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Saturday, September 23, 2017

Revising the Land Law: creating equity for farmers

Updated: 09:54’ - 27/12/2010

The article focuses on legal issues which require attention during the revision of the 2003 Law on Land. The intention is to provide legal treatment of the farmers equitable to other land use right holders, thus ensuring their ability to increase incomes and welfare along the path of Vietnam toward an industrialized nation by 2020.

Pham Duy Nghia*

Over the two decades of reform, Vietnam already issued four Laws on Land in 1987, 1993, 1998 (revised) and 2003. To implement these land laws, a huge body of governmental decrees, ministerial circulars and administrative guidelines has been promulgated. As announced by the Government, the 2003 Law on Land will be revised possibly in the coming years 2011-2012.

This rapid change of the land law reflects the pressures of commercialization of land as Vietnam industrializes and urbanizes. In traditional Vietnam, private property rights in land exist, but legal protections are weak and unsystematic. French rulers introduced the modern land registration system, protecting private land. After the collapse of the colonial rule and during the war time this registration system was abandoned.  Following the unification of the country, land was nationalized. The 1980 Constitution of Vietnam declared that all land and natural resources belong to the “ownership of the entire Vietnamese people”.  In dismantling the central planning economy and Soviet cooperatives in agriculture, with the 1987 Law on Land, the State began to recognize the lease system, granting limited rights to use agricultural land to farmer households. The initial term of lease was confined to 20 years. Beginning with the 1993 Law on Land, the Vietnamese State extended the scope of land use rights granted to farmers and land use leased to foreign investors. It also recognized that land has a value and the State had the right to determine the value of land when it was converted for industrial or residential purposes. Subsequently, as amended in 1998, land use rights of domestic enterprises were provided with increased protection. Yet, with an eye to investment promotion, the State sought to keep the land price low, estimated only 10-30% of the market price of land (Dang Hung Vo, 2009).

The expansion of the market economy in Vietnam has significantly increased the value of land. Foreign and domestic investors and land users in urban areas demand certainty and protection for their land use right. In 2003, the Law on Land was substantially revised to cope with this requirement. The 2003 Law extended the scope of protected rights of land users, including the right to capitalize all interests associated with land (right to use land, right to transfer land use right, right to use land as collateral for loans, right to contribute land as capital in creating companies, etc.). Land use right leased to investors and granted to households for housing purpose, de facto, has become a strongly protected private property.

However, with regard to agricultural land, there are no essential changes under the 2003 Law. There is no clear stipulation whether the lease term of 20 years shall be extended or abolished. Farmers may exchange land, and transfer land, but they cannot decide to use land for other purposes. When agricultural land is converted for non-agricultural purposes, farmers are entitled only to compensation decided by the State.

As the economy has grown over the last two decades, the demand for land for industrial, residential, and other purposes has increased rapidly. Provincial governments often see the conversion of agricultural and forestry land as the only path to rapid development. Land recovery is based on administrative decisions with farmers excluded from participating in this process. Injustices result when compensation for recovered land does not adequately compensate farmers for their foregone income (wealth and security). Farmers can legitimately claim that they are bearing a disproportionate burden of the costs of Vietnam’s modernization. Meanwhile the profits may go to land developers and their supporting state officials, significantly worsening the distribution of income in the country. As a sign of this tension, the number of land disputes has increased dramatically over recent years. Compensation and clearing of land for investment projects has become increasingly contentious in the face of farmer resistance and demonstrations. Over the last five years, the number of claims and petitions on land disputes has been double, reaching 12,000 per annum (VDR 2010).

Evidence provided in the literature [IPSARD 2008, Dang Hung Vo 2009, FETP 2010] the 2003 Law on Land needs to be revised. The Government has made the commitment to do so: revising the Law on Land was on the legislative agenda of the National Assembly (Resolution 31/2009/QH12). During this process there is a strong need to create and protect the farmer’s rights to agricultural and forestry land (Dang Kim Son, IPSARD 2008). These requirements are essential if the Vietnamese Socialist State is to create justice in wealth distribution and to ensure social peace as it progresses along the path to a fully industrialized status.

The following brief suggests five areas in which the 2003 Law on Land could constructively be amended. These include protecting farmers’ property rights to land, strengthening due process in land recovery for investment projects, enhancing accountability and good governance in land management and providing support for commercialization of land.

Creating certainty for property right for farmers

Stronger protection of farmers’ land use rights will make it more difficult for the government to take land in the sense that land recovery will become more expensive. Though inconvenient for agencies seeking a low-cost means of promoting industrialization and urbanization, raising the tangible cost of land recovery improves social equity. It ensures that the burden of gains of development is more equitably apportioned among farmers, developers, and the various levels of government involved. 

As it is currently framed, the Law on Land overwhelmingly benefits domestic and foreign investors, benefits urban residents and is convenient to use by the bureaucrats. Domestic enterprises are already demanding treatment equal to that of foreign investors. Specifically, they are requesting the same methods for paying land rental in lump sum and the full right to capitalize the lease on land. Current leases for commercial projects are for periods up to 50 years; for housing and development projects, the lease term is in fact unlimited.

By contrast, Vietnamese farmers experience several disadvantages. They do not enjoy the above stated protection of their leased agricultural land and the lease term on cultivation land is formally limited only to 20 years. These disadvantages are evidence that farmers are not well organized and they have limited means of making public voice collectively. Moreover, since they are not represented in the law drafting process, their interests have not been significantly reflected in the Law on Land. To counteract this bias, we suggest that the constituted Law Drafting Board promote the treatment of farmers equitable to other land use right holders by considering:

- Formally abolishing the 20-year term for agricultural land, thus creating equality among all users of land, whether  foreign or domestic investors or farmers;

- Recognizing long-term land use right of the farmers in regard of granted land while the notion of “ownership of the entire people of land” remains unchanged;

- Recognizing all transfer and exchange of land which have been conducted under free will and open agreements among farmers and other acquirers;

- Ensuring equal treatment among users of residential land and agricultural land, equal treatment among urban land users and users in the countryside;

- Ensuring equal treatment of agricultural land users and foreign investors in regard of land use rights.

Ensuring the flexibility of use of agricultural land

As findings of another land policy analysis (Malcolm McPherson et al. 2010) indicate, farmers in Vietnam face multiple constraints in efficiently utilizing the land to which they have title. While foreign and domestic investors are free to commercialize their leased use right, Vietnamese farmers are prohibited from doing so. As an example, the Government continues to set an exceedingly low size limit on agricultural land for each individual farmer household. The 2003 Law still classifies agricultural land into different categories based on short- or long-term cultivated crops (annual crops: rice; perennial crops like fruit trees). Farmers are not allowed to change from annual crops to perennial crops and forest products. This rigid rule prevents farmers from using their land flexibly according to the incentives provided by changing market conditions.

We suggest that the constituted Drafting Board revising the 2003 Law on Land provide a more pragmatic approach thereby allowing the flexible use of agricultural land. Specific examples include:

-  Reconsidering the size limits for agricultural land, either by abolishing them or adjusting them to support the reasonable modernization of agriculture;

- Abolishing the conditions set for exchange of agricultural land, for example removing the requirement that acquirers of agricultural land have to be farmers;

- Paying attention to using tax as means of wealth distribution: should the  Government wish to  prevent increases in disparities in  wealth distribution, this policy would require the  introduction  of property tax for all land users, with suitable exemptions to lower administrative costs and avoid taxing the poorest/smallest land owners.

- Simplifying the current complicated categories of land use, thereby enabling farmers to decide freely the pattern of production guided by commercial incentives and market forces. 

Due process for land recovery

If the Law on Land is re-drafted primarily to facilitate industrial development, it will primarily reflect the Government’s objective of recovering and converting land to support industrialization. If the foreign and domestic business communities are better organized and have more options to influencing the  drafting process,  farmers’ interests will not be effectively considered, particularly in cases in which agricultural land is taken for development projects. Creating due process for land recovery and compensation is without doubt the most sensitive issue in revising the 2003 Law on Land.

Due process in land recovery that reflects all legitimate interests, including those of farmers, requires:

- Strict and limited use of land taking for public purposes.  In this respect, the Drafting Board should consider narrowing the scope of the term “public purpose” so that only pure sovereign acts are included like taking land for building of national roads, for construction of government buildings, for defense and security purposes.

- Providing strict procedures (due process) for land taking, such as requiring disclosure of public purpose, facilitating of hearing of related parties before the local councils or other people’s representative bodies. Only after passing this due process, may the authorized state agency begin the process of taking land.  The observance of due process will help minimize the number of land disputes.

- Just as important, due process should be required in all administrative acts that impinge on farmers’ rights to agricultural land. Any administrative decision which may restrict the farmer’s right has to be consulted with the farmer in advance. Moreover, farmers need to be informed of their rights to make claim or petition to challenge administrative decisions when necessary.

- All other land uses besides “public purpose” shall be deemed as commercial or business purpose in accordance with the business definition by the 2005 Law on Enterprises. Using land for business purpose include such activities as: the conversion of land to residential land, conversion of land to industrial use, taking land for building of entertainment and for-profit services like medical care and education. In these cases, the state agency has no right to decide on taking of land. The acquirer has to buy the land use right from the farmers. In other words, conversion of land for all other development purposes (either for housing projects or building of hospitals, high schools or private universities) needs to be defined as commercial. Consequently, the farmers shall have in these commercial projects more rights to negotiate on conversion and compensation. Or, if they do not wish to sell, they may use their land to acquire equity in the commercial activity.

Enhancing land management

As indicated by Vietnam Development Report 2010 and World Governance Indicators (WGI), the accountability of the state apparatus in Vietnam has significant deficiencies.  As power is increasingly devolved from the central government to 63 provinces and 17 large state “conglomerates” (corporations), there is an urgent need to strengthen law enforcement and administrative discipline. Furthermore, since land is a scarce and valuable resource, preventing corruption in its allocation and inefficiency in its use needs to become a top national priority.   Enhancing accountability of the state authorities relating to land requires at least the participation of citizens, civil society and the media in the process of policy making, implementation, and enforcement.  In particular, it requires the effective supervision by the legislature and judiciary over administrative activities. While most of these issues go beyond the scope of potential revisions to the 2003 Law on Land, appropriate reforms can be achieved through very small steps.  Some examples include:

- Facilitating farmers participation in the formation of land use policy, i.e., disclosure of policy proposals and clarification of policy aims; facilitating policy impact assessments; undertaking  hearings in people’s representative bodies (provincial- and district-level people’s councils) in projects relating to land conversion; strengthening existing institutions like the Fatherland Front and VUSTA, and Vietnam Farmers Association in exercising oversight of administrative authorities;

- Implementing Resolution No. 49 of the CPV Political Bureau on Judicial Reform. This relates to strengthening the organizational and professional capacity of regional administrative courts to handle claims of farmers against administrative acts at the provincial level (creation of regional administrative courts is very important to keep these courts independent from provincial governments).

- Promoting access to justice through the provision of legal aid and consultancy to support farmers in litigation. This would involve providing funds to support legal counseling for farmers submitting their claims to the courts and representing their interests in litigation, publishing all court decisions dealing with land use right disputes, and allowing the mass media to report the court decisions to the public.

- Supporting farmers to associate freely, particularly to seek reasonable means to help them make public their voice collectively. In negotiating for compensation, for example, farmers need numerous institutions to act collectively. This may be a free association allowed by law.

Providing public services supporting commercialization of land

As the transformation and modernization of Vietnam proceeds, the role of the State in land management has been changing. From its initial role as a distributor of land and provider of public services that require large amounts of land (health, education, infrastructure, administration), the State is now moving to a more mature role. This will require that the State shift from short-term decisions (leases, conversion, land price, etc.) to that of a regulator and market facilitator. This pattern of regulation should be implemented by providing a broad legal framework for land use, national land use planning and land taxation, among other activities. None of these should involve direct intervention that grants or transfers land use rights to investors. This change will move the State’s role to that of an impartial broker in facilitating economic growth and social development, removing it from direct involvement as an interested party in the recovery, conversion, and allocation of land. This broad perspective should be adopted as the Drafting Board revises the 2003 Law on Land. Particular legal issues that will support the transformation of the role of the State include:

- Clarification of land use rights in SOEs, state-owned farms and existing state-owned agricultural cooperatives.  This should involve the conversion of previously allocated land to long-term leases to create equal treatment among all land users;

- Equitization of SOE and other state-owned farms, in which land use rights are considered part of the business’s assets. This will significantly narrow the scope for state intervention in land transactions.

- Building a national registration system of land use rights derived from the land records of provincial agencies. This registration system is a prerequisite for introducing the property tax.

- Reforming the registration system currently based on the name of the land user into the registration based on individual land parcel. The registration should include all obligations and rights registered relating to that piece of land (mortgage, securities, neighbor rights, building, and other restrictions in regard of construction or use of land).

- Reducing the financial burden for the registration of land use rights. The State may require an insignificant fee for registration, but this would not be a basis of revenue generation.

- Drafting and issuing regulations to provide information from land registration to the public. The aim of land registration is not to issue the “land use right certificate”, but to provide reliable information relating to land that is open to public access.

Concluding Comments

The key policy issues for developing agriculture, promoting rural development and providing farmers with access to land are well recognized and understood by the Vietnamese Party and State. Yet, the existing Law on Land generally protects business investors and grants provincial people committees with wide-ranging discretion to convert agricultural and forestry land for development purposes. These biases will have to change if farmers and rural residents are to be treated justly and equitably under the law. Indeed, if the Government is to achieve its socio-economic objectives of growth, poverty reduction, and social harmony as a means of achieving industrialized status by 2020, the Land Law and its implementation will need to be fundamentally restructured. Key changes are the need to recognize and to protect legitimate property rights of the farmers in regard of their leased land. Administrative acts which constrain the free utilization of farmer’s rights should be limited and the enforcement of those acts be strictly supervised. These changes in the law will help boost agricultural production and exports by encouraging agricultural investment and the most efficient use of Vietnam’s limited source of productive land. They will also prevent land recovery processes from exacerbating rural poverty. And, by enabling farmers to participate in the conversion of land they will enhance social harmony and help prevent the exaggerated accumulation of wealth that accompanies such conversion.-

References

1. Dang Hung Vo, What do we need to amend in the 2003 Law on Land, Legislative Studies, Issue 11 (148) June 2009 pp 32-40;

2. Dang Kim Son, IPSARD 2008, Farmers, Rural Development and Agriculture, unpublished conference papers, co-organized with Tia Sang, July 2008;

3. Nông dân, Nông thôn và Nông nghiệp: Những vấn đề đang đặt ra, NXB Tri Thuc 2008;

4. Government Decrees, Circulars and Guidelines to implement the 2003 Law on Land (CD Room published and distributed by the Ministry of Natural Resources and Environment) 2008;

5. Laws on Land 1987, 1993, 1998, 2003;

6. Vietnam Development Report 2010: Modern Institution;

7. World Governance Indicators (WGI) 2009.-



* Prof. Dr. Fulbright Economics Teaching Program at HCM University of Economics, nghiapd@ueh.edu.vn

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