Former Deputy Minister of Natural Resources and Environment Dang Hung Vo said coming up with a working mechanism for land pricing will be a key reform to solve land-related issues, yet it is hardly reflected in the latest draft. The views were raised during a workshop held by the Viet Nam Chamber of Commerce and Industry in Ha Noi yesterday, attended by several high ranking figures.

Vo said one mechanism for land pricing that he saw had been working in reality, citing an example of HCM City, was the consensus-based, benefit-sharing approach. In this approach, direct negotiations would be made by investors and land owners only and if investors reached a mutual agreement with 70 to 80 per cent of the land owners, they could start their projects.

"The State should only step in to work with these 20 to 30 per cent who could not settle with investors. But let’s allow investors to deal with the landowners by the market rules first. Of course, it is impractical to expect 100 per cent agreement, so the ratio of at least two thirds should be a working goal," he said.

He predicted this approach would result in fewer disputes than the current practice of setting the compensation rate against the benchmark prices decided by local authorities at the beginning of each year. This way of pricing resulted in a much lower rate compared to the market value.

Pham Sy Liem, vice chairman of the Viet Nam Construction Association, said the pricing method as proposed in the draft that "would be in accordance with the market value" was impractical because the market-based price was normally decided on a case-by-case basis at a specified time and place, while the compensation rate was normally set for an area over a certain amount of time.

He proposed using the "fair price" method in which the compensation was the amount of money needed to create the property in a similar place of equal value to the property revoked. This should also include a bonus that was brought in by the development project.

This method, Liem said, based on the radical perspective that landowners should not be viewed as ‘victims’ but rather as those who gave up their own land for the common development purpose.

"So it’s only fair if they could have a share of the development project afterward," he said.

He suggested Viet Nam could learn from the international practice in which compensation was paid in the form of land bonds to avoid paying a large amount of cash at one time.

President of the Viet Nam Value Appraisal Council Nguyen Ngoc Tuan suggested a pricing method based on the income of the property owners. "The price should be determined based on how much the property owner could earn during the ownership," he said.

Tuan said it was crucially important to explain to the landowners why there was the difference between the land price before and after a development project to save them from the perception that they did not get a fair share, as seen in many cases so far.

"We have to understand that the land price is higher because of the new infrastructure that has been brought in by investors. The thing is if the former landowners know how much the investors have put in that helps raise the land price to higher rate, they will not react," he said.

"But that requires investors to be transparent about their operations, which is not really the case now."

The participant highlighted the urgent need to set up an independent appraisal agency that is separate from the land management agency, otherwise, in Vo’s words, "corruption is inevitable."

The amended Land Law, prepared by the Ministry of Natural Resources and Environment, is expected to be passed by the National Assembly in the middle of next year.