Accessing capital for developing Vietnam’s infrastructure currently requires mobilisation from various capital resources, of which capital resource from land is a long term solution. However, land price management is still overlapping and unclear, making it difficult to mobilise capital from this resource.
Monopoly leads to abuse of power
For years, capital for infrastructure has come mainly from 4 resources: ODA loans (approximately 30-40 percent); from the State such as State Budget, government bond, commercial banks loans (also about 30-40 percent); from users and private sector (6 percent). It is forecast that in the future, the capital from ODA will hardly increase. Non-refundable aid and most preferential forms of funding will become increasingly difficult to find.
Budget for infrastructure investment in 2012 and in following years meets only 46 percent of construction demand. Therefore, among every areas of infrastructure, land is considered a long term financial resource to replace ODA.
According to Dr Pham Sy Liem, Director of Institute for Urban Research and Infrastructure Development, in the land market of Vietnam the Government is the supplier. Land prices are defined by provinces, cities directly under the Centre and announced at the beginning of the year, based on price frame regulated by the Government plus costs.
“Because the Government is the only supplier, this is a monopoly market, which has led to abuse of power. In many projects, land prices are 3 times more than required by the Government,” Dr Pham Sy Liem said. It is one of the reasons why land prices have strongly increased although Vietnam has been applying the market economy.
No solution found yet
In order to break the vicious cycle of land prices between the two levels of interdependence, Dr Pham Sy Liem said that the view of land acquisition policy must be changed, by regarding people whose land is acquired not as victims, but as people that contribute land to development projects, as well as provide capital to invest in those projects.
Dr Pham Sy Liem also said that policies should be more practical, localities must have concrete plans, helping to keep down the cost of ground clearance when implementing investment projects.
In contrast to Dr Liem’s view, Dr Nguyen The Chinh, Deputy Director of Institute of Strategy and Policy on Natural Resources and Environment (Ministry of Natural Resources and Environment) said that land is a good so it must be exchanged in the market. Therefore, taxed land price must be close to exchange price in the market. In fact, the current price frame is no longer suitable, the market is unstable, depending greatly on psychological factors; therefore, prices at 70 percent of average market prices are proper. According to Mr Chinh, it is necessary to change regulations on land tax, instead of average rate, land tax must be calculated applying progressive measures for non-agricultural land, especially land in urban areas, to limit speculation and increase State budget income and strongly develop a land fund to re-invest for infrastructure investment.
According to Dr Vu Sy Cuong, Financial Policies Consultative Group, there should be studies and policy reports on exchanging land for infrastructure to create suitable solutions. However, Mr Pham The Minh, Vice Chairman, General Secretary of the Federation of Civil Engineering Association, said that this solution should not be applied because if land price is not precisely estimated, investors will easily take advantage to make profit, many works’ planned environment has been broken. “The mechanism of exchanging land for infrastructure has been abolished since 2003, and it should not be re-applied,” Mr Minh emphasized.
Hai Ly
Vietnamese
