Land still largest barrier

08:23' 13/07/2007 (GMT+7)

VietNamNet Bridge – According to a survey by the International Finance Corporation (IFC) on the acquisition of land by small- and medium-sized enterprises (SMEs) of Vietnam, of every four SMEs only one is directly allocated or able to lease land from the state. Some 75% of developing SMEs say that the biggest hindrance for their development is land shortage. It is estimated that in 2007, around 50,000 SMEs will be established. The increase of new enterprises has made the demand for land to build factories, offices, shops increase dramatically. Most enterprises want to be allocated land from the state to be assured in production. However, the fund of land is limited and usually only big enterprises can directly access land allocated by local governments, mainly foreign-invested projects. According to Nguyen Thi Chuyen, Chairwoman of the Minh Tam Pottery and Lacquare Cooperative, the land reserve for industrial zones is still large but SMEs are unable to implement long-term plans to use large areas of land in industrial zones. They mainly use land owned by their own families or hire small plots of land and thus, face limitations in expanding investment and production. Dao Trung Chinh, Vice Head of the Land of the Ministry of Natural Resources and the Environment, also affirmed that private companies that wanted to have land often had to hire land from state-owned firms at high prices and for unspecified durations. According to most SMEs, seeking land to serve production is the most complicated, most costly, time-consuming task among all the administrative formalities necessary to establish a new firm. A survey of GTZ reveals that normally, to be allocated land from the state, enterprises must fulfill seven kinds of formalities which require around 230 days for completion and they have to go through many related state agencies. The dissatisfaction of enterprises revealed in the survey regarding the land use right licencing process is quite high. Meanwhile, most enterprises complain of competent agencies’ sluggishness in this issue. Recently, land registration centres have been established in almost all provinces and cities, contributing to reduce administrative formalities related to land. However, the time needed to fulfill those formalities remains long. Besides access to land, the biggest worry for investors at present, particularly small- and medium-size ones which have enterprises located outside industrial zones, is the constant change of land-use plans of local governments. According to Truong Thai Son, Deputy General Director of the Hoang Quan Real Estate Company, land-use plans are not good because the registration system and grassroots information (social-economic, natural resources, development forecast information) for making decisions on planning are insufficient. The making of land-use plans is sometimes based on the orientations of the upper level and inaccurate reports from the lower level, which make land-use plans frequently change, causing difficulties for production plans of enterprises. In addition, the planning process doesn’t witness the participation of enterprises and people. According to Mr. Son, in Vietnam the need for intermediate services on land for production is a fact but the market scale is not large enough to encourage the appearance of professional service providers. At present, an enterprise that seeks land for production often thinks of going to the local government to submit its project and ask for land allocation, not to land brokerage agencies. More than 50% of SMEs of Vietnam in IFC’s survey said that it was very difficult to find a suitable plot of land on the secondary market. Up to 66% of SMEs that have been successful in seeking land have been so thanks to their personal relations. This shows that the improvement of information infrastructure can have positive impacts on the information balance of the land market. One thing needed to improve the transparency of the market is the efforts of the local government in creating and making public the land reserved for production. Moreover, local government and management boards of industrial zones also have to permit the construction of industrial zones with small plots of land suitable for small- and medium-sized enterprises, instead of only those for big enterprises. (Source: Viet Nam Net)