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Currently, to find access to land, businesses have to spend a
large sum to buy the LURs on a negotiated price, arrange their
own compensation for clearance, and yet at the same time they
have to follow the whole procedure as if applying for land
allocation from the State. The average time needed for this
procedure usually spans from 18 months to two years, and can
cost 5-6 times as much as the official costs, as well as
multiple times the official value of the land as determined by
the State. These costs include LURs purchase (transfer cost),
compensation for crops and other establishments on the land,
assistance in vocational training for agricultural workers whose
land is being transferred, contributions to the local community
(nearly the amount paid to land occupants), payment of transfer
tax, land-use-conversion tax, and sales tax equivalent to 1% of
the land value. That does not include costs for “oiling the
machine” and opportunity costs for the business' time and
efforts. It is ironic that after the whole procedure and all
these costs, what businesses get in the end is the land and the
“red book” that reads “land leased from the state, rent paid
annually”. So the whole outlay of money to “buy” the LURs, to
compensate occupants, to prepare the ground and install
necessary infrastructure, and so on, still does not entitle the
holder to the land as a business' asset and can not be used as
collateral to obtain financing from the bank.
Mr. Vu Duy Thai, Chairman
of Hanoi Trade and Industry Association
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It stands to reason that there is a close relationship between
the perception of security of land rights and the level of
investment in business facilities and land improvements. Viet
Nam is among only a handful of countries (e.g. China, Tanzania)
that have not permitted a significant amount of land ownership
or ownership-equivalent rights in the commercial sector to
co-exist alongside the state land sector. The IFC-FIAS survey
suggests that leases, both state and secondary market, are
perceived as more insecure than other forms of tenure and that
among SMEs holders of rights of long term land use are more
likely to invest more in land improvements than holders of
leases. This finding may reflect as much the issue of lease
durations as the security of the right. But as Vietnam is
developing one of the small number of leasehold land economies
in the world today, clarification and assurances of protection
of the rights of lessees in both the primary and secondary
markets should be a priority. Moreover, creation of a larger and
more dynamic secondary market in land rights, which might entail
creation of more ownership-equivalent rights of long term use
for the commercial sector, or at least longer term leases which
are freely transferable and have clearly defined and guaranteed
rights of renewal, may have beneficial affects on levels of
investment.
Mr. Steve Butler, IFC-FIAS consultant on land
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The new government decree 3 has made certain efforts
to establish equal access to land and land rights for both
domestic and foreign enterprises. Currently, domestic
enterprises leasing land (with annual rent payments) cannot use
that piece of land as collateral to apply for a bank loan,
partly because the State has yet to install a mechanism limiting
the risk that banks may bear in case the firm goes bankrupt. In
other countries, loans based on the collateral of future
properties are popular. Long-term leased land (even on
annual-rent-payment terms) and attached properties can be used
as collateral for commercial loans. The current Project of the
Ministry of Natural Resources and Environment on finalizing and
modernizing the land management system, which is now prepared to
debut its first stage in nine provinces, will allow enterprises
and individuals to access a database of land registrations (at
the level of land plot and land use history) to facilitate
citizen and enterprise access to capital, while exercising
land-related rights.
Mr. Do Duc Doi, Deputy Director
of Land Registration and Statistics Department, Ministry of
Natural Resources and Environment
(3) Decree on supplement regulations
on issuance of LURs certificates, land recall, exercise of LURs,
compensation procedures for land clearance, occupant resettlement
upon the state's recall of land, and procedures for land-related
claim settlement (draft).
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