Crippling rent pains to ease

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Decision 2093/QD-TTg, dated November 23, 2011, will mean manufacturing firms can enjoy a 50 per cent cut in land rent this and next year. This is on the condition that the firms are now paying more than twice the amount they did in 2010 after land rents were redefined in Decree 121/2010/ND-CP on collection of land rent and water surface rent effective from March 1, 2011.

Trading and service firms won’t benefit from the discount. The idea of discounted land rental was initially floated back in July when the Ministry of Finance (MoF) proposed to the prime minister that a land rental reduction should apply in 2011 for businesses struggling with high inflation and interest rates.

The MoF proposal came in the wake of Decree 121 which saw a tripling of annual rents from 0.5 per cent of total land price to 1.5 per cent of that land price.

At the same time, land prices also skyrocketed to become 1.5-5 times higher than in the previous frame depending on the type of land and area.

Decree 121 stipulates that when land rent is paid annually, the amount of annual rent will be equal to 1.5 per cent of the land price for a particular piece of land promulgated by the provincial people’s committee who must follow the provisions of the government in determining land prices and price brackets.

However, if at the time of leasing, the land price fixed by the provincial people’s committee is not close to the market price for such land, this authority may re-determine the price based on such a market price. The price bracket stipulated in Decree 69 is between 0.5 and 2 per cent.

According to a recent research conducted by the Vietnam Chamber of Commerce and Industry (VCCI), in Haiphong, the land rent enterprises were forced to pay in 2011 were up to 10 higher than those of 2010. In some cases, there had even been a 20-fold increase in land rents. For example, in 2010, Ngoc Hai Company paid VND27 million ($1,304) in land rent, but this figure rocketed to more than VND400 million ($19,232) for the same area in 2011.

Similarly, the land rent costs for Haiphong Automobile Company in 2011 were VND3.13 billion ($151,207), or five times higher than the 2010 figure. Ha Long Canned Food Company, meanwhile, was subject to a 920 per cent increase in land rent this year.

To Ngoc Thach, general director of Haiphong city’s Hong An Equipment Company, said consecutive increases in land prices in many areas in recent years had affected the land price frame regulated by the provincial People’s Committee which then led to increased the costs of land rental.

“With such a push towards increases, many enterprises are facing bankruptcy,” said Thach.