Land Reform Bulletin: 1996
Réforme agraire: 1996
Reforma Agraria: 1996

Tenurial Reforms and Agricultural Development in Viet Nam, Part One

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

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

Contents

• 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

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

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

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

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Critical appraisal of the land tenure system

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).

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.

Right of land transfer

Allocation of forest land to individuals and households

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

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

Further reforms in land law and land administration

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

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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To: Tenurial Reforms and Agricultural Development in Viet Nam, Part Two