Market to get shot at new law

The draft needs futher discussion

The draft proposes eight new regulations affecting businesses, deputy minister of Natural Resources and Environment, Dang Hung Vo, said.
Vo said the draft would add regulations on leases of over 50 to 70 years, on leasing and allocation procedures, on land recovery in projects delayed for more than one year, and on compensation and relocation.
The draft also regulates business options on leasing or on allocated land, as well as the management and use of land in industrial and economic zones.
The amended Land Law aims to resolve obstacles in land recovery, compensation and clearance, sky-rocketing land prices, rampant law suits, and the illicit use of land.
Investment consultancy company Investconsult said the draft Land Law had shortcomings that needed further discussion.
Investconsult general director Nguyen Tran Bat said the draft’s provision that foreign individuals and organisations could only lease land would complicate foreign-invested infrastructure and housing projects.
An Investconsult study showed that foreign investors can lease land to build houses for sale, but when the house was sold, the form of land use had to be changed from lease to allocation.
In the transformation process, the State has to clear land lease procedures for investors and allocation for buyers while local investors who build houses are allocated land and have only to transfer land use rights to buyers.
The price of houses in foreign-invested projects is often higher than locally-invested ones as the foreign prices not only have to include land lease fees for the whole life of the project, but also the land use fees buyers have to pay when changing the form of land use.
Investconsult has proposed foreign and Vietnamese property investors be allocated land according to other articles of the draft Land Law.
The manufacturing and distribution group of the Vietnam Business Forum that represents foreign-invested enterprises (FIEs) in Vietnam has also said the existing land compensation system is unrealistic and does not reflect real estate market value.
The group said that under the current rules, the deemed value of land use rights was the land rental and did not include compensation and clearance costs. This means that to have the land free of use, FIEs must pay twice: first for land rental and second for vacant possession of the land.
This makes the value of the land extremely high as compensation and clearance can be a costly exercise. Not only must compensation for the recovered land be paid for, but the assets erected on it, subsidies for living and production, damages to the occupants, costs relating to any job relocation caused by the clearance and other expenses incurred from the compensation and clearance process must be paid.
The group also said land compensation and clearance was very time consuming, leading to delay in the implementation of investment projects and sometimes the cause of losses to the State in terms of missed investment opportunities.
While the Foreign Investment Law introduced positive changes to land clearance and compensation issues (the responsibility of land compensation and clearance is imposed on the Vietnamese party if the land use rights are contributed by it) obstacles still exist.
The groups said it was frequently the case that the Vietnamese party to a FIE did not have sufficient funds to pay these costs and in practice, the responsibility to provide financing for this falls on the FIE, both in the case that the FIE leases land directly or that land use rights are contributed by the Vietnamese party.