Proposal to amend and supplement the Decree on the establishment, appraisal and approval of sea encroachment investment projects

According to Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), regulations on land reclamation activities bring many benefits and are therefore very necessary. The Ministry of Natural Resources and Environment needs to soon complete the decree for promulgation, contributing to removing bottlenecks in land reclamation projects at present.

Commenting on the draft Decree on sea encroachment activities" sent to the Prime Minister and the Ministry of Natural Resources and Environment, the Chairman of HoREA said that he highly expects the Government to issue this Decree to detail the implementation of Article 190 of the 2024 Land Law, which will take effect from April 1.

HoREA basically agrees with the Draft Decree on sea encroachment activities (Draft Decree) and gives comments on some concerns in the Draft Decree.

Specifically, Mr. Chau proposed to amend and supplement Clause 2, Article 3 of the Draft Decree, for 3 reasons.

Firstly, the land reclamation investment project, the land reclamation items in the investment project in localities may include coastal alluvial areas, or coastal protective forest land, or coastal aquaculture land. The change of land use purpose for these types of land must be carried out in accordance with the provisions of the law on land and relevant laws.

Second, the sea encroachment investment project, the sea encroachment item in the investment project according to the planning not only aims to create land fund but can also "create land fund with specialized sea surface" to implement investment projects along the route such as: Wharf from the mainland to deep sea areas, or coastal wind power projects, offshore wind power projects, or oil and gas pipelines or power cables, optical cables.

Third, the sea encroachment investment project, the sea encroachment items in the investment project in a certain sea area, or coastal alluvial area, or coastal protection forest land, or coastal aquaculture land must be implemented according to the planning, and must comply with the provisions of relevant laws.

In addition, the Chairman of HoREA also proposed to amend and supplement Article 5 of the draft Decree on the establishment, appraisal and approval of sea encroachment investment projects or sea encroachment items of investment projects.

This not only complies with the provisions of construction law but also with related laws such as investment law, housing law, real estate business law, maritime law, forestry law, etc.

The reason given by HoREA is that the sea reclamation project is a public investment project "aimed at creating land funds, land funds with specialized sea surface for socio-economic development purposes" after "accepting the completion of sea reclamation", then a bidding process will be conducted to select investors to implement component projects or construction items within the scope of the sea reclamation project.

A sea reclamation project is an investment project "using foreign capital from public investment and projects using other capital" (private capital). According to the provisions of the PPP Law 2020 and the Investment Law 2020, the "strategic investor" or "investor selected according to the provisions of the PPP Law 2020 and the Bidding Law 2023" will both carry out sea reclamation activities and carry out component projects or construction items within the scope of the sea reclamation project.

In this case, investors must not only comply with "the provisions of the construction law", but also comply with "relevant laws" such as investment law, housing law, real estate business law, maritime law, forestry law, agricultural law, fisheries law, and environmental protection law.

How to determine land use fees and land rental fees for "sea encroachment projects"?

HoREA proposed to amend and supplement Article 6 of the "draft Decree" on "land allocation, land lease, and allocation of sea areas for sea encroachment" in the direction of "copying" the content of Clauses 3 and 5, Article 68 of Decree 43/2014/ND-CP and Clause 21, Article 1 of Decree 148/2020/ND-CP, instead of "referring" to Clauses 3 and 5, Article 68 of Decree 43/2014/ND-CP and Clause 21, Article 1 of Decree 148/2020/ND-CP.

According to HoREA's analysis, Decrees 43/2014/ND-CP and 148/2020/ND-CP will expire from the date the 2024 Land Law and the Decree detailing the implementation of a number of articles of the Land Law take effect from January 1, 2025 or may be considered by the National Assembly to take effect from July 1, 2024.

State officials, civil servants and public employees only need to base on this Decree to implement without having to look up previous related Decrees.

It is proposed to add the case of "no bidding to select investors to implement projects using land" or the case of land allocation, land lease to "strategic investors, PPP project investors" to Point c, Clause 2, Article 6 of the "draft Decree" because Article 124 of the 2024 Land Law stipulates "cases of land allocation, land lease without auction of land use rights, no bidding to select investors to implement projects using land" and the 2020 PPP Law stipulates the selection of investors through bidding for PPP projects.

Regarding the determination of land use fees and land rents for sea encroachment projects, the Association agrees with the regulation that the determination of specific land prices for calculating land use fees and land rents is carried out in accordance with the provisions of the Land Law, in Clause 1, Article 8 of the Draft Decree.

HoREA agrees with the regulation: "In case of applying the surplus method to determine specific land prices, the estimate of total development costs must include land reclamation costs approved by competent state agencies."

In addition, HoREA also requested the Prime Minister and the Ministry of Natural Resources and Environment to carefully consider the expert's proposal to add interest costs in estimating total development costs when applying the surplus method.

Because the interest expense is a very large actual expense, because investors all have a need to borrow medium and long-term credit capital. In some cases, investors have to borrow at high interest rates, causing the loan cost to account for more than 20% of the total project investment.