Legal changes bolster market economy reform

Le Net at LNT & Partners law firm takes a look at the developments and their anticipated effects.

Revised and Restated Constitution

The 1992 Constitution was revised after more than 20 years of Vietnam’s economic reform process. Once again, it underlines the leading role of the Communist Party, the state sector as the foundation of the economy and the notion that land belongs to the whole nation and is administered by the state. The new constitution states that private and foreign-invested sectors are granted equal rights to set up and run their businesses. The state sector is supported and maintained only in core industries.

The Constitution allocated more powers to the National Assembly and president. The National Assembly is now vested with the right to decide on national fiscal and monetary policy. The president has the power to appoint deputy prime ministers or ministers as proposed by the National Assembly, appoint high-ranking officials and high court judges. The Constitution also clarifies the power of the People’s Procuracy and establishes the State Auditing Agency.

The Constitution stipulates that any “unconstitutional” acts shall be resolved. The Constitution can be seen as a positive move towards the constitutional rule of law.

Three major legal changes should help liberalise the economy furtherPhoto: Le Toan

New Land Law

The new Land Law, which replaces the 2003 legislation, addressed concepts of landed property and compulsory purchases or seizures – a huge source of dispute in the last decade – particularly after notorious cases in Haiphong and Hung Yen. The new Land Law specifies the instances in which such compulsory seizures may occur, which mainly relate to ODA projects, infrastructure development or social housing projects. Moreover, the land price or land pricing method shall be decided by the state with an aim to limit its affect on the real estate market. In addition to land prices and compensation, the new Land Law reduces the scope for amended land zoning planning. The law clearly states that once zoning has been approved, it cannot be changed except under special cases. It is hoped that this strict rule will avoid unplanned urbanisation and the exploitation of those that control land allocations before real investors with fiancial capacity have an opportunity to invest.

The law introduces two concepts: a land price table and particular land price. While the land price table is introduced once every five years, the particular land price will be determined on a case-by-case basis, by a land valuation committee based on the land price table and market price. The land price table is used to calculate land compensation and land use fees for individuals or households, whereas the particular land price is used for land compensation and land use fees for economic organisations or foreign-invested enterprises.

An important part of the Land Law is devoted to land compensation payments and clearances. The law allows provincial people’s committees to determine land prices for compensation and provides a timeline for voluntary land compensation in the case of land recovery, following which the state could apply for a forced land clearance. The compensation is prioritised in the form of land compensation and, only when there is no land available, would monetary compensation be applied. The law also requires the land developer to propose a relocation project before implementing land compensation. 

Foreigners and overseas Vietnamese are now allowed to receive land use right certificates if they are allowed to buy houses or apartments adjacent to land pursuant to the Law on Housing.  It does not affect the right of foreign-invested enterprises to obtain land use right certificates for industrial land or residential land projects. The new law also maintains the status quo for projects that have already been granted freehold or leasehold status before the introduction of the new law on July 1, 2014.

New Public Procurement Law

The Law of Public Procurement, also effective from July 1, 2014, is introduced with the aim of reducing waste and corruption in public procurement, as well as encouraging private-public partnerships. The new law supplements new methods in the assessment of bids, including bidding concentration and tendering in specialist industries such as pharmaceuticals and medical equipment. Bid concentration is a new feature of this Law on Public Procurement, which authorises the project owner to organise bids for a single professional purchaser instead of multiple suppliers. This process may expedite the public procurement process while maintaining control over cost over-runs and co-ordination among the suppliers. The law implements and combines widely recognised international public procurement principles with local experience in relation to public procurement issues.

To enhance the efficiency of public procurement, the law hands bid appointments down to ministries or provincial people’s committees, rather than the prime minister. The decision-maker will also have to answer to supervisory authorities, to the public, and project owners. 

To reduce the price adjustments or project cost over-run problems, the Law on Public Procurement prioritises fixed price methods. If other methods are used, such as lump sum unit price or adjusted unit price, then the bid decision-maker must explain why the selected method of public procurement is preferred vis-à-vis fixed price contracts.

In short, the three laws earmarked by the National Assembly mark a bold step towards stronger reforms to confer more supervisory powers and reduce the abuse of power, waste and corruption, while recognising the importance of professional and uniform executors.

All eyes are now on how the new laws will be implemented.