrial zones, economic
zones, high technology zones; for the invested projects with the 100%
foreign direct investment; and for the industrial-servicing production
projects with the domestic investment at high level, otherwise
investors must directly get land by transfer, by rent or by land
contribution as capital.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (8)
9.It fully renovates the mechanism of compensation, support, and
resettlement for the people whose land recovered by the State:
compensation by land is prioritized over compensation by money, and if
compensation by money is applied, compensation amount will be based
on the market price of land; farmers whose land area is recovered over
30% of their agricultural land would have compensation by nonagricultural land and free training for new jobs; people whose residential
land is recovered would be resettled at sites with better living conditions.
10.It fully renovates whole the land administration based on: (i) moving a
big part of the administrative works to land registration system operated
by the Land Registration Office (public service organization), (ii) providing
specific regulations to promote transparency of land use registration in
LURC issuing procedure, in land transaction procedure, (iii) apply
administrative penalties to State officials who broke the laws or
harassed people/organizations at administrative works.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (8)
11.It renovates settlement mechanism of land disputes, land
complaints on administrative decisions, and denouncements on land
corruption based on principles that procedures must be transparent,
time-limit must be fixed, authorities and responsibilities must be
specific, and results must be publicized.
The above mentioned land policies positively impacted on
the speed up in the country’s industrialization and
modernization. Domestic and foreign investments
significantly increased. The real estate market rapidly
expanded and had higher proportion in the economy.
More industrial zones, economic zones, high technology
zones, new urban areas are constructed throughout the
country.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (9)
Investment by ownership in the period of 2003 - 2006 (million USD)
Investment in
Vietnam in the
period of
2003 - 2006
2003
2004
2004 - 2003
2005
2005 - 2004
2006
2006 - 2005
Total Investment
14,953
18,183
+3,230
21,446
+3,263
24,931
+3,485
Investment from
State owned
sector
7,910
8,739
+830
10,102
+1,363
11,569
+1,467
Investment from
non-State
(domestic) sectors
4,649
6,860
+2,210
8,150
+1,290
9,406
+1,256
Foreign Direct
Investment (FDI)
2,394
2,584
+190
3,194
+610
3,956
+762
The above table indicates that total investment in Vietnam in the period of 2003-2006
slightly increased year by year, wherein State sector’s investment increased, non-State
domestic sectors’ investment decreased, and foreign direct investment (FDI) significantly
increased. One can say that eliminating the “ask-give” mechanism in land does not satisfy
the non-State domestic investors, creating equality in rights and obligations on land between
domestic and foreign investors satisfies strongly the foreign direct investors.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (10)
Structure of GDP by economic sectors in the period of 2003 - 2006 (million USD)
2003
AMOUNT
TOTAL
2004
%
21,015
AMOUNT
%
22,652
2005
20042003
AMOUNT
%
+1,637 24,564
2006
20052004
AMOUNT
%
+1,912 26,571
20062005
+2,007
Agriculture
4,427
21.1
4,620
20.4
+193
4,806
19.6
+186
Industry
8,087
38.5
8,914
39.4
+827
9,867
40.2
+953 10,890
41.0 +1,023
Services
8,501
40.5
9,119
40.3
+618
9,892
40.3
+773 10,712
40.3
4,969
18.7
+163
+820
Structure of GDP by economic sectors shows that Vietnam’s economy development
has recently moved towards an industrialized country with industry’s contribution of
over 40%, service’s contribution of over 40% and agriculture’s contribution of
around 19%.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (11)
Structure of GDP by economic sectors in the period of 2003 - 2006 (million USD)
2003
AMOUNT
TOTAL
21,015
STATE
SECTOR
8,635
NON-STATE
SECTOR
10,031
FOREIGN
INVESTMENT
2,349
2004
%
AMOUNT
%
22,652
41.1
2005
20042003
AMOUNT
%
+1,637 24,564
2006
20052004
AMOUNT
%
+1,912 26,571
20062005
+2,007
9,304
41.1
+669
9,990
40.7
+686 10,625
40.0
+635
47.7 10,729
47.4
+698 11,609
47.3
+880
1,265
47.3
+956
11.2
11.6
+270
12.1
+347
3,381
12.7
+415
2,619
2,966
Structure of GDP by ownerships shows that State sector’s contribution is of about
40% and slightly decreasing, non-State sector’s contribution is of about 47% and
increasing, foreign direct investment’s contribution is of only about 12% and
significantly increasing. It is concluded that the land policies renovation has
accelerated the country’s industrialization.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (12)
Development and implementation of the legislation system on land
still be challenged by the following issues:
1.The renovation of the four above mentioned land management
tools was asynchronous: the land legislation system and land
administration system were rapidly improved but not land finance
system. To date, non-agricultural land use taxation has no changes
compared to that of the state-subsidized economy, and the land use
planning system has not been developed conformably with the
market economy mechanism.
2.Land policies and land legislation have always been developed in
accordance with the country sustainable development direction.
However, the real estate development policies and legislation are not
synchronous themselves, there is a lot of the legal conflicts, causing
difficulties in applying these laws and policies in practice.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (13)
3.In the land legislation system, there are some differences in the rights
and obligations on land between foreign investors and domestic
investors. These differences must be adjusted to be in accordance with
Vietnam’s commitments joining the WTO.
4.Land use planning system is inflexible, not conformable to the market
mechanism, and lacks of a specific quantification measure to assess its
effectiveness in social, economic and environmental aspects. It is
popular that land use planning and construction planning and socioeconomic development planning are not synchronously developed.
5.The State controlled land prices still somewhat differ to the market
prices (land use fee is about 70% of market price of land, State’s land
rental payment is only about 30% of market rental price of land), while
there is no legal corridor for the land valuation activities. The land price
disparity keeps raising the land complaints, land disputes and existing of
the “ask-give” mechanism in land.
III. THE RENOVATED POLICY OF LAND FOR
COUNTRY'S INDUSTRIALIZATION (14)
6.Tax posed to land transfer is 28% of income for enterprises (from
2003) and 25% for individuals (from 2009). Tax posed to agricultural
land use is waived for land area under land use area limit, and deducted
for land area over land use area limit. However, tax posed to nonagricultural land use with attached properties has not been adjusted
accordingly ; the current non-agricultural land use tax (no tax for
attached properties) for lands of highest price is as low as 1.6 kg
rice/1m2/year. This taxation for non-agricultural land with attached
properties has lead to land speculation.
7.The land administration system was thoroughly renovated towards
enhancing transparency, publicity and simplicity to encourage public
registration of land transactions and reduce corruption in land
management. However, local authorities do not strictly observe these
renovations; land use certificate issuing and land transaction
registration have not been transparent, while corruption in land
management is not eliminated.
IV. CONCLUSIONS (1)
1. land policies and legislation have become the turn points in the
country’s renovation and a main motive force for agricultural and
rural development. Presently, land laws and policies play an
important role in the country’s industrialization and modernization.
However, the current policies on land still have many shortcomings
which could negatively affect the sustainable development.
Policies on land finance have been insufficient to eliminate
weaknesses in land management such as land corruption and
speculation, and unreasonable compensation for land recovery.
Land use planning has not harmonized economic development,
social development and environmental protection. Land
administration system has not yet provided transparent civilian
relationships between the State and land users and between the
land users.
IV. CONCLUSIONS (2)
2. At the end of 2007, a new 'hot fever of land-house' started to
raise in big cities of Vietnam, making land prices in Hanoi and Ho
Chi Minh city to go on top of the world while the average income
per capita is still in bottom group of the world. This 'land fever' is
expected to flare up since there is a big 'virtual demand' from land
speculation. Dwelling house construction and commerce is
bringing 'super' profits to investors, thus attracting huge
investments into the land-house market. In 2006, the economic
growth of Viet Nam is 8,17% with the inflation of 6,60%, and in
2007, the economic growth is 8,48% but the inflation is 12,63%.
The 'hot fever of land-house' is one of the main reasons to increase
the current inflation. An economic disaster will happen if the real
estates market’s over-blow is not timely prevented.