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Legal Aspects of International Business

GENERAL BACKGROUND

Property rights in all the countries have been changed into private ownership. In case of Cambodia, stated in Land Law 2001, private ownership of land has been recognized. By contrast, in some countries like Lao, China, and Vietnam land still owned by State. However, nowadays, there is rebalancing the role of private actors and the state, as the result individual and household rights in land are consolidated.

Because of the effectiveness of property right to the development of economy, policy as well as society of a nation, the property rights have been reformed for long time ago in the world. Nowadays, on the process of shifting to market-oriented economy, there are a revolution to understand the important of property rights and the relationship among recognizing property rights and socio-eco development in Vietnam.

Currently the property right in Vietnam is similarly to the other countries, but it is also having another different characteristic. According to Vietnam Land Law 2003, land administered by State and owned by people with specified purposed. The land management has been conducted by the city authority. The property rights appear to be very strong with the definite purpose of gaining a better understanding of the views for and limitations on property rights in Vietnam's real estate market, most notably Ho Chi Minh City and Hanoi. This is the real estate market which is land belong to all the people and the state onbehalf will transfer the use rights to the people according to the law.

However, freehold other than simple ownership is shown to be important in eco-socio development. The regular negotiations about property rights in real estate property, both formal and informal, make a major contribution to how people assume about property and what kinds of property uses to make of it. When ownership recognized, individual people will be willing to invest their capital and the government would be able to acquire land for planned infrastructure development. The recognizing property rights in a properly way will improve the success of eco-socio development and how this regulation could be endured or not when Vietnam change the way to attract foreign investment, to get the financial benefit of the global development, a paradigm shift to market economy.

Property Rights moving towards a thriving real estate market in the competitive world.

Following the Marxist ideology, the private ownership of capital and of the means of production, including land has been rejected. That led to the restraint of land markets in socialist countries. However, in many cities of developing countries, as the real estate market developing rapidly as the result of urbanization, the property rights have been recognized. In Vietnam, the real estate market has been boom from 1993 and played an important role in the economy growth.

Under the law of supply and demand, the real estate market is developing spontaneously in which 70% of transactions performed out of the State's restraint. People can now own houses while only the state can own land, a private person or entity can also own use rights to a parcel of land for a specific period.

In 1994 the state presented the Building Ownership and Land Use Certificate (BOLUC) which combines home ownership with the land use right into one legal document. Land rent is the benefit gained from the land (a kind of return). It divided into absolute land rent and differential land rent; differential land rent is the extra-scale benefit show the different between the medium production price and the individual production price (land rent also divide into 2 types: One come from the benefit of the natural and the other is come from investment of the human labour). Absolute land rent is the extra-scale benefit that the user must extract to the land user as the rent fee. Therefore, it must elaborate the private land ownership to remove the absolute rent land. Land price (after smartly invested) in the market will be calculated on land rent by rate return.

That is the foundation theory of the land administration in economic-politic meaning of the Vietnam government. This argument needs to be grasp thoroughly in social economic otherwhile it will be lean to one side, too private benefit from land or too social benefit lock the market operation. To study about the legislation framework of land of Vietnam, it sensibly examine the model of some industries and industrial countries, focus on the transitional countries. Two of them are China and Taiwan is good practices.

China has a social-economic and politic institution similar to Vietnam context. Both of the countries use economic market socialist orient to industrialize to pass though a transitional period to socialist stage. Taiwan was successful in achieving a revolution in land rights through eliminating its feudalism, and in industrializing the economy. The Taiwan government has admitted that the privatized land ownership schemes are based on “equal land right” theory recommended by Sun Yat-Sen in the past which definitely allow Taiwanese to acquire and own land. Therefore, it believed that a good basis regarding planning private usage and land price management had established. Taiwan has issued a sound system of real estate appraisal and a Value Added Tax (VAT) framework when its use is changed into other purposes in consequence of re-planning or other developments of infrastructure by investment from state's capital. The Taiwan real estate market plays an important role in solving housing needs, developing infrastructure for the industrialization process, and contributing significantly to GDP.

THE IMPORTANCE OF PROPERTY RIGHTS IN LAND

In developing countries where transitioning economy, property rights, labour and capital are considered as 3 main factors of market-oriented economy. Unlike labor and capital, land is the special one since limitation, these factors linked and interdependence closely. However, almost cities in these countries are bearing deform of property market since the effectiveness of management policies and mechanism that lead to property stockpile.

Socialist legal systems organized property in a fundamentally different way from private property systems. In China, the new institution of ambiguous property rights over state-owned urban land evolves from the socialist people's landownership. This institutional change is driven by the changing economic system and by two new organizations—the local developmental state and danwei-enterprises. The new institution facilitates the formation of an emerging land market. This land market, structured by ambiguous property rights, has accounted for the dynamic urban physical growth in many of China's coastal cities in the 1980s and 1990s.

DEVELOPMENT OF LAND USE RIGHTS IN VIETNAM

From 1960, The Democratic Republic of Vietnam introduced three types of land ownership, private and cooperative.

Eventually, practice and theory converged in the 1980 Constitution, which vested all rights in land to the state. This principle appeared in the 1988 Land Law, but was changed to peoples’ ownership and state management in the 1992 Constitution and 1993 Land Law. Since the central and local government, exercise the the right of land ownership on behalf of the people, they also have rights to possess, use and dispose of land. The 1993 Land Law set out six main principles governing land: (1) belongs to the entire people; (2) uniformly administered by the state; (3) promotes effective and economical usage; (4) the state protects agricultural land; (5) encourages investment in land; and (6) stipulates the value of land. While retaining ultimate control over legislation and policy, the central state has devolved from land management to People’s Committees. The City Peoples Committees, for example, possess broad discretionary powers to allot land use rights in urban areas. Local authorities are also responsible for promulgating zoning and land use regulations, registration and settling certain types of land use disputes.

During the adjusting Land Law process, there are some problems, such as:

• The property rights affect the changing from state enterprises to private property rights;
• The relationship between property right and the price of the housing in transition of the real estate market;
• Land reform and the rural development in Vietnam, especially for leasing land, recorded process of transfering of land;
• The difficulties with the existing system is that despite constitutional and legal authority to transfer land use rights, vague administrative procedures coupled with the doctrine of state land management imposed an administrative consent on transfer;
• The impact of a land reform in Viet Nam;
• The power to exchange, transfer, lease, inherit and mortgage their land-use rights to have the evident of land rights and economic development to indicate that the additional land rights led to significant increases in the percentage of total area devoted to multi-year crops, as well as some increase in irrigation investment; and
• Seceding from direct investment and implementation, powerful actor of the local state that insisting the “growth first” approach and facilitating urban (re)development.

THE WORLD REVIEW

Formerly, Central and Eastern European (CEE) cities have been pressured of economic growth. At that time, there is different among the socialist European cities and the ones transforming their western counterparts. Lacking of real estate markets affected the structure of socialist cities and caused the structureing cities slowly there. The authorities at city level struggled in approving the city comprehensive plan, how to develop their suburbs to meet the demand of new housing and commercial facilities parallel with maintaining their historical city centers. These problems take place due to incomplete property right in these countries.

In China, there is an interaction between state and market in the urban development process in which property right play a specific role besides other factors like budget, comprehensive plan, etc.

State’s intervention through regulatory for real estate market has played as a constructive role for shaping of a functional land market. By assigning rights and liabilities, the state plays a supportive role contributing to efficiency on the one hand. On the other hand, however, by regulating the market, the state may likely dominate the place-making process and become the chief determinant of the built form of places. Bottom up individual and community initiatives could be stifled and resultant developments may not be in stakeholders' interests. Old town charm is attributed to its diversity and pluralism, which results from numerous individual landowners' free choices over time. The alleged monotony of planned new towns is often created by a homogenous structure of property rights or by a state's dominance in the management of land development. The rhetoric of procedural public participation can be annulled easily by the substantive property rights regime.

LAND USE RIGHTS AS A COMMODITY IN VIETNAM’S CASE

Since the introduction of Doi Moi policies, the land and housing management system has been reformed with an orientation to market principles. In Land Law 1988, all land is owned by the people and the State played as an administrator in term of permitting the grant of land use rights to organizations and individuals.

The land and housing reform policy introduced since 1988 has stimulated the formation of a real estate market in Vietnamese cities in which properties with attached land use rights can be transferred freely among state and private owners. Unfortunately, State still intervented directly to the market and remains partly informal since the necessary legalation framework and procedures have not been adopted to fully carry state policy through to fruition. Vietnam has 2 land price system now, one basing on the price provided by Government and the other is the market price which is often two or three times higher than the prices provided by the Government. There is not a proper mechanism for land valuation that caused complex and difficult for compensations for relocated settlers as well as tax valuation. By 1999, most of the houses have not got land use right certificates which lead to the difficult in house and land management. As the result the government can not control land and housing transactions.

PROPERTY RIGHTS REFORMS AND INSTITUTIONS IN VIETNAM

Vietnam does not have the right institutions including clear legislation, title registration, and capable court systems in order to protect private property.

With the introduction of the 1993 and after that in 2003 Land Law, a major change in property rights promulgated in Vietnam. Like leasehold rights currently applied in U.K and Hong Kong, the state retained ownership of all land but a private person or entity could now possess, transfer, and mortgage use rights to a land parcel for a specific period. Legally, urban households must obtain a BOLUC, which combines homeownership with the land use right into one legal document. Like other communism and centrally planned countries, government bureaucracy has involved in many aspects of economic life such as solving disputes among partners. Fortunatly, decentralization is piloting in HoChiMinh City by giving them high amount of discretion nowaday. Thus, in Vietnam one can have state-sanctioned property rights that are not necessarily enforced by the courts and registration institutions which are the focus of international development projects. Instead, property rights enforcement occurs at a variety of levels of civil and state institutions and ranges from negotiation to increasingly formal legal means.

In China, property ownership is still unstructured situation, belongs to the public. However, China is keeping the leading position in economic developing in comparison with other socialist countries. In the past, making decision is overcentralized in all issues and housing policy is among those issues which the local authorities should have a more actively role. There is not coordination among levels as well as lacking of proper legislation framework. That is the reason why the China’s economy developed slowly for long time ago. Therefore, Vietnam should form a suitable institutions and a proper property rights system to cope with the smooth transition.

Land law reform covers a set of measures designed to reform land tenure structure and related production and supporting services structures not only to eliminate obstacles to economic development but also to accelerate the process of development. The objectives of land reform have been generally recognized as being principally social and political. One outcome of land reform is income redistribution and increases in individual welfare. Another outcome of land reform is the disposition of investment funds acquired by the landowners after they sold their land. A third and more important effect of the land reform is setting up an institutional and organizational structure for a sustainable development process.

FOREIGN INVESTMENT IN PROPERTY MARKET

Last year, 2007 is positive year for the property market, as the result of having changed significantly in real estate investment laws in 2006. The most important thing is offerring certain ownership concessions to oversea as well as more accessible to foreign investors.

Because of the character, government, related legislation system, potential investors determined to join the real estate market in Vietnam when the time is right should be aware that it is likely that short term gains will be an unachievable prospect because it is likely the government will restrict speculative property investment.

In addition, all worker foreigners have had right to rent accommodation and they are restricted to the development of housing and commercial real estate

Foreign investors can buy into ‘pure investment’ property, such as hotels and resorts, for rental and leasing contracts by investing in construction and development of the projects – none of which can be for their own personal use.

RECOMMENDATION

In preparing for complexity land market, land use right have to use conforming to the international standpoint, especially in globalization trend and the capacity of the nation in the race to attract the foreign investment. It means the land use right allow the people have the right rights for making decisions fast and transparency. In addition, the right on mortgaging and land ownership opportunity through joint-venture business is the key point of the process.

To some extent, this ownership is not different in comparision with land ownership regulations in Western nations (England, Canada, and Australia). There is redical title for the King or Government, and then the land will be allotted or transferred to individual and organization at smaller levels.

Due to a large potential demand now in Vietnam, property development could achieve good results. So, there are some issues suggested in order to push up the development of real estate in Vietnam:

• Consolidating the legislation framework in Real estate for real estate industry, especially the related foreign investment law to attrat foreign investors to weigh up Vietnam's long-term market and the market will become much more flexible and much more desirable.
• Ceasing the interfereing of state in land transactions
• Using the market price for land allotment, land leasing, land transfer taxing
• Develop a matured mortgage system, well interconnectedness
• Restructuring financial system espeacialy new laws in a bid to curb soaring prices for further opening up of the real estate market.

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