We are pleased to see that after three sessions, the revised Land Law was passed by the National Assembly on November 29.
The revisions address some of the points that we have raised overtime, but there remain issues which continue to be unresolved. As withall new laws, implementing decrees, circulars and regulations will besubsequently issued which will provide greater clarity on the intentionand objectives of the revision.
We set out below ourthoughts on the key changes affecting foreign investors based on thefinal draft of the Land Law which was debated prior to being passed asthe approved version is yet to be released.
The use of out of date definitions has been a longstanding issue withthe previous Land Law. As the other laws including the Law onInvestments have been revised and revamped over time, the previous LandLaw still maintained definitions which were increasingly confusing andled to inconsistencies in the implementation of the law.
We see for instance the use of unclear and overlapping definitions forforeign investors, domestic investors and joint ventures which has ledto inconsistent interpretation of the law. We have for a long timediscussed issues surrounding this with the drafters and were pleased tosee more precise terms and definitions used. In this regard, we werepleased with our engagement with the drafters and note that the majorityof the inaccurate definitions have been revised.
One of the issues that domestic and foreign investors alike strugglewith relates to land pricing. We have consistently raised the importanceof having clear and transparent procedures and processes for thedetermination of land prices. Many investors consider this to be themost important issue affecting real estate development today. Withoutclarity on land pricing, investors are unable to determine if a projectis economically feasible.
Whilst land prices are tobe determined according to market prices under the previous Land Law,the authorities had the right to re-determine the prices when thecalculated price is different from the land use right assignment pricesin normal market conditions. The implementation of this right wasproblematic as it led to unnecessary delays, while at the same timeincreasing the administrative burden on the authorities and createdregulatory uncertainty for investors.
The finaldraft of the revised Land Law provides that price lists shall be updatedevery five years and the right to re-determine prices can be exercisedonly if the market price changes by more than 20 percent. There are alsoclearer provisions on how land prices will be determined.
We are pleased to see efforts made to address this issue, which hasbeen a major source of difficulty faced by investors. We hope that thenew provisions will be implemented consistently and completely toachieve this objective.
Rights of foreign entities
There has been an improvement in the revised Land Law with regards toforeign entities obtaining land rights from the state. The revised LandLaw for the first time provides that land can be allocated to foreignentities which invest in residential housing projects for sale andlease. This is an important step towards removing procedural differencesbetween the rights of domestic and foreign investors which was notnecessary. It is a step in the right direction to level the playingfield between domestic and foreign investors with regards to landacquisition.
The impact of this provision will onlybecome evident when the provision is implemented. We are hopefulhowever, that this means that the differences between domestic andforeign entities are slowly being removed and it will result in moreefficient use of land.
The revised Land Law has alsoexpanded the circumstances whereby foreign investors will becompensated if the state recovers land from them. Under the previousLand Law, it was not clear if joint venture entities would becompensated. The revised Land Law now clearly states that compensationfor recovery of land leased with a one-off payment would be extended tojoint venture entities as well. This is a positive development anddemonstrates that there is no intention to discriminate against foreigninvestors in this regard.
Land recovery for socio-economic development
For a while now, there has been a lot of discussion about the right ofthe state to recover land. This is clearly a very emotive subject sinceit involves balancing the rights of various parties. This issue hasbeen debated quite extensively and many have expressed their views aboutthis issue.
The revised Land Law provides that landmay be recovered where such land recovery is for socio-economicdevelopment and in the national or public interest. The provisionfurther states that policies for investment projects under this form ofland recovery must be approved by Vietnam’s National Assembly, the primeminister or the provincial people’s councils.
Investment policies for projects of national importance must be approvedby the National Assembly. Investment policies for projects forconstruction of industrial zones, processing-export areas, hi-techzones, economic zones; new urban areas and projects funded by officialdevelopment assistance (ODA) must be approved by the prime minister.Investment policies for projects for construction of new urban areas,new rural residential areas; upgrading of urban areas, rural residentialareas; industrial clusters; concentrated areas for processing andproduction of agricultural, forest, aquatic products; projectsdeveloping protected forest land, specialised use forest land, etc. mustbe approved by provincial people’s councils.
It will beinteresting to see how these requirements will be implemented by theauthorities and to what extent it will affect the balance of preservingthe rights of all interested parties.
Although the revised Land Law does not address all the comments andopinions from various sources, there has been a healthy level of debateregarding issues of great importance. We will need to wait regulationsof the revised Land Law to fully understand how the new revisions willbe applied. The hope is that the implementing regulations will be clearand consistent in their language and objectives to avoid difficultiesfaced with the previous Land Law.-VNA
Revised land law offers better clarity to investors: expert have 934 words, post on en.vietnamplus.vn at 2013-12-10 06:48:16. This is cached page on Talk Vietnam. If you want remove this page, please contact us.