Recently, there is an uproar over story of land prices after the auction. This is a trick to buy, collect land from people at a low price and then wait for public planning to sell at double or triple the original price following a prepared scenario.
| Groups of people flocked to localities to hunt land recently. |
Collecting land, playing tricks after auction
Related to a series of exorbitant land auctions and then cancel deposit took place in the past time, notably Thu Thiem land auction. Prof. Dr. Nguyen Mai, Chairman of the Association of Foreign Investment Enterprises, in a recent share, has quoted a story in Loc Ninh district (Binh Phuoc) to warn investors. Accordingly, when planning urban areas, before announcing the planning, investors buy and collect land from people at a low price to collect red books. Then, when the planning is public, they will sell it for 2 or 3 times the price they bought by tricks like arrange series of cars to trick and bait buyers and increase the price, profiting the difference."So, as you can see, the important thing is to start with planning first" Mr. Mai said.
According to Mr. Mai, currently VietNam has the most expensive roads in the world due to the huge cost of site clearance. Ha Noi once made a good decision to expand Kim Lien Road, taking 50 meters from both sides of the road, pay compensation equal to the increased amount of land rent. Following the planning, Ha Noi should have had a modern urban area on both sides of the bridge but then failed to do it.
Mr. Mai said that planning issues need to have a long-term vision, possibly within 10 years, not planning within a year or a few years. The Ministry of Planning and Investment and the Ministry of Natural Resources and Environment need to study and guide land planning in the process of urbanization.
"Along with that, where planning exist, data must be made public to avoid asymmetric information" Mr. Mai said. As for the story of Thu Thiem land auction in Ho Chi Minh City, he said that big cities like Ho Chi Minh City need to learn from experience. We cannot follow what the Department of Justice of Ho Chi Minh City said that: "it is legal so we cannot deal with it", but it is necessary to have a longer-term view and have a strategy to propose a common solution for the whole country. It is legal according to the law does not mean that we can let it go and not learn from experience.
Back to the problem of buying land with cheap price then sell at auction for high price, posing the problem of market prices, how to determine the appropriate starting price. Dr. Phan Duc Hieu, standing member of the Economic Committee of the National Assembly, recalled the story in Duc Tho district (Ha Tinh province) back when the land was recovered and then put up for auction with a starting price of 4.7 billion VND/plot. As a result, no one bid for it. And government can not just set a too high auction price will also make the local unsatisfied.
Obviously, in order to avoid the above consequences, Mr. Hieu said that it is impossible to focus only on the land and investment law but we need to amend it synchronously. The goal is to find a way to improve the land use value, instead of only focus on the financial side, to maximize the return.
This problem lies in both the Law on Investment and the Law on Bidding, it is necessary to comprehensively amend relevant laws to ensure that selling prices reflect the market correctly. The most important thing here is to amend the law related to the auction process, selecting the best candidate.
"The issue here is not just the auction. My example was the problem of speculation in a bad sense, but speculation in the sense of normal business is a good thing." said Mr. Hieu.
Regarding the legal thinking, he emphasized that if the law is not fully complete, we can not blame investors. Thus, it is necessary to complete and perfect it.
Difficulty in proving that investors profit from auction
Dr. Duong Dang Hue affirmed that the law does not prohibit
businesses from dropping deposits or terminating contracts. The parties have
the right to sign and the right to cancel. Currently, according to the law, we
have mechanisms and sanctions to handle this.
However, Mr. Hue said that the regulations are still limited
and not close to reality. Therefore, in the near future, it is necessary to
strengthen research, and at the same time promote more severe economic
sanctions.
"If loosing deposits is not enough for businesses, then
in my opinion it is necessary to add an administrative penalty as a percentage
of the signed contract, winning price at the auction (about 10%)", Mr. Hue
suggested.
In addition to the sanction issue, according to Mr. Hue,
another issue that we need to pay attention to is whether there will be
behavior that disrupts the market to profit.
However, he said that proving it is very difficult, almost
impossible to do. When it comes to the legal side, it's impossible to give any
proof, just as it's impossible to prove profiteering. And even if it can really
be proven that the investor has caused market disturbances to gain profit, then
the regulatory agency involved in the case should also be held accountable too.
Meanwhile, Mr. Nguyen Dinh Tho, Director of the Institute of
Strategy and Policy of Natural Resources and Environment (MONRE), said that the
current legal framework is sufficient to conduct a public and transparent land
auction.
The world of auction is public procurement, and auction is
the sale of public property. Therefore, no one can replace action by bid, but
it can only be a conditional auction, and investors must ensure new conditions
for participating in the auction. Ensuring the best source of revenue for the
state.
Regarding the land price of Thu Thiem, Mr. Tho said that in fact
in the world, Hong Kong for example, there is a valuation position of up to 3.1
billion VND/m2. If Thu Thiem becomes a world financial center like Hong Kong,
the price of 2.4 billion VND/m2 cannot be said to be unreasonable.
“It is reasonably to say that, auctioning to get the highest
amount of money isn’t wrong”, Mr. Tho emphasized.
In the recent future, Mr. Tho stated that the requirement to
publicize the land data is top priority, each plot of land must be identified.
Must be provided with sufficient legal status, auction land price, surrounding
land price and must keep the transaction histories.
Regarding the proposal to add sanctions to prohibit
businesses from participating in auctions, participating in 5 years after
depositing, it is not feasible, he said, because they are willing to set up
other businesses to go to auction, so it is enough for businesses to lose their
deposit when they leave the deposit.
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