Pacific Money | Economy | South East Asia
Among other things, the country’s land acquisition procedures are creaky, opaque and difficult to challenge.
People ride past a row of concrete pylons being built as part of the metro system in Hanoi, Vietnam February 19, 2017.
Big plans are underway to improve transportation infrastructure across Vietnam. Recently, the first metro line of its kind opened in Hanoi, which seems to be gaining popularity. Another pair of metro lines has progressed in Ho Chi Minh City, along with a mega-airport development in Long Thanh, accompanied by an extensive network of road and rail links.
A long-discussed idea for a high-speed rail line running 1,500 kilometers north-south – at a cost of tens of billions of dollars – has also recently been revived. This places Vietnam squarely in line with other countries in the region such as Thailand, Indonesia and the Philippines, which have invested heavily in transport infrastructure. But in Vietnam, long delays have pushed many of these projects back years, messing up funding agreements and raising the question: what’s holding them up?
Take Ho Chi Minh City’s Metro Line 1, which was mainly funded by the Japan International Cooperation Agency (JICA). The project is overseen by the Management Authority for Urban Railways (MAUR), an agency of the HCMC government. In 2014, the government released a report on the project, in which it estimated that the first line would be operational by 2018. But land acquisition was extremely slow, and they sailed past that deadline. In a September 2020 newsletter, MAUR announced that only around 44 percent of the required space had been handed over. It now appears that the line could be operational by 2023, but that could easily be postponed.
The land acquisition has also severely delayed HCMC’s second subway line, a project that has been held up by administrative, engineering and land clearance bottlenecks for over a decade. This complicates the project’s funding as original lenders, which include the Asian Development Bank and German state lender KfW, have almost doubled the estimated cost. The government is now proposing that the line will not be operational before 2030.
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Things are a little smoother for the new mega-airport project in Long Thanh, which is expected to handle tens of millions of passengers and relieve the nearby Tan Son Nhat International Airport. With a total price of around 16 billion US dollars, the airport is intended to anchor an extensive rail and road network in southern Vietnam and is considered a project of national strategic importance. In May 2022, it was reported that 90 percent of the land needed for the airport’s first phase had been handed over, and authorities expect the project to be operational by 2025. As with the subway projects, land acquisition has slowed things down, but not quite as much.
On the surface, this may seem somewhat surprising. Vietnam is a one-party state with a highly centralized administrative structure. Technically, all land is owned collectively by the people but administered by the state on their behalf. A new land law passed in 2013 further enshrined the state’s ability to reclaim land for economic development purposes. So why has land acquisition led to massive delays in major public works projects?
For one thing, planners and policymakers often underestimate the complexity of large infrastructure programs, especially when they have limited experience with them. The government of Ho Chi Minh City has never built a metro line before, and the MAUR agency tasked with executing it is relatively new. On the other hand, the Airports Corporation of Vietnam, the state airport operator, has been around for a long time. Therefore, it is not surprising that they are better at building airports than MAUR at building subway lines.
But the bigger problem is that Vietnam’s land law needs to be revised. Although it establishes the state’s right to acquire land for socio-economic development, the process remains opaque and difficult to challenge. The compensation is not based on market prices, but is calculated by the state. The executive branch—national, provincial, or municipal, depending on the project—has the most power to set terms and decide the outcome of disputes. As a result, people are being offered less than market value, and the law does not provide a clear way to challenge these results.
When land acquisition is carried out in this way, it can be slower than when safeguards are in place to ensure a minimum level of transparency (e.g. external appraisers) and legal mechanisms are in place to appeal against the will of the state or to challenge him. If Vietnam wants to speed up the pace of some of these projects—and especially if this high-speed rail project has a chance of being built in our lifetime—a good place to start would be to look closely at land acquisition laws.