Vietnam’s Land Law evolution

After another decade of land takings and conflicts, the National Assembly of Vietnam has passed new amendments for its Land Law. The law’s performance not only affects the regional rule of law movement but also holds real fiscal weight.

Hanoi plans to invest heavily into the land-sensitive subject of its highspeed railway, metro and airport network. Experts have cast the new law as another reiteration of the ‘status quo’, which is the prioritisation of social stability. While correct in principle, it is crucial to understand that this ‘status quo’ — paradoxically — has not been static in application. Viewed through the lens of the country’s history, the new law is a shift in the pact between parties in the land–economy tug-of-war.

Vietnam’s private property market was born in a radically different socio-political environment. As the country opened its door after the Doi Moi policy, the primary objectives of the 1987 Land Law and its 1993 updates were poverty alleviation and boosting agricultural productivity through property rights reform. But as large segments of the population moved away from the agricultural sector and waves of foreign direct investment landed in Vietnam, the simple focus on rural land tenure became a tight coat for further development.

The 2003 Land Law put forward ‘socio-economic reasoning’ as a criterion for land takings, marking the start of the state leverage of ‘fiscal socialism’, where the state uses its discretion to convert land types for infrastructure and investment. While this model promotes radical economic growth, it is not without costs. Vast gaps between the regulatory and post-taking compensation prices have led to demonstrations.

Following the fallout of mass private takings, the 2013 Land Law tried to lay out specific purposes for land taking while leaving leeway for the 2003 model. To compensate, a flurry of policy experiments have taken place, from the requirement of commercial developments to retain 20 per cent of land for social housing to erratic compensation calculation values and on-site land swap for resettlement. The violent confrontation in Dong Tam in 2020 showed that land related grievances have not left the public agenda.

Vietnam’s history suggests that formal legal institutions generate economic growth, but it remains silent on addressing the social costs associated with this growth. The causal link between institutions and economic growth is a misunderstood and narrow relationship. Institutional development was not centred on the modern-day hyperfocus on formal property rights as the economic therapy for developing countries. More important has been the design of institutions — formal and informal — with local conditions in mind to circumvent vested interest.

With above goal neglected, the legislation debates again devolved into a deadlock. The executive advocated for the removal of the residual method for land valuation in order to eliminate private sector gains from land tax calculation inaccuracies, only to later backpedal. The private sector opposed the ban on using agricultural land for residential commercial developments, even as a severe oversupply of high-end housing disrupted the market.

In the end, the Vietnam 2024 Land Law does not reflect the triumph of statist will or market force. But the border of their sphere of influence has been redrawn to address the cost of high growth. From the state’s perspective, the impact of the 2023 real estate crash, stemming from regulatory tightening, has considerably challenged its role as the adjudicator of the land economy.

For the first time since its conception in 1993, the centralised price bracket has been abandoned, signalling a major step away from the Soviet-style bureaucratic mentality. An ambitious clarification of the state-managed land fund also aims to unify compensation for large land acquisitions and reduce disputes. Recognition of the state as the regulator of the land value surplus from development has been supported since the 2013 Land Law, yet it has never explicitly translated to policies. Proponents of the free market also need to reassess their strategy. The new law has gone beyond ‘market value’ to recognise the sociological concerns of post-taking displacement.

Land users now are to enjoy ‘residence and living standard equal or better than their former place of residence’ according to a new landmark resolution of the Communist Party of Vietnam. Since property value surplus arising from project development is a limited pool, developers need to prioritise stakeholders’ interests before those of shareholders. Investors are now required to negotiate with individual land users for commercial housing projects — a move construed by investors as the state skewing the scale of risk away from itself. But this has been a recognised practice in liberal markets, adopted by major players like Bill Gates and Disney Corp.

The dilemma for Vietnam’s bureaucrats, previously acting akin to land brokers, is whether they can be professional trustees of the people’s property. For the Vietnamese private sector, if they speak for the expansion of market principles, the dilemma hinges on whether they are willing to step outside of their corporatist dependency on state sponsorship.

Individual smallholders can kindle hope. The Party’s resolution on post-resettlement living standard stands as a solid legal precedent for better land compensation claims. But in negotiations for private land transfers, they would need to embrace the goods and ills of market fluctuation, where collective action is less visible when redirected against private entities, as seen in the Evergrande crisis in neighbouring China.

Phuc Hai Tran is Doctoral Candidate at the Faculty of Law, University of Toronto.

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