GVN TACKLES LAND ISSUES

UNCLAS SECTION 01 OF 04 HANOI 000885

SIPDIS

STATE FOR EAP/BCLTV

E.O. 12958: N/A
TAGS: PGOV EFIN ECON SENV SOCI VM ETMIN
SUBJECT: GVN TACKLES LAND ISSUES

Reftels: A) 04 Hanoi 2594, B) HCMC 307, C) 04 HCMC 1173


1. (U) Summary: Vietnam's rapid economic development and the
flow of migrants from the crowded and poor Mekong Delta, Red
River Delta and Northwest Highlands into urban centers and
the Central Highlands have contributed to considerable
tension over land issues. While allocation of title to
agricultural land improved the lot of Vietnam's small
farmers during the 1990s, peasants are now being displaced
by rapid urban growth in Vietnam's two crowded deltas. In
response, there have been regular protests in front of
government buildings with farmers complaining about
insufficient compensation for their land and, on occasion,
clashing with authorities attempting to resettle them.
Rapidly rising real estate prices in urban areas are linked
with official corruption. In-migration and disparate rates
of economic development have produced tensions over land in
the Central Highlands, where inflows of migrants have led to
tensions with indigenous ethnic minorities. Vietnam
recently introduced a new legal regime to cover land issues,
but the new law's ability to significantly curb corruption,
abuses and complaints remains in doubt. End Summary.

The New Land Law
--------------


2. (U) The basic provisions of land rights in Vietnam are
set out in the Land Law of 2003, which came into effect on
July 1, 2004, and its nine implementing decrees, only five
of which have been released to date. Under the law, all
land is officially under the ownership of the State, but
long-term land use rights (a.k.a. land leases or land use
certificates) represent a legal alternative to ownership and
can be acquired for varying lengths of time depending on the
type of use and leaseholder. Leases are set at twenty years
for agricultural land held by an individual, fifty years for
forestry land held by an individual, fifty years for land
held by an "economic organization" (including licensed
foreign investors),and up to seventy years for investors in
projects with "large capital investment but slow capital
recovery," or areas under "difficult socio-economic
conditions." "Foreign organizations and individuals" can
apply for a land lease "for the execution of an investment
project in Vietnam." If granted, such leases are for fifty
years, or seventy years for large projects or those in
underdeveloped areas. Land lease rights for residential
land and in urban areas are indefinite.


3. (U) Upon expiry, leaseholders can apply for the renewal
of their leases if the land user has "demand for continued
use thereof," and can show that "the use of land is in line
with approved land use planning." The issue of renewal will
be faced when the first round of agricultural leases begins
to expire in about ten years. Leases can also be bought and
sold. Adding additional levels of complexity, ownership of
buildings is generally separate from ownership of the land
they stand on. In newer developments, land and buildings
generally have unified title, but in urban centers shops and
houses are frequently developed on land held by state owned
enterprises, ministries, or other government bodies.
Further, all Vietnamese have residence cards linking them to
a certain province or city. Lack of residency bars them
from purchasing land or buildings, as well as from using
many public services, including public schools. Many
personal residences are guaranteed only by a contract
between the migrant purchaser and the residency-holding
landowner, under whose name the property officially remains
registered. The enforceability of these contracts has not
been extensively tested.


4. (U) The transfer of land from State to private hands has
been relatively rapid in the countryside, but much slower in
urban areas. As of the end of 2003, 90 percent of
agricultural land had land leases issued for it, effectively
meaning it had been transferred from State to private
ownership. Only 25 percent of forest land, which is home to
many ethnic minority groups, had leases issued. In urban
areas, 20 percent of industrial land and 15 percent of
residential land had land leases issued. A Swedish
development expert explained that the GVN prioritized the
creation of land leases for agricultural land during the
1990s as a way to reduce poverty in the countryside. The
complexities of land and property control, the skyrocketing
value of land for the State-owned enterprises (SOEs) or
other State bodies that currently hold it, and the desire to
avoid paying taxes have contributed to slowing this process
in developed areas.

5. (U) Under the Land Law and the 2004 Decree on
Compensation, Support and Resettlement when Land is
Recovered by the State, authorities can and do exert eminent
domain to recover land for use in infrastructure development
and economic development, including the creation of
industrial parks, economic zones, and "large investment
projects." Authorities compensate people displaced either
with an equivalent amount of land zoned for the same use, or
financially. However authorities generally set a single
rate of compensation for all land in a province zoned for a
certain use, which creates problems. For example, in 2004,
business owners whose shops and land had been seized to
widen a main road in Da Nang complained that their
compensation did not account for the higher value of street
front property. Article 56 of the Land Law stipulates that
when the State does set land prices "they are close to the
actual prices of land use rights transfer under normal
market conditions." The law does not set forth how such
normal market rates are to be determined, however.

Urban Sprawl Leads to Tensions
--------------


6. (U) While the right to lease holding has not been
particularly contentious, acquiring, rezoning and developing
land has led to significant conflict. Vietnam's major urban
areas are in the midst of a development boom. Greater Ho
Chi Minh City is surrounded by a rapidly expanding sprawl of
housing and light industry, and Hanoi has plans to more than
double the amount of land allocated for new housing and
industrial zones by 2010. Large sections of western Hanoi
are a forest of half-completed housing blocks and cranes,
and middle-class Hanoians compare house prices with a fervor
that matches that of their Washingtonian counterparts.
Speculators often buy and sell apartments in high-rises
numerous times before construction is completed, and prices
are extremely high, particularly in comparison to the
nominal earning power of most urban Vietnamese. Selling
space in yet-to-be-constructed buildings is theoretically
illegal in Vietnam, but individuals often pay a "reservation
fee" equal to the cost of an apartment that allows them to
be allocated one in the new building for free.


7. (U) The rapid growth of urban areas has created
considerable friction between developers and municipal
government on one side, and displaced landholders on the
other. Those displaced, usually small farmers, frequently
complain that they are being compensated at far less than a
true market rate. They are generally compensated for land
seized by the State at the agricultural rate, while the land
is then rezoned to the far more valuable rates for
residential or commercial land. Much of the windfall in
profit between the two rates is generally thought to be
returned in kickbacks to the government officials involved
in approving the development. Some Ho Chi Minh City
developers suggest that the profits of this corruption is
then plowed back into land speculation, contributing further
to price hikes (Ho Chi Minh City's experience with land
development is reported septel from ConGen Ho Chi Minh
City).


8. (U) Small protests of peasants pushed off their land by
expanding cities are a regular feature in front of the
National Assembly building and other government offices in
Hanoi. Tensions have at times resulted in violence; in
January 2005, villagers in Ha Tay Province sacked and burned
a government office building when police tried to clear them
off land for which they did not think they had been
adequately compensated. Similarly, in December 2004,
peasants in an outlying district of Hanoi threw Molotov
cocktails at police who were trying to clear them off land a
Thai company was planning to develop into a golf course.
Unrest connected to land issues in undeveloped rural areas,
such as the large-scale protests in Thai Binh Province in
1997, occurred in the past but has been diminished by the
GVN's efforts to accelerate the issuance of leases for
agricultural land.


9. (U) The Government has made some moves to address this
problem. One of the most significant changes in the 2003
Land Law is that private developers must come to an
agreement directly with landholders when acquiring land for
commercial development. This theoretically includes both
Vietnamese and foreign landowners, but Dr. Nguyen Quang
Tuyen of the Faculty of Economic Laws at Hanoi Law College
told Poloff that he knew of no cases in which a foreign
developer had acquired land other than by using the state as
an intermediary. Hanoi and Ho Chi Minh City have
experimented with market-based measures, such as public
auctions, when allocating public land for private
development. Prior to the passage of the 2003 law, the
State acquired all land from holders and then reallocated it
to developers. Authorities have also talked of requiring
developers to provide funds for skills retraining for
displaced peasants.


10. (U) Dr. Tuyen claimed the rates of compensation for land
used in State projects have been raised to more closely
align with market rates. Nonetheless they still fall short
of market values. "Peasants must make sacrifices for the
development of the nation," Tuyen explained. He also
alleged that small farmers have unrealistic notions as to
the true value of their land. Dao Trung Chinh, Deputy
Director of the Department of Land at the Ministry of
Natural Resources and the Environment argued that many of
the areas of tension have to do with land reallocated before
the new, and more equitable, provisions of the 2003 Land Law
came into effect. "There have been no protests" about land
leases reassigned since then, Chinh claimed.

The Other Type of Rent Seeking
--------------


11. (U) With the large amount of money connected to land
leases in Vietnam's booming cities, rent-seeking behavior is
rampant. In May 2004, for example, the Hanoi People's
Committee passed a regulation requiring investors to hand
over "free of charge" 20 percent of the square footage of
apartment blocks to the city for allocation to the city's
Department of Natural Resources, Environment, Land and
Housing. This is to be put into the city's "land fund" for
allocation to the poor, displaced, or individuals who have
contributed to the State (in practice, mostly
revolutionaries) as the city sees fit. Developers must also
allocate 50 percent of high rises and 25 percent of housing
development to be sold by the city to "target buyers" at pre-
set prices, though the developers gain the proceeds from the
sale.


12. (U) Personal and political connections are widely
rumored to be key in obtaining the right to purchase one of
these apartments, many of which are immediately "flipped,"
or resold to other buyers at a handsome profit. In one
instance, according to news reports the Chairman of the
Hanoi People's Committee had to apologize to war veterans
when it was revealed that lower level officials were
demanding payments for them to receive apartments that
should have been granted for free. The allocation of a free
or "officially priced" apartment represents a massive
windfall. Per capita income in Vietnam is USD 537 per year.
A 1,400 square foot apartment in western Hanoi currently
sells for about USD 100,000.

Land Tensions in the Central Highlands
--------------


13. (U) The tensions brought on by rapid migration into
urban areas are mirrored by a similarly large movement into
Vietnam's Central Highlands. According to official GVN
statistics, 41 percent of the 1.3 million domestic migrants
from 1991 to 2003 resettled into the Central Highlands,
mostly Gia Lai, Dak Lak, and Dak Nong provinces. Much of
this migration came originally under the New Economic Zones
(NEZ) program that brought settlers from the overcrowded Red
River Delta in the north and from crowded urban areas in the
South after 1975, providing them with residence rights and
financial support. With the rapid expansion of coffee
production in the 1990s, these programs were overtaken, by
"free migration" from other areas of Vietnam, which had no
Government support. Currently 70 percent of migrants into
the Central Highlands are from the Kinh majority group, and
the rest are from nine other ethnic groups, mostly from the
North and Northwest Highlands.


14. (U) In August 2004, Deputy Prime Minister Nguyen Tan
Dzung announced that the GVN would suspend official
migration programs into the Highlands, and sought to slow
free migration, bringing it to a halt by 2010 (Ref. A). GVN
officials indicated this is intended to allow ethnic
minorities time to improve their participation in economic
development without competition from incoming migrants.
Whether the suspension of planned migration is being
enforced in reality is not clear, although provincial
leaders in the Central Highlands assert to us that they are
implementing the suspension. Suspending the NEZ programs
will likely have little impact, however; they were
chronically underfunded and resettled few people in recent
years. In discussions with Consulate General Officers, Gia
Lai officials indicated they were unwilling to turn away
spontaneous migrants (Ref. B),would continue to provide
them with subsidies for clearing virgin land and said that
they believed the province could accept another 400,000
migrants. Officials in Dak Lak told ConGen officers that
they had banned unplanned migration to the province,
however.


15. (U) Provincial officials recognized that these migrants
caused frictions with ethnic minorities, but attributed this
to the minorities' perception of unused land as "theirs."
(Ref. C). In a similar vein, Professor Tuyen said that
ample land exists in the Central Highlands, but that
minorities use it inefficiently. Chinh of the Land
Department alleged that minorities find themselves without
land because they sell it off to new migrants too freely.
Analysts in the donor community in Hanoi suggest that many
of the minority groups' problems came during the move to
allocate specific land leases for agricultural and forest
land during the 1990s. This locked the semi-nomadic swidden
farmers onto specific, smaller plots of land and allocated
other parts of their wide-ranging territory to newer
arrivals. Regardless of the reason, many indigenous ethnic
minorities in the Central Highlands perceive themselves as
having had land taken or swindled from them, and this
represents a driving motivation for unrest in the area.


16. (U) In July 2004, the Government created "Program 132,"
with the goal of allocating arable land to all ethnic
minority households by 2006. Land for use in this program
has reportedly been reallocated from State-run farms or
reclaimed from unused land. How well these programs have
been implemented is not clear. The GVN is also training
ethnic minority farmers to adopt less nomadic farming
techniques. Anecdotal observations suggest that ethnic
minority farmers are less able to make the most of GVN
agricultural extension programs compared to their Kinh
neighbors.

Comment
--------------


17. (U) Land use and ownership have always been crucially
important in Vietnam. The political legitimacy and
credibility of the GVN and the Party rests in part on how it
handles the tensions inherent in the effort to encourage
economic growth while dealing with entrenched interests,
often governmental, who hold land or otherwise profit from
its allocation. Past efforts to allocate agricultural land
rights in the have been somewhat effective in reducing
tensions in undeveloped areas of the countryside. The GVN
is only now facing up to the more complex issue of urban
land, where the financial interests are greater and players
more politically important. The intersection of public
corruption and the sensitive issue of land allocation and
use creates the most plausible scenario under which the CPV
could lose the support of the population.

MARINE