US embassy cable - 05HANOI885

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