Looking closely, for the past five to seven months, government agencies and the public alike have been discussing, commenting on, and holding seminars on amending the Land Law. The main issue is the bottlenecks in daily life caused by the shortcomings of the current land law. Looking further back, from 2016 to 2020, the Prime Minister has requested amendments to the Land Law four times.
The first amendment was to serve the development of large-scale, high-tech agricultural economy (2016). The second amendment was to create a legal framework for the development of the tourism real estate segment (2018). The third amendment was to remove legal obstacles in the approval of residential real estate projects (2020). The fourth amendment was to prevent security risks when many foreign investors hold land with strategic defense advantages (2020).
It wasn't until June 16, 2022, when the 13th Central Committee of the Communist Party of Vietnam adopted Resolution 18-NQ/TW at its 5th Conference on "continuing to innovate and improve institutions and policies, enhancing the effectiveness and efficiency of land management and use, creating momentum to make Vietnam a high-income developed country," that the amendment of the Land Law was considered a crucial political initiative, further strengthening the development steps to bring the country to a high-income level.
Looking back at land laws throughout the period from the country's reform to the present, it is clear that the guiding principle has been to treat land resources as an input market for the economy. The 1987 Land Law had a purely centrally planned economy structure, which is not surprising since the market economy was only officially adopted at the 7th Party Congress in 1991.
After four years, the 1993 Land Law moved closer to a market mechanism by defining land prices as state-regulated and establishing a market for land use rights for households and individuals. After ten years, the 2003 Land Law fully embraced the market for land use rights for economic organizations, households, and individuals; and land prices regulated by the state must reflect market forces. The 2013 Land Law retains these provisions but frequently uses administrative tools to address the shortcomings of the market mechanism.
To date, it can be seen that legal regulations related to promoting the land use rights market remain only in written form, and have not been implemented in the rapidly changing daily life. This shortcoming has resulted in a context where land-related complaints consistently account for about 70% of all civil complaints, and the number of officials facing legal consequences is increasing.
Current land laws have two major shortcomings: firstly, land prices set by the State, while gradually increasing, are always significantly lower than market prices; and secondly, the process of land transfer is not linked to benefit sharing.
The first drawback stems from the existence of two land prices, while the law stipulates that state land prices must reflect market values. This drawback has remained unchanged for the past 20 years. The difference in value between the two land prices is the main cause of both complaints from people whose land is confiscated and benefits for investors who are allocated or leased land, linked to the authority of state officials. The difference between the two land prices can be seen as an indicator of the standard deviation of the land use rights market, the level of complaints from those whose land is confiscated, and the opportunity for corruption among authorized officials.
Therefore, the crucial step is to establish a State-mandated land price list that reflects market value. Market value is compiled from market prices in land transfer contracts. Due to the unreasonable regulations of the income tax on land transfer, people involved in land transfers still record land prices in contracts that are only equal to the State-mandated price to reduce taxes. By raising the land price list to closely reflect market prices and stipulating that income tax on land transfer is calculated only according to the list, those transferring land will record the actual land price in the contract. From there, we can gradually obtain a database of market land prices and calculate a land price list that reflects the market. When the land price list increases, the income tax on land transfer will increase, causing difficulties for people, and the State will reduce the tax rate to a more appropriate level.
The second drawback of the land transfer process from its current use to investment projects involves benefit-sharing. For a long time, the law has only focused on two transfer mechanisms: one is mandatory, based on land expropriation decisions, and the other is voluntary, based on market transactions between investors and current land users. The mandatory mechanism is always associated with complex complaints from the people. The voluntary mechanism, on the other hand, makes it difficult for investors to reach agreements with 100% of the current land users, making success almost impossible.
According to the Constitution, the State may reclaim land in cases of absolute necessity for national defense and security purposes; and for economic and social development in the national and public interest. Looking at this regulation, it is clear that in cases where investment projects are unprofitable, the mechanism of compulsory land reclamation by the State must be applied. What needs improvement is to revise the compensation, support, and resettlement plan to ensure fairness. Sensitive issues still arise in profitable investment projects where the investor's private interests are linked to national and public interests, as defined for each stage of development.
In essence, profitable investment projects must utilize a land transfer mechanism that includes both mandatory and voluntary elements. The mandatory element is the land transfer itself, while the voluntary element is social consensus, meaning agreement with the majority of the community currently using the land on a transfer plan that benefits all parties. Abroad, this is known as a social consensus land transfer mechanism.
Resolution 18-NQ/TW mentioned above addressed a series of issues related to resolving legal bottlenecks currently encountered in practice, as well as issues guiding the country's development. The resolution set the central task of "promoting the commercialization of land use rights".
Based on the experience of industrialized countries near Vietnam, to escape the middle-income trap and move towards high-income status, it is necessary to focus on building a high-quality workforce linked to high technology. To achieve this, significant capital is needed, which can be obtained by exploiting the potential capital in land through the process of land capitalization. We can imagine that land value increases significantly once an investment project is implemented on it; the remaining issue is how to collect and distribute that capital.
Vietnam can thrive by relying on market mechanisms, leveraging the strength of its people to enhance the value of its human resources, embracing technology, and standing on its own two feet by controlling the process of land capitalization.
Illustrative photo: Quang Dung – Thanh Cuong
