Allow investors to be paid with land funds.

(Baonghean) - A reporter from Baonghean Newspaper had a conversation with Mr. Tran Duc Thang, Director of the Department of Public Assets Management (Ministry of Finance), about this issue.

Public-Private Partnership (BT) investment is one of the country's major economic policies in the current period. However, attracting individual investors to participate in projects safely and effectively requires significant support from the policy-making bodies. To diversify the attraction of resources for investment in infrastructure projects, hospitals, schools, etc., serving socio-economic development, the Government issued Decree No. 15/2015/ND-CP on the mechanism of payment using land funds, abolishing the previous regulation of paying BT contracts with money.

PV:Sir, under the mechanism where the State compensates investors with land funds when implementing construction investment projects in the build-transfer (BT) form, determining the value of land use fees and land lease fees used to be very difficult, wasn't it?

Mr. Tran Duc Thang:It is true that Decision No. 23/2015/QD-TTg, which stipulates the mechanism for the State to pay investors with land funds when implementing BT (Build-Transfer) investment projects, has resolved the difficulties for investment projects under this form. First and foremost, it has resolved the difficulties in determining the value of land use fees and land lease fees for the land used for payment. According to land finance policy regulations, the determination of land use fees or land lease fees for the land used for payment can only be done when the State has a decision to allocate or lease the land. In reality, at the time of signing the BT contract, most of the land used for payment had not yet received a decision on land allocation or lease. Therefore, determining the value of the land used for payment at the time of signing the BT contract lacked a legal basis.

In Decision No. 23/2015/QD-TTg, the Government stipulated that the land fund for payment includes: Land identified in land use planning and plans approved by competent State agencies for economic development purposes in accordance with land law; and land of existing buildings and land at the old location used to pay for BT projects to invest in the construction of works at the new location. Accordingly, Decision No. 23/2015/QD-TTg stipulated the procedures for land that has not yet been cleared and land of existing buildings and land at the old location, so that local authorities and investors have a basis to carry out the necessary work before the land is allocated, corresponding to each type of land fund for payment as stipulated in land law.

These regulations aim to expedite the process of allocating land funds for payment to investors as stipulated in land law. Once the land fund has been cleared and meets the conditions for land allocation or lease as prescribed by land law, Decision No. 23/2015/QD-TTg stipulates that the value of the land fund for payment is the land use fee or land lease fee determined at the time of the decision to allocate or lease the land as prescribed by land law, serving as the basis for offsetting against the value of the BT project.

PV:What about the issues regarding the timing of payments for BT contracts, sir?

Mr. Tran Duc Thang:In practice, previous policies stipulated that payment would be made after the BT project was completed. This regulation is not entirely suitable for cases where payment is made using land funds. Firstly, from the investor's perspective, although they have invested capital for a period of time to implement the BT contract, they still have to spend a lot of time carrying out the procedures and processes stipulated by land law to obtain: land allocation, land lease, determination of land use fees, land lease fees for the land fund used for payment, recognition of completion of financial obligations, etc. Only after completing this process can the investor exercise their rights as a user of the land fund used for payment. Secondly, from the State's perspective, there have been cases where the land fund for payment has been arranged, the investor has accepted the land, and interest on the borrowed capital for the BT project will not be charged from the date of land handover until the project is completed; however, the parties have failed to implement the agreement.

The administrative area of ​​the newly constructed Nghe An Friendship General Hospital has recently been renovated. Photo: Xuan Nhuong.

Decision No. 23/2015/QD-TTg stipulates that the payment time for BT projects using land funds is the time when the Provincial People's Committee issues a decision to allocate or lease land to the investor. The issuance of the land allocation or lease decision is implemented simultaneously with or after the completion of the BT project, as stipulated in Clause 3, Article 43 of Government Decree No. 15/2015/ND-CP dated February 14, 2015, on investment in the form of public-private partnerships.

Furthermore, to ensure a balance of interests between the State and investors, Decision No. 23/2015/QD-TTg also stipulates the termination of interest payments in the financial plan of BT contracts from the date the investor receives the decision on land allocation or land lease from the State; it also stipulates the issuance of land use right certificates to investors in accordance with land law for the land area of ​​the land fund used for payment corresponding to the value of the BT project completed according to the schedule determined by the competent State agency in accordance with the law on investment and construction, and the completed financial obligations of the difference in value that the investor has paid in case the value of the land fund used for payment is greater than the value of the BT project.

PV:Regarding the issues arising from using existing buildings and land as land for payment under BT (Build-Transfer) contracts for the construction of projects at new locations, how will these be resolved, sir?

Mr. Tran Duc Thang: In reality, there have been several cases recently proposing the implementation of BT contracts using the method where the investor invests capital to build the project at a new location according to the plan, hands it over to the State, and requests to be paid with the value of the land and buildings at the old location. This is a flexible and effective method that significantly reduces the pressure of investment spending from the State budget. However, in practice, implementation is facing obstacles with land law regulations such as: the old location lacks a land use plan, and there is no land allocation decision from a competent State agency, which serves as a basis for determining the value of the land fund for payment... Therefore, before implementation, ministries, sectors, and localities must report to the Prime Minister for guidance on each specific case.

Decree No. 15/2015/ND-CP stipulates that projects implemented by investors to recover investment capital for infrastructure projects can be carried out simultaneously with or after the completion of the infrastructure project, as agreed in the project contract. This regulation has somewhat resolved the aforementioned difficulties regarding the payment timing. Furthermore, Decision No. 23/2015/QD-TTg clearly defines the determination of the value of the land fund for payment for existing buildings and land at the old location, such as the value of land use rights, assets on the land, etc.

Given the current limited state budget and the practical difficulties in paying for BT projects with land funds in the past, the Prime Minister's decision to allow the implementation of the above regulation from August 15, 2015, is an urgent and effective solution to promote the development of investment projects under the build-transfer contract model.

PV: Thank you very much, sir.

Red River