Problems relating to Trade and Investment on Vietnam

21. Restrictions on land ownership
Issue	Issue details	Requests	Reference

(1) Land Ownership not authorised to FFEs	- Landownership is not authorised to wholly foreign owned enterprises. (Vietnam, being a Communist State, does not authorise such ownership to its own people). - Land ownership right with unlimited term is not authorised in Vietnam for 100% foreign owned enterprises.	- It is requested that GOV authorised FFEs landownership to FFEs for the sake of their stable operation. - For the sake of stable business operation, it is requested that GOV takes step to amend the law, enabling 100% foreign ownership.	- Circular No.94/2011/TT-BTC
	(Action) - Foreign entities continue to be denied land use rights in Vietnam. However, the Government extended land use rights to business establishments of the foreign investors in Vietnam in the form of FIE's. FIE's are entitled to mortgage the value of land use right with Vietnamese local banks or foreign bank branches. The General Department of Land Administration drafted a revised Ordinance on the Rights & Obligations of Foreign Individuals and Organizations Leasing Land in Vietnam and submitted it to the Prime Minister in 2002. The draft included transferal, increasing land lease periods, and providing for leasing land from private individuals. - In November VNA passed the New Land Law effective 1 July 2004. Under the New Land Law, FIEs established under Foreign Investment Law are authorised to lease the Land Use Rights (LURs). An FIE leasing the land and making a lump sum payment for the entire lease period is authorised to: (1) transfer or sub-lease during the lease period the LURs or the assets, which belongs to the land; (2) put up during the lease period as mortgages or collaterals LURs and the assets to credit institutions; and (3) use as capital investment in kind LURs and the assets during the lease period. On the other hand, land users paying the lease fees on annual installments are authorised to transfer, sell or submit as collaterals only the assets, provided however that, most land users of foreign nationals are not able to enjoy much of the benefit by the change of the Law. To enjoy the benefit, foreign investors are forced to purchase the land in effect. To many foreign investors, this is not a feasible proposition since the huge amount of the upfront capital outlay is required just to lease the land. Thus, most foreign investors choose the annual installment system. It is especially burdensome for investors considering investment in the housing assets sector, forcing them even to scrap the plan. Moreover, this change in Law presents a difficult problem to land users of foreign nationality desiring to mortgage the LURs of having to pay in lump sum in advance, the entire sum of the land lease fees. Suppose many of the foreign land users do not pay in advance the lease fees for the entire lease period, or are incapable of doing so, to many foreign land users, the LURs themselves are beyond their reach, even if they could use mortgage the land property. - On 29 November 2013, National Assembly approved the Land Reform Law Bill, which entered into force from 1 July 2014. Foreign investing enterprises making investment relative to land property or using fixed assets have no alternative but to acquire the land utility right from GOV.
	(Improvement) - Ministry of Natural Resources and Environment (MONRE) on 19 November 2007 promulgated Directive No. 02/2008/CT-BTNMT (Directive 02) to promote implementation of the Land Law No. 13/2003/QH11 (2003 amendment). Directive 02 provides for various measures to accelerate implementation of the Land Law by the authority in each Province. More precisely it lays down expansion of laws, promotion and execution of educational edification programmes, organisational, administrative improvements for agencies and measures related to implementation of the Land Law. Three Directives have already been promulgated on implementation of the Land Law, namely, Directive No. 05/2004/CT-TTg of 9 February 2004 by the Prime Minister "On the implementation of the 2003 the Land Law", Directive No. 05/2006/CT-TTg of 22 February 2006 "On remedying weaknesses and violations in and further accelerating the implementation of the Land Law", and Directive No. 09/2007/CT-TTg of April 6, 2007, "On enhancing the management of land use under planning and investment projects". - On 1 January 2007, the Law on Real Estate Businesses No. 63/2006/QH11 (Law 63) was enforced. Domestic enterprises and FIEs are permitted to conduct real estate businesses specified in the following under Law 63: 1) Investment in construction of houses and buildings for sale, lent, loan or sale under installment payment; 2) Leasing land property after investing into improvement of land property and preparation of infrastructure; 3) Real estate ("RE") brokerage service 4) RE appraisal service 5) Management & operation of RE trading floors 6) RE consulting service 7) RE auction service 8) RE advertising service 9) RE management service - Under Law No. 63/2006/QH11 of June 29, 2006 on Real Estate Business, enforced on 1 January 2007, Vietnamese individuals and business establishments are permitted to conduct all types of real estate business activities. Individuals and business establishments engaged in real estate business activities (real estate business and real estate related service) are required to satisfy the specified conditions and business registration requirements. Individuals engaged in appraisal and brokerage (including staff members of real estate businesses) must have special business licence issued by the People's Committee of the Province. One of the important issues incorporated into the Law on Real Estate is its transferability of new urban zone project, housing zone project, and industrial zone project. Law 63 requires as a general principle the observance of the followings: (1) Approval by the competent national authority; (2) The investor, being transferee, must satisfy the conditions as organisation or individual to conduct real estate businesses and must undertake to fully fulfill its responsibility as transferee; (3) Transfer must be made by written contract. However, substantive provisions concerning the transfer of these projects have not yet been disclosed.

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