Vietnam

Screen Shot 2019-04-12 at 4.11.14 PMBy Huynh Hoang Sang, bizconsult Law Firm

 

The Government recently promulgated Decree No.69/2019/ND-CP on the utilisation of public property for making payment to investors upon execution of construction projects in the form of build-transfer contracts (BT Contract) (Decree 69/2019). Decree 69/2019 replaced Decision No. 23/2015/QD-TTg (Decision 23) and takes effect from October 1, 2019.

In the past, Decision 23 allowed the State to make payment only by land funds to investors executing construction investment projects in the form of build-transfer (BT Project). Otherwise, Decree 69/2019 provides that the State could expend the public property including (i) land funds; (ii) land, houses and other assets on land; (iii) infrastructure assets used for the national interest, public interest; and (iv) other types of public properties (according to the Law on management and use of public property). The expansion of the extent of public properties under Decree 69/2019 is reasonable and in line with the Law on management and use of public property 2017 and further adaptable to the need of BT Projects. Besides that, proceeds from public properties auctions could also be used to pay investors for execution of BT Projects in accordance with the Law on Public Investment and Law on State Budget. The expansion of subject of properties used for payment to investors undertaking BT Projects will provide more tools for payment in such projects and encourage the development of BT Projects in the future.

The use of public property for payments to investors undertaking BT Projects is implemented under the principle of parity — the value of the BT Project is equivalent to the value of public properties expenditure. Accordingly, the value of public property shall be determined based on market price as per the regulations at the time of payment and the value of the BT Project shall be determined based on the result of the auction. In case the value of the paid land funds is larger than the value of the BT Project, investors shall pay the difference to the State budget. Otherwise, if the value of the paid land funds is smaller than the value of the BT Project, the State shall choose to pay the difference in cash or through land funds at the time of finalisation of the BT Project.

Decree 69/2019 provides the valuation method and payment schedule for each type of public properties. However, payment made from the public properties as mentioned above always requires an approval from the Prime Minister.

One noteworthy point in Decree 69/2019 is that the payment through land funds for investors shall be enforced in two methods as follows: (i) allocating land with collection of land use fees or (ii) leasing land with collection of a one-off lump sum payment of rent for the entire lease term. The land fund paid for investors includes non-clearance lands or land with completion of clearance. Noting that the use of land with completion of clearance for making payment to investors must be reported by Provincial People Committee (PC) to the Prime Minister for considering and deciding before the issuance of the decision on in-principal approval of the BT Project.

In contrast, in terms of non-clearance lands, based on (i) approved plan 1/500 or 1/2000 and (ii) request from competent authorities who signed the BT Contract, the Provincial PC shall commit with investors in writing on the use of land funds for the payment to the BT Project. In such case, investors should pay attention to the advance payment for compensation, clearance expenses under the approved plan on compensation and clearance, and such advance payment amount shall be put in the price of the BT Contract. One critical thing to note is that the advance payment amount shall not be accounted for loan interest charges in capital mobilisation of the BT Project. After receiving the deposit, the State shall implement compensation and clearance works as per the approved plan. In this situation, investors should expect that the compensation and clearance works may take a long time and, in the worst case, may be long-term delayed, hence the capital cost of the BT Project may be materially affected due to the non-interest in loan of capital mobilisation of the BT Project from the advance payment amount.

The time of payment for the BT Project shall be calculated from the date the authorities issue a decision on land allocation, land lease or property transfer to the investor. The handing-over of public properties for payment to the investor shall be enforced after the BT Project is completed or under the schedule determined by the authorities in accordance with the Law on investment and construction.

Under this new and favourable regulation, we think that BT Projects in Vietnam will not only be developed steadily but also attract more investor interest from across the region.

 

 

Screen Shot 2019-03-12 at 5.41.37 PM

W: www.bizconsult.vn

Hanoi:
T: (84) 0) 24 3933 2129
F: (84) 0) 24 3933 2130
E: info-hn@bizconsult.vn

Ho Chi Minh:
T: (84) 0 28 3910 6559
F: (84) 0 28 3910 6560
E: info-hcm@bizconsult.vn

M: (84) 9 1801 9209
E: sanghh@bizconsult.vn

Related Articles by Firm
Tightening regulations on corporate bonds issuance in Vietnam
Decree 81 is said to be an attempt to tighten and control corporate bonds issuance in Vietnam in the wake of a worrisome proliferation ...
The Law on Investment 2020
The current economic situation in Vietnam has revealed various disadvantages and loopholes in the legal framework, especially under the backbone law on investment.
Vietnam: Release of long-awaited guidance on Competition Law
The long-waited guidance on the Competition Law — the Decree 35/2020/ND-CP (Decree 35) — was issued on March 24, 2020 with effect from May 15, 2020, and casts light on certain prominent provisions of the Competition Law, such as economic concentration ...
Vietnam: Liability exemption due to the Covid-19?
On April 1, 2020, the Vietnamese prime minister issued Decision No. 447/QD-TTg to officially declare Covid-19 a nationwide epidemic. The Covid-19 pandemic, along with the application of certain preventive measures of the Vietnamese competent authorities have greatly affected most Vietnamese-based enterprises ...
Changes to investor selection for land-using projects under Vietnam’s Law on Bid
Significant amendments to the scope and process of for selection of investors of PPP projects and land-using projects.
Vietnam: New regulations on automobile transport business
After a long time in the drafting stage, the Government issued Decree No. 10/2020/ND-CP (Decree 10) on January 17, 2020, regulating automobile transport business and conditions for conducting automobile transport business ...
Vietnam: Sweeping reform to securities market
The New Law is said to be a radical improvement to securities market regulations in Vietnam and is expected to overcome those shortcomings observed for the past 10 years ...
Vietnam: New Labour Code taking effect on January 1, 2021
The participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) poses numerous requirements on the reform of laws, including labour laws ...
Legal issues on peer-to-peer lending business in Vietnam
Peer-to-peer (P2P) lending has been growing rapidly in Vietnam, along with the development of financial technology ...
Vietnam: New guidance on forex management to FDI enterprises
Some significant improvements regarding capital transactions and M&A pertaining to foreign-invested enterprises in Vietnam ...
Vietnam: Tightened policy on import of used machineries, equipment and technological lines
From 2015, the import of used machineries and technological lines is subject to the Circular 23/2015/TT-BKHCN, which contains some inadequate points causing difficulties in import of used machineries, technological lines, especially those of more than 10 years old in fact ...
New law on competition takes effect
Vietnam’s National Assembly passed the new Law on Competition (New Competition Law) on June 12, 2018 and it will be taking effect on July 1, 2019, 14 years after the implementation of the Law on Competition 2004 ...
Encouraging foreign direct investment in Vietnam's education sector
One of the noteworthy points under Decree 86 is educational association, which is defined as twinning between Vietnamese private kindergartens ...
New electricity pricing and new sample of PPA of rooftop solar power projects
The number of solar power projects (SPP) in Vietnam has grown quickly in recent years, especially after the Prime Minister promulgated Decision ...
Reform of regulations on private issuance of corporate bonds in Vietnam
One of the most notable points under Decree 163 is that the requisite conditions for issuing corporate bonds have been significantly liberalised ...
Reform of regulations on private issuance of corporate bonds in Vietnam
The conditions for issuing corporate bonds have been significantly liberalised ...
Related Articles
Covering Ears to Steal Bells: Ignoring insolvency at risk of liquidation
The closest Chinese equivalent to the English idiom of ‘sticking one’s head in the sand’ is ‘covering one’s ears to steal bells’ ...
JV Compliance Issues during the Transition Period under the new FIL
On 1 January 2020, the Foreign Investment Law of the People’s Republic of China came into force ...
Related Articles by Jurisdiction
Guidance on mortgages of residential houses yet to be built
On December 9, 2015 the State Bank of Vietnam issued Circular No. 26/2015/TT-NHNN guiding on procedures for mortgage and ...
Brave new worlds
Asia’s emerging economies continue to play bigger roles on our increasingly integrated world stage. Melinda Finch investigates the rising stars of India, Indonesia, Malaysia and Vietnam and considers the impact of their ascension on the legal industry.
Latest Articles
Watch again: “Is Covid-19 taking women lawyers’ careers back to the 1950s?”
A second chance to watch….. the opening Women In Law Dialogue Series Webinars: Asia and North America time-friendly (first aired ‘live’ in August 2020) ...
Covering Ears to Steal Bells: Ignoring insolvency at risk of liquidation
The closest Chinese equivalent to the English idiom of ‘sticking one’s head in the sand’ is ‘covering one’s ears to steal bells’ ...