Developing Land Markets Within the Constraint of State Ownership in Vietnam

The development of land markets in Vietnam has attracted much attention. Stephen B. Butler discusses some institutional efficiencies of land market reform in Vietnam based on a survey conducted in 12 provinces. Six hundred sixty-five small and medium enterprises, 65 land market intermediaries, and 12 state land officials were interviewed for their opinions on land tenure security, land use planning effectiveness, ease of market transactions, and public administration capacity. Public officials and land market intermediaries believe the current land allocation method in Vietnam to be inefficient. To obtain land use rights for a development project, an investor must apply to local officials detailing the proposed land investment and technical plan for construction and provide evidence of sufficient capital to undertake the project. Upon the receipt of a license from the government, the developer can select a land site and sign a land contract with the government.

Butler asserts that this system has three problems. First, the procedure imposes tremendous burdens on local government capacity. In places where there is not enough staff or trained personnel to handle the applications, review standards become arbitrary. Second, the approval procedure distorts land prices and thus the supply of land. The survey reveals that inadequate land availability is the major complaint from business land users. Third, involving local governments in land rights allocation encourages rent-seeking behavior. The state confiscates land from holders with little compensation and leases the site to developers for high leasehold charges. This practice can lead to social conflict and jeopardize public confidence in the state as the protector of private property.

This paper was presented at the Lincoln Institute’s annual Land Policy Conference in 2008 and is Chapter 6 of the book Property Rights and Land Policies.