Land Reform 1996:Viet Nam:1
SD DIMENSIONS / Land Tenure / Land Reform Bulletin: 1996

Tenurial Reforms and Agricultural Development in Viet Nam, Part One

T. Haque
Director, Centre for Asian Studies
National Institute of Rural Development
Rajendranagar, Hyderabad 500 030, Pakistan

L. Montesi
Senior Officer, Rural Development Organizations
FAO Rural Development Division, Rome

The Socialist Republic of Viet Nam is undergoing a process of transformation from a centrally planned economy to a market-oriented economy. Based on field surveys and activities carried out in 1994-95, within the framework of the FAO project Agricultural Support Services Programme, this article is intended to: analyse the nature and extent of reform in the land tenure system and agricultural support services in Viet Nam; examine whether the undergoing process of reform would be conducive and sufficient to insure market-led, sustainable agricultural and rural development; and analyse the major constraints to market-oriented agricultural development and suggest appropriate remedial measures.


Réformes de régime foncier et développement agricole au Viet Nam

La république socialiste du Viet Nam connaît un processus de transformation passant d'une économie centralement planifiée à une économie de marché. Basé sur des enquêtes de terrain et des activités menées entre 1994 et 1995, dans le cadre du projet de la FAO «Programme de services de soutien agricoles», ce document vise à analyser la nature et l'étendue de la réforme du régime foncier et des services de soutien à l'agriculture au Viet Nam; examiner si le processus de réforme en cours sera conducteur et suffisant à assurer un développement rural et agricole durable guidé par le marché; analyser les principales contraintes à un développement agricole orienté vers le marché et suggérer des mesures appropriées pour y remédier.


Reformas de la tenencia de la tierra y desarrollo agrícola en Viet Nam

La República Socialista de Viet Nam ha encaminado un proceso de transformación desde una economía planificada a nivel estatal hacia una economía orientada al mercado. El presente artículo ha sido elaborado sobre la base de la experiencia de trabajo de campo y de las actividades que se llevaron adelante en los años 1994-95 en el marco del Proyecto FAO "Programa de Apoyo a los Servicios Agrícolas". Los principales objetivos del documento son: analizar la naturaleza y la dimensión de la reforma del sistema de tenencia de la tierra y de apoyo a los servicios agrícolas en Viet Nam; examinar la capacidad del proceso de reforma para asegurar la funcionalidad del mercado como también un desarrollo agrícola sostenible; analizar las mayores dificultades del desarrollo agrícola en un sistema orientado hacia el mercado y proponer algunas medidas de corrección.


Contents

Part One
  • Introduction

  • Nature and extent of tenurial reforms
    • Land Law of 1987
    • Land Law of 1993

  • Critical appraisal of the land tenure system
    • Right of land transfer
    • Allocation of forest land to individuals and households
    • Right of land lease to foreign investors
    • Ceilings on landholdings
    • Further reforms in land law and land administration
      • Permanent settlement of land-use right
      • Statutory land commission
      • Reorganization of land administration
      • Improvement of the right of land lease
      • Modification to the right of land transfer
      • Consolidation of holdings
      • Settlement of land disputes
      • Liberalization of the rules on the use of land

  • Land taxation in Viet Nam

Part Two (separate document)

  • Impact of tenurial reforms on land-use efficiency and agricultural productivity
    • Improvement in land-use efficiency
    • Change in cropping patterns and the trend towards agricultural diversification
    • The growth of agricultural production

  • Areas of concern for sustainable agricultural development
    • Yields of rice are low in many regions
    • Overall declining trend in crop yields in recent years
    • Sustaining the changes in factor productivity
    • Slow growth in use of modern inputs
    • Decline in the growth of livestock output
    • Need for further reforms in infrastructure, institutions and policy environment

  • Conclusions

  • Bibliography


Introduction

Viet Nam is undergoing a process of transformation from a centrally planned to a market-oriented economy. The agricultural production organizations have been decollectivized and lands have been allocated to private individuals and households for stable, long-term use. Cooperatives and state farms provide only inputs and services to farm households on a self­accounting basis. There is also an effort to develop a free market delivery system. These measures are intended to accelerate the pace of diversified, market-oriented agricultural development. Nevertheless, the Vietnamese agricultural economy still suffers from various infrastructural, institutional, technological and agroclimatic constraints and, in addition, the land tenure system and the overall policy environment may require further improvement to satisfy the needs of sustainable agricultural development. This article analyses some of these aspects of agricultural development in Viet Nam.

The article is based on data collected by the authors as members of the FAO Mission in Viet Nam from March to August 1994. It concentrates on relevant government documents and reports; field observations; the results of discussion with policy-makers and government officials; and the results of a survey conducted by the Ministry of Agriculture and Food Industry (MAFI, the counterpart national agency). Tabular analysis and graphics have been used to present the final results and conclusions and an exponential trend equation was estimated to calculate the variations in the growth rates of inputs and outputs of the agricultural sector during the pre- and post-reform eras, covering the years from 1976 to 1992. Changes in factor productivity in Vietnamese agriculture were examined by calculating the differential growth rates of output over inputs.

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Nature and extent of tenurial reforms

Prior to 1981, the land tenure system in Viet Nam was highly unstable and inefficient. In North Viet Nam, the cooperative-managed collective farming system was firmly established in the 1960s and 1970s but, in South Viet Nam, collectivization started only after unification in 1975, and before it could take a firm hold the national land policy was changed in 1981. The pre­1981 land tenure system did not motivate farmers to improve soil fertility or land-use efficiency as they did not feel attached to the land. Each farm household received a share of outputs according to the recorded labour hours of its members. In January 1981, the Executive Committee of the Communist Party of Viet Nam promulgated Decree No. 100, aimed at improving agricultural productivity through increased individual incentives. Decree No. 100 did not alter the collective production relations as such, but it provided the workers with greater incentives, because they were allowed to keep 100 percent of the surplus they produced over the contracted output, although land and production materials were still controlled by the cooperatives. Individuals and families were allocated land and simple tools, while other production services and inputs were provided by brigades. The farmers were free to add more inputs and allocate their own time and labour to produce higher yields and surpluses.

In the pre-1981 system, the production brigades were allowed to keep 70 percent of any surplus produced above the contracted level and farmers were given only 30 percent, so the post-1981 system represented a marked improvement in terms of production incentives. On the other hand, it also brought greater costs to those who failed to produce the contracted level of output, as now farmers were required to pay 100 percent to make up the deficit, while in the earlier system, it was to be paid on a 30:70 percent basis by brigades and farmers respectively. The new system, therefore, provided greater managerial freedom and production incentives to farmers for higher production.

In 1987, however, there was a shortfall in agricultural production partly owing to bad weather conditions and partly to some of the negative aspects of Decree No. 100, coupled with unsuccessful government policies. It was noticed that direct private investment in agriculture was not increasing in proportion to the investment for capital construction from the government. Therefore, in 1985, the farmers' share in surplus output was reduced and the initial encouragement provided by Decree No. 100 began to decline. While the managerial efficiency of cooperatives deteriorated, the farmers also felt that there was little they could do to improve the situation.

Land Law of 1987

In December 1987, a new Land Law was enacted, which recognized the land-use rights of individual households. It abolished the old contract system and allocated lands to individual households for a period of three to 15 years on the basis of the number of family members or the labour capacity of the household. The land-users could keep the entire output after fulfilling their tax and other obligations.

According to the 1987 Land Law, however, land-use rights were not transferable and land could not be used as collateral for loans. The rights of sale and inheritance were not recognized.

In April 1988, the political bureau of the Communist Party passed Resolution No. 10 which recognized the household as an independent economic unit and issued instructions for the allocation of land to households for up to 15 years, advising the cooperatives to sell production materials to their members at low prices. It was felt, however, that the Land Law of 1987 did not generate sufficient farmer incentives for sustainable agricultural development. In many areas, lands were allocated to farmers for a period of only three to five years and plots of land were either transferred or taken back arbitrarily. Cooperatives continued to believe that they had control over land and production materials and, in the absence of land titling and records, farmers continued to feel insecure and probably did not utilize their production potentials fully. In addition, the law did not provide any mechanism for the settlement of land disputes which assumed grave proportions in many localities.

Land Law of 1993

In order to remove some of the above­ mentioned handicaps, a new Land Law was enacted in July 1993 which became effective from 14 October of that year. The new law provides for the allocation of land to organizations, individuals and households for long-term and stable use. The period of land allocation is 20 years for annual crops and 50 years for other perennial crops and forestry (Article 20). The tenure can be renewed on expiry, if the land-users need to do so and if they have used the land properly according to law. All land-users will be given land-use right certificates (LURCs) (Article 2). In addition, Decree No. 64, which the Communist Party (CP) issued in September 1993, and Decree No. 02 (issued on 15 January 1994) have provided measures for regulating the allocation of agricultural land and forest land respectively. The government passed an ordinance on 15 March 1994 for the regulation of land-use above specified ceilings. All these measures are intended to create a land tenure system that will be conducive for sustainable agricultural and rural development.

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Critical appraisal of the land tenure system

The question that arises is whether the recent tenurial reforms will ensure the emergence of a stable, albeit individual household-based, land tenure system, in which farmers do not feel insecurity of tenure, can make long-term investment in land improvement, take other measures for productivity growth and help in the growth of a market-oriented agricultural economy. Under normal circumstances, 20 years for annual crops and 50 years for perennial crops should ensure stability in the system, particularly when the term is renewable if the landholder so wishes and has used the land properly in the first period. However, the question remains as to whether there will be arbitrariness in the decision of the state when assessing whether the land-users have used the land in accordance with law and whether this will lead to insecurity of tenure, discouraging any long-term land improvement measures by the cultivating households. Some aspects of these provisions look similar to the tenancy laws of India, which govern the security of tenure of tenanted land, but in the present context, Vietnamese farm households appear to be the tenants of state and not of private landowners although the law does not explicitly say so. Hayami, a noted agricultural economist, suggested that the land tenure period in Viet Nam should be extended to 50 years for annual crops (FAO, 1994a); there seems no reason why it should not be 99 years, as in China, or even permanent, as elsewhere, which would allow market forces to decide who leaves and who stays on the land in future.

Data for the period up to June 1994, show that LURCs had been issued in only 19 percent of the total communes, covering about 18 percent of the total farm households in the country (Table 1).

TABLE 1 - Communes and households covered by issuance of land use right certificates (June 1994)
Region Province Percentage of communes covered Percentage of households covered
North Mountain Ha Giang 30.533.8
Tuyen Quang26.2 18.6
Cao Bang14.3 9.1
Lang Son4.0 5.3
Bac Thai14.7 41.7
Lao Cai6.7 4.2
Yen Bai6.9 3.8
Lai Chau- -
Son La6.8 7.5
Quang Ninh2.8 7.8
Mid LandVinh Phu 61.042.8
Ha Bac12.2 7.1
Red River DeltaHoa Binh 28.035.0
Hai Tay6.0 7.0
Hanoi13.9 15.8
Hai Phong- -
Hai Hung 46.6 16.1
Thai Binh1.4 1.0
Nam Hainh15.9 13.5
Ninh Binh5.3 5.6
Central coast of North LandThanh Hoa 21.721.0
Nghe An1.3 1.5
Ha Tinh2.3 2.3
Quang Binh15.0 10.1
Quang Tri16.9 15.4
Thua Thien Hue19.3 20.5
Central coast of South LandQuang Nam Da Nang 5.34.7
Quang Ngai10.6 9.9
Binh Dinh13.1 7.7
Phu Yen36.4 12.3
Khanh Hoa15.6 17.8
Ninh Thuan3.8 2.4
Binh Thuan6.4 1.9
Dac Lac35.2 23.5
Lam Dong31.1 17.4
Gia Lai- 10.8
Kon Tum- -
Northeast of South LandDong Nai 16.123.5
Song Be- -
Tay Ninh60.2 38.7
TP Ho Chi Minh5.0 10.1
Ba Ria Vung Tau15.1 19.0
Mekong River DeltaLong An 0.624.2
Tien Giang19.4 12.5
Ben Tre22.4 18.3
Dong Thap83.3 59.0
Vinh Long75.0 68.3
Tra Vinh33.3 18.4
Can Tho63.2 28.1
Soc Trang76.6 33.2
An Giang100.0 72.0
Kien Giang15.8 12.4
Minh Hai45.0 44.4
TOTAL 19.117.9

On the basis of discussions with various field functionaries in the provinces and interviews with the administrative authorities, it was revealed that the main reasons for this slow progress in the issuance of LURCs included:

  • a lack of adequate finance to carry out the work of mapping, measurement of land and issuance of LURCs;
  • a lack of trained cadres to carry out the work efficiently;
  • a lack of interest and enthusiasm on the part of officials;
  • a lack of proper direction and supervision;
  • disputes among the cadres.
The complete process of cadastral surveys, mapping, registration and certificate issuance is a costly affair and it is doubtful whether the Government of Viet Nam, with the limited resources at its disposal, will be able to accomplish the task in the near future. The country cannot afford to delay the process, however, particularly because the development of the market factor in agriculture would become highly uncertain as a consequence of doing so.

Right of land transfer

Article 3 of the 1993 law stipulates that households or individuals receiving land allocated by the state shall be entitled to exchange, transfer, lease, inherit and mortgage the land­use right. The right of lease, however, seems to be highly restrictive; why should the lease period be restricted to three years, as long as the land lessee uses the land for its stipulated purpose, within the ceiling limit?

Allocation of forest land to individuals and households

Decree No. 02 provides for the allocation of forest land to individuals and households. The main objectives of allocating forest land to individuals and households are: to involve individuals and households in the protection of the forest from fire, theft and environmental degradation; and to promote the utilization of forest land and the greening of bare lands with trees by encouraging individuals and households to participate in afforestation for economic gains.

According to the existing procedure, it is the cooperatives which decide whether individuals or households have the capacity to afforest land within three years of its allocation and, when the decision of the cooperative is approved by the commune and district people's committee, the individuals and households receive forest land for 50 years with an obligation to pay to the cooperatives a share of the timber harvested, which is generally 20 percent for newly planted trees and 50 percent for previously planted trees. However, it must be ensured that this does not become an exploitative sharecropping arrangement and that it remains free from corruption.

Right of land lease to foreign investors

Articles 80 to 84 of the new land law are devoted to regulations on land leased to foreigners. The law permits the leasing of land to foreign investors if the lease is based on the economic and technical justification that is approved by the authorized state body according to the law on foreign investment in Viet Nam.

Nevertheless, the law does not specifically mention how foreign companies interested in agribusiness or export can enter into contracts with local small producers directly or with state farms engaged in plantation crops; these procedures are not clearly spelled out.

Ceilings on landholdings

Decree No. 64, dated 27 September 1993, provides that there will be a ceiling of: 3 hectares of annual cropland in 16 provinces where the per caput land availability is high; 2 hectares of annual cropland in another 37 provinces; 10 hectares of perennial cropland in the delta region; and 30 hectares of perennial cropland in the hilly and mountainous regions. Mollar and others (SPC/FAO, 1993) cautioned against the imposition of low ceilings on landholdings but, given the present pressure of population on land and the lack of non­farming employment opportunities, there seems to be no escape from the imposition of low ceilings on landholdings. Any policy must be related to a particular stage of development and according to the needs of a particular socio­economic situation. In addition, the recent data show that the Red River Delta region, which has the lowest average land per household, has also witnessed the most impressive growth in rice output (FAO, 1994b).

Further reforms in land law and land administration

At present, the National Assembly is considering further amendments to the land law with respect to land transfer and the regulation of land above ceilings (which existed prior to the 1993 law and were subsequently regularized). While the full details are not known, it is expected that the restriction on the land-use period for lands above the ceilings will be withdrawn and rights of land transfer, lease and mortgage may be explicitly laid down and improved.

In order to accelerate the pace of market-oriented agricultural development, agrarian reforms have to be undertaken much beyond the level of present thinking at government level. Some of the essential measures are outlined below.

Permanent settlement of land-use right. The land-use period should be declared permanent and inheritable without any condition. This would result in optimum, efficient utilization of land for productivity growth and would also help to develop the land market.

Statutory land commission. The government should set up a land commission to complete the task of surveying, mapping, land registration and the issuance of LURCs within a time-bound programme. Some senior officials of the Central Department of Land Administration are of the opinion that, at the present rate, it would take at least 15 years to complete the work. This would result in uncertainty in the minds of agricultural producers and adversely affect productivity. Meanwhile, temporary certificates should be issued immediately to all land-users to avoid uncertainty.

Reorganization of land administration. The three divisions of the Central Department of Land Administration (namely land mapping, land registration and land inspection) have to work in an integrated manner. If possible, these divisions should be merged into one and put under the charge of an additional director-general who should also function as the chairperson of the proposed statutory land commission. This would lead to better coordination of the work and speedy implementation of land law at the grassroots level. This unit will also have to be properly strengthened in terms of its scientific workforce and financial resources. In addition, the Institute of Land Planning and Investigation and the Institute of Mapping should be merged to allow better coordination of the work and improvement in work performance. The Land Policy Group of MAFI and the General Department of Land Administration should have greater collaborative linkages in order to evolve an efficient land-use planning system.

Improvement of the right of land lease. Article 78 of the Land Law should be modified so as not to restrict the lease period to three years, otherwise the present provision will restrict the development of the land market. All recorded leasing within the stipulated ceiling limit should be permitted without any time limit. The state farms producing plantation crops should also engage in long-term lease contracts with small producers and dispense with all year-to-year contracts.

Modification to the right of land transfer. Article 75 of the Land Law should be modified to remove the long list of restrictions imposed on land transfer and allow land transfer for more productive purposes according to market norms.

Consolidation of holdings. The law should provide for consolidation of fragmented holdings which restrict agricultural production efficiency. Quality differences in land should not stand in the way of reallocating land to any individual household in one fragment, particularly if the size of holding is accordingly adjusted. The government has already fixed a price scale for various categories of land.

Settlement of land disputes. The law should specifically provide that all land dispute cases should be settled at the village level through a specially constituted people's representative group at the first instance. Disputes should be referred to courts only when conciliatory efforts fail. This is necessary in order to avoid the expensive law-enforcing mechanism that operates through the courts, particularly at this early stage of the country's development.

Liberalization of the rules on the use of land. Articles 42 to 51 should be suitably modified to make the land-use rules less restrictive. For national security and social equity, certain restrictions may be necessary but, within the ceiling limit, land-use patterns should be decided by the individual producers according to their market and profit expectations.

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Land taxation in Viet Nam

Generally speaking, agricultural taxation is used as an instrument for resource mobilization and social equity. An irrational tax policy can, however, cripple production incentives and agricultural growth. In Viet Nam, agricultural taxes include land-use tax, land transfer tax and taxes on agricultural exports and imports. As well as these, there are cooperative fees, irrigation charges, turnover tax on agribusiness, etc.

The land-use tax rate is fixed at 7 percent of the average value of output from land obtained during the previous three years. The tax rates vary from 50 kg per hectare to 550 kg per hectare, with rates of up to 650 kg per hectare for various categories of perennial cropland. Once defined, the land categories remain unchanged for ten years. Several categories of land are either totally or partially exempted from the payment of land-use taxes. The rates of land transfer tax vary from 10 to 40 percent of the value of the land, depending on the purpose for which the land transfer takes place. The irrigation fee ranges from 300 kg of paddy per hectare for two crops for pump-irrigated areas to 250 kg per hectare for two crops for gravity-irrigated areas. The cooperative fee varies from 5 to 7 percent of output. The government also imposes export tax, ranging from 1 percent on the export value of rice, maize, crabs and fish (other than shrimp, prawn and culture fish, for which it is 2 to 3 percent) to 4 percent on bovine hides and skins. The turnover tax ad valorem, ranges from 1 percent in the case of food, insecticides and seed to 6 percent on noodle production and industrially processed food products.

It is generally felt that the turnover tax is slightly too high. The export tax is considered to be reasonable and does not seem to affect either agricultural exports or agricultural production adversely. However, the long list of exempted categories of land for the purpose of land-use tax and land transfer tax need rethinking, in order to generate resources and to avoid a rent-seeking attitude among the tax enforcement authorities. The land categories should not be rigidly fixed for ten years for the purpose of taxation, as land development through public investment should be a continuous process.

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