Overview

On 28 February 2020, the Prime Minister issued the Decree 25/2020/ND-CP stipulating certain articles of the Law on Bidding regarding investor selection (“Decree 25”).  The aim of the Decree 25 is to overcome difficulties in apply regulations for real estate project, especially to address overlaping provisions under the Law on Land and the Law on Bidding in regard to land allocation and land lease procedures.  The Decree 25 replaces the Decree 30/2015/ND-CP and will take effect from 20 April 2020.

New regulations in Decree 25

Land allocation

Despite certain regulations (e.g., the Law on Housing, Decree No. 30/2015/ND-CP, etc.) recognizing the bidding as a method of selecting investors for investment projects involving lands, no guidance was given on land allocation procedure after the selection of investor via bidding, which created some confusion. As a consequence, a lot of investment projects involving land allocation have hit a roadblock after selecting investors due to the uncertainties regarding their land use right.

The Decree 25 is issued to solve these problems. It stipulates that time for land allocation will start immediately after the completion of compensation and resettlement. Detailed procedure for land allocation will be implemented in accordance with Article 68.3 of the Decree 43/2014/ND-CP dated 15 May 2014 stipulating some articles of Land Law, some of which can be summarised as follows:

i. Investors have to submit a dossier requesting for land allocation following guidance of competent authority, to the competent People’s Committee and fulfill their financial obligations in accordance with the law;

ii. Investors have to pay land use fees if required;

iii. Investors are granted certificate of land use right.

Conditions to determine investment projects involving land

Compared to the previous Decree, the Decree 25 adds the conditions for competent authority to determine which investment projects will be considered as investment project involving land. These conditions can be summarised as follows:

  • Being on the list of projects requiring land recovery which have been approved in accordance with the law; or being of land areas under the State’s management;
  • Conforming to the socio-economic development plan; and
  • Being ineligible for organising auction for land use rights in accordance with land law.

Minimum amount paid to State

The minimum amount paid to the State is an amount which the investor commits to pay to the State unconditionally if he/she is chosen by the State for an investment project involving land. This amount is exclusive of the land use fees which investor must pay in accordance with the land law. This amount helps to reflect the land’s value and avoid losses to the State’s budget.

Following Article 47 of the Decree 25, the minimum amount paid to the State is determined is based on:

  • Area of land with a fee for using the land or rent of the land, of the land fund to be allocated or leased to investors for implementation of the project;
  • Average increase in value after bidding per unit of the land or of the land fund with the same using purpose within local area or of the land fund used for implementation of the project; and
  • Coefficient adjustment of average increase in value after bidding of the land areas or of the land fund with similarities or of the land fund for implementation of the project and other necessary factors (if any).

Preliminary step prior to investor selection procedure

The Decree 25 adds a preliminary step to the investor selection procedure which requires the investors to submit their registration dossiers to the Department of Planning and Investment (“DPI”) and the National bidding network system. Then, the DPI will conduct a preliminary assessment on capacity and experience of the investors based on their registration dossiers. After the assessment, the chairperson of the provincial People’s Committee might instruct the investor(s) that:

  • In case there are two or more investors complying with requirements, open bidding procedure will be implemented; or
  • In case there is only one investor satisfying the requirements, the competent authority will guide the investor to submit dossiers in accordance with the Law on Investment and other relevant laws.

Facilitation for bidding procedure

The Decree 25 also stipulates certain articles which helps to facilitate the bidding procedure.

Firstly, it simplifies the procedure by removing the preliminary step in contract negotiation, investment agreements signing and investment registration certificate issuance.

Secondly, it allows competent authorities to proactively set time of bidding. Accordingly, it only stipulates the minimum time limit for the investors to prepare prequalification file, bid dossier and proposal dossier, and it lets competent authorities to decide themselves the time limit for evaluation and approval of those mentioned dossiers.

Lastly, to improve the transparency of information in bidding, besides the requirement for the DPI to publicise all information regarding the contract for public private partnership project and investment project involving land on the National bidding network system, the Decree 25 additionally requests investors to submit their prequalification files and registration files for investment projects involving land via National bidding network system.

In short, the new Decree 25 has removed many obstacles and helps to reassure investors in land projects. If you want to know more about the Decree 25 and investment laws in Vietnam, please contact our office.


DISCLAIMER

This LBN newsletter are NOT legal advice. Readers are advised to retain a qualified lawyer, should they wish to seek legal advice. VCI Legal are certainly among those and happy to be retained, yet VCI Legal is not to be hold responsible should any reader choose to interpret/apply the regulations after reading this LBN without engaging a qualified lawyer.