While tourism development projects were once eligible for state land recovery under the 2003 Land Law, the removal of this provision in the 2013 Land Law has triggered bottlenecks in critical tourism initiatives.
Entangled Legal Complexities
Discussing the limitations of Vietnam's tourism industry, Mr. Nguyễn Văn Đính, Vice Chairman of the Vietnam Real Estate Association (VnREA), points out that the existing infrastructure only meets a fraction of the demand, and its quality is often subpar, leaving high-end tourism products in short supply. Over a hundred large-scale tourist projects are currently in limbo, awaiting legal resolution. If this situation persists, it will not only deter tourism investment but also pose difficulties for investors and local governments striving to attract investments.
Survey findings from the Vietnam Real Estate Research Institute underscore the critical role of legal factors, accounting for 50% of the considerations influencing participation in the tourism and resort real estate market, with economic-financial factors constituting 30%. Yet, the current legal framework for tourism infrastructure development remains incomplete, offering inadequate encouragement for organizations and individuals to invest in tourism infrastructure projects.
Lawyer Nguyễn Hồng Chung, Chairman of the Board of Directors of DVL Ventures and Vice Chairman of the Hanoi Real Estate Club, shares insights into the legal challenges faced by tourism projects: "A tourism project encompasses various types of land, with 70% of it being state-managed. While negotiations with local communities are viable for privately owned land, reaching agreements for state-managed land poses a dilemma. Auctioning may seem reasonable for state-managed land, but initiating an auction requires the formation of a new project, which, unfortunately, is at odds with the Investment Law's stipulations."
Current legal regulations permit the selection of investors through land use rights auctions for tourism, commercial, and service projects. However, a lack of land recovery mechanisms for these project types means that tourism businesses cannot allocate or lease land through competitive bidding for land use rights. Instead, they are limited to transferring or auctioning land use rights, a process heavily reliant on land availability, local budgets, and the necessity for land compensation agreements with 100% of affected households, leading to hesitation among many potential investors.
Dr. Cấn Văn Lực from the BIDV Institute of Training and Research emphasizes the need for a complete and supportive legal framework for tourism infrastructure development. Sustaining and synchronously developing investment projects in tourist areas require substantial capital and access to land resources for long-term investment and operation. However, the current legal framework falls short of providing the necessary support, leaving organizations and individuals with limited access to land resources for developing tourism infrastructure. Moreover, there is a dearth of detailed regulations governing the issuance of certificates for commercial and service land, including tourist land and other forms of tourist real estate established on tourist land. Furthermore, regulations related to the granting and transfer of land ownership and assets tied to commercial land and tourism services, such as condotels and shophouses, remain incomplete and inconsistent.
The Way Forward
To position tourism as a key economic sector, experts and investors advocate for specific regulations on tourist land in the revised Land Law. Large-scale tourism projects, including amusement and entertainment areas, multipurpose complexes, and housing/urban developments combined with tourism and commerce, should be subject to state land recovery. Furthermore, mechanisms for leasing and transferring commercial and service land use rights to foster tourism development should be introduced. Additionally, stronger sanctions for intentional violations of planning and investment laws concerning tourism development are essential to curb speculation, resource wastage, and land disputes.
Currently, approximately 239 resort real estate projects are scattered across the nation, with condotel, villa, and shophouse projects valued at around VND 681,886 billion (about USD 30 billion). However, stagnation has gripped this segment, attributed not only to the impact of COVID-19 but also the lack of a comprehensive development strategy for the tourism industry, particularly regarding the enhancement of mechanisms and legal frameworks. Realizing the full potential of land resources and infrastructure for tourism in Vietnam represents a significant challenge that must be addressed.
Legal Challenges in Unlocking Tourism's Potential
The updated Land Law stands at a crossroads. To transform tourism into a cornerstone of the economy, as envisioned by Resolution 18-NQ/TW of the Politburo, it's imperative to establish mechanisms for creating land reserves dedicated to tourism. Large tourism projects and expansive tourism complexes must be included within the ambit of state land recovery. However, the current draft Land Law outlines 30 cases of land recovery for socio-economic development without specific mention of tourism, entertainment, and recreation development projects.
Renowned real estate legal expert Mr. Nguyễn Văn Đỉnh emphasizes that without provisions for land recovery in tourism projects, it's challenging to realize large-scale initiatives and attract talented investors. Investment in tourist areas is capital-intensive and entails a prolonged capital recovery period. If the existing regulations in the revised draft Land Law remain unchanged, the execution of pivotal tourism projects could face roadblocks, inadvertently sidelining potential investors. Furthermore, foreign investors are precluded from engaging in land negotiations with local communities to secure land for their projects.
For tourism to genuinely blossom as a pivotal economic sector, industry experts and investors advocate for the integration of specific regulations concerning tourist land into the revised Land Law. This should encompass the inclusion of large-scale tourism projects, such as amusement and entertainment areas, multipurpose complexes, and housing/urban developments combined with tourism and commerce, under the umbrella of state land recovery. Additionally, mechanisms for leasing and transferring rights to use commercial and service land for tourism development should be introduced. It's equally vital to enact regulations while bolstering sanctions for deliberate violations of planning and investment laws associated with tourism development to curtail speculation, resource wastage, and land disputes.
According to data from the Vietnam Real Estate Association (VnREA), the nation presently hosts approximately 239 resort real estate projects. Among these, condotel projects have an estimated value of about VND 297,128 billion, while villa projects are valued at approximately VND 243,990 billion, and shophouse projects are estimated at around VND 154,245 billion. The combined value of these three real estate segments stands at roughly VND 681,886 billion, equivalent to USD 30 billion. However, this segment, which experienced robust growth for some time, has stagnated in recent years.
The prevailing real estate market is nearly stagnant, with minimal transaction activity. Alongside the pandemic's impact, the primary reason for the sharp decline in this market is the lack of a comprehensive development strategy for the tourism industry, particularly the enhancement of mechanisms and legal frameworks. Realizing the full potential of land resources and infrastructure for tourism in Vietnam poses a substantial challenge.
