Decree 35 clarifying legalities for industrial real estate

Duc Tran - Associate, ACSV Legal

Decree 35 abolishes several regulations on the development planning of industrial zones (IZs) and economic zones (EZs) and replaces them with regulations to comply with the 2017 Law on Planning and Resolution No.110/NQ-CP dated December 2019.

It is expected that these changes will help save time and costs for the local authorities in the process of making, appraising and adjusting the regional and/or provincial planning.

The implementation of this planning has been incorporated into the provincial planning. On that basis, the provincial People's Committee can propose to the competent authorities to make investment policy decisions for the project in accordance with the local development orientation.

Decree 35 waives the requirement for planning tasks in certain cases: formulating the planning of subdivisions for construction of IZs in areas where the general construction planning or general construction planning of EZs has been approved; and formulating the detailed planning on construction of those in areas where the construction subdivision planning has been approved. This will help investors save more time in implementing projects.

Decree 35 gives more power to local authorities in the process of the management of IZs. For example, the right to adjust locations and the acreage of planning areas for construction in some specific cases is delegated to local people's committees.

More specifically, when adjusting the location, the acreage of the planned area of the IP should not exceed: 2 per cent and six hectares compared to the acreage as determined in the list of IZs in the province or city, or 10 per cent and 30ha compared to the area size as determined in the list of IZs in the centrally affiliated city or province after obtaining written opinions from the concerned ministries.

This is a positive change for local authorities and infrastructure companies because this procedure used to be complicated and time-consuming.

According to Decree 35, local people's committees can assign infrastructure investors to organise the formulation of subdivision planning for construction in the area where the general planning for construction already exists while simultaneously organising the formulation of detailed planning for construction.

Previously, the government would adjust the content related to planning, policies, among others, which would cause difficulties for investors implementing the project. The reason for this is that in the implementation process there could be various unforeseen problems not taken into consideration when formulating the project, particularly in relation to compensation and site clearance.

Decree 35 eliminates the procedure for establishing an IZ for infrastructure construction projects. Instead, it is considered to have been established since the date of issuance of the policy decision or the investment registration certificate.

Previously, under Decree 82, after obtaining the certificate or policy decision, the management authorities of the IZs or local departments of planning and investment must submit a written request to local people’s committees for the issuance of an approval decision on the establishment of IZs.

Compared to Decree 82, Decree 35 sets out when the occupancy rate of 60 per cent does not need to be met: when the project has been terminated; the total land area of established IZs in the province or the centrally affiliated city is less than 1,000ha; the location of the IZ in the district-level area is on the list of areas eligible for investment incentives; it is in the form of an eco-industrial park, or supporting specialise or high-tech parks; or it is an expansion of a project which will be implemented by the original investor.

The abolition of this occupancy rate is meant to encourage the development of eco-industrial parks, support industrial parks, specialised industrial parks, and high-tech industrial parks, as well as to welcome infrastructure developers with a high investment capacity.

When determining the list of IZs in the province or the centrally affiliated city, under Decree 35, the land fund must be guaranteed for planning the construction of houses, public services, or utility facilities for employees at least at the rate of 2 per cent of the total IZ area.

Furthermore, one of the conditions for considering and approving the investment policy for IZ infrastructure projects is to have a plan for building houses, public services, or utility facilities for employees. Another condition for being able to expand the project is that it has built and put into use a residential area, public service or utility facilities for employees.

Decree 35 perfects the mechanism to fund the building of residential areas for employees in the IZs. Prior to Decree 35, residents were not entitled to reside in IZs and export processing zones (EPZs). If necessary, foreigners (including managers, executives, and experts) were allowed to temporarily stay at enterprises in IZs or EPZs according to the regulations of local people's committees.

Decree 35 now also allows employees to temporarily reside and stay in the IZ. This new regulation seeks to improve the quality of the employees' livelihoods and promote the production and business activities of enterprises.n