Strict management and use of state properties – Unit 2: Changes in management and use of state land and housing

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The Vietnam national museum of history have attracted public attentions when it became a group of restaurants.

To better control and create the basis to exploit sources from the huge state properties more effectively, the state property management agencies have been implementing many effective solutions including completion of a legal framework.

Put state land into framework

According to the latest statistics from the Ministry of Finance, Vietnam has 2.585 million square meters of state-owned land, in which 91.65 % is managed and used by the non-public business group, the rest 7.8% by state agencies; 0.54% by the management organization group and 0.01 % by project management boards. The land allocation aims to create more favorable conditions for the operation of agencies and units. However, recently, violations on the use of state land have been constantly arising.

This was possibly reflected in a recent report from the Government Inspectorate. In the first quarter of 2017, the agency conducted 1,885 administrative examinations and 36,580 specialized inspections and detected economic violations of 41.821 billion vnd and 168 hectares of land. The Government Inspectorate has proposed to recover 8,773 billion vnd and 80 hectares of land; and removed out of settlement value and asked competent authorities to consider handling 33,049 billion vnd and 88 hectares of land.

More specifically, in September, 2016, the inspection result for Vietnam Petroleum Group showed many violations on land management and use such as this group leased land and contributed capital for business cooperation with 49.983 m2 of land; did not signed lease contract of 69,910m2 land with local authorities, or transferred land use rights without auction; and their member companies have not yet fulfilled their financial obligations with the state budget on land use as the Corporation transformed into a joint stock company.

The inspection result No. 43 in 2016 of the Government Inspectorate also pointed out many violations on most stages in management and use of state land fund in Hoa An district, Cao Bang province such as many violations of Land Law 2013; causing risk of a loss of 856 million vnd, that caused quite a stir.

Earlier, in 2015, the Government Inspectorate also found out many violations in state land management in Hanoi. The state land management in Cau Giay and Tu Liem was also assessed as existing the state land encroachment and illegal construction and lease.

Recently, in early May 2017, the Government Office issued a notice of the Deputy Prime Minister Vuong Dinh Hue, which directed the Ministry of Finance to send the list of housing and land which were changed on using purpose to implement investment projects to the Government Inspectorate for inspection of land management. This originated from the review of land use in the equitized companies (CPH) of the General Department of Taxation from 1 July 2014 to 30 November 2016, It was found that during SOE equitization, especially SOEs which hired state land in prime locations in the downtown, determined the enterprise value in the period that regulates to not calculate the value of land use right transfer into the enterprise value for equitization but did not hold auction upon equitization. Besides, re-arrangement of state land and houses which were permitted to change the purpose of building trading centers and offices for lease or houses for sale by the People's Committee did not conduct auctions under regulations.

This was one of the violations on management and use of state land over past years.

From 2001, the Prime Minister directed state asset management agencies to pilot the arrangement of state-owned land and houses. In 2007, the arrangement was officially implemented nationwide according to Decision No. 09/2007/QD-TTg of the Prime Minister.

In order to overcome the above violations, on the basis of reviewing and inheriting the current regulations, the draft Law on Management and Use of State Property (revised) stipulates 6 groups of principles for uniform application in management and use of state properties, state land, in which focusing on appointing management and use rights to agencies, organizations, units and other entities according to regulations in order to clarify management and use subjects and their responsibilities, strictly implement the principle of effective exploitation and use of state properties; manage and use state properties economically, publicly and transparently.

Facilitate the source exploitation

Besides the state land, the management of offices and public business establishments is also a hot issue. Many agencies have difficulties in a workplace and have to rent offices, while some agencies have built new offices but still retained the old house and land, causing waste of state land and properties. Moreover, many agencies deliberately manage and use the offices and properties not in accordance with their function and purpose.

A recent report of the Ministry of Finance showed that by mid-year 2015, over 200 land establishments of central agencies, as well as Hanoi city, were not used for the right purpose. Of which, 60 establishments for rent, 5 joint venture establishments not in accordance with regulations; 90 establishments for residential houses, which needs to be relocated; and the rest was other illegal establishments such as encroachment and arrangement for other entities. A case in point is that in 2016, Party’s Secretary of the Hoa Binh Ward, Thuan An Town, Binh Duong province and Director of the Ha Giang Electricity were disciplined for using state offices to organize wedding party for their children; the Hanoi Cooperative Alliance let enterprise use its headquarters to motorcycle business or typical cultural space of the Vietnam National Museum of history changed into a group of restaurants and eateries with full of noise regardless of other popular situations such as a ward’s people’s committee lease its yard to be a parking lot

According to the current Law on Management and Use of State Property, the above violation acts are contrary to law because the State administrative agencies and the non-public business units who are not independent on finance are not allowed to use the state properties for lease or production, trade and service and joint ventures. Only non-public business units who are independent on finance are determined the state property value transfer to management unit according to the mechanism of capital allocation and used them for lease, production, trade and service and joint ventures.

From the view of the expert, Assoc. Prof. Dr. Hoang Van Cuong, Vice Principal of the National Economics University said that the use of state properties not in accordance with functions and purposes of units is originated from that the law only permits units who are independent on finance to exploit allocated state properties. Therefore, other agencies and units which are allocated state properties but do not use all their functions often think that it is wasteful if not using all their functions. But the law does not permit the exploitation, these agencies and units exploited stealthily against the law.

"This is a huge amount of assets, if exploitation is not allowed, people will exploit unofficially, resulting in inefficient use and in transparent financial management, leading to losses of state resources and causing a social discontent. Thus, it is high time for us to change our mind on exploitation and use of state properties” - Mr. Cuong said.

According to the Ministry of Finance, the actual number of non-public business units certified as master of master of finance low. On 31 December 2016, according to the report of the ministries, branches and localities, 723 non-public business units were determined state properties to allocate under the mechanism of capital allocation to enterprises, with the total value of delivered properties of over 21 trillion. Therefore, the exploitation of state properties non-public business units according to the law was limited. Meanwhile, the amount and value of state properties in the non-public business group were quite large, accounting for nearly 70% of the total value. If these properties are used appropriately and effectively, they will create many social public services and reduce state budget to invest in the non-public business units.

Thereby, the draft Law on Management and Use of State Property (revised) proposes that all of the non-public business units have the right to exploit state properties, regardless of financial dependence or independence. Particularly non-public business units, which self-ensure their regular expenditures and investment expenditures, are more independent on properties than other units. This is also a prerequisite for non-public business units to gradually approach to self-independence and reduce subsidy of the State to the non-public business units.

In particular, according to the Public Property Management Department and the Ministry of Finance, to ensure the State control for the use of state properties for purposes of trade, service, lease and joint venture, the draft law on Management and Use of State Property (revised) stipulates 8 requirements be complied with, decision authority, responsibilities of non-public business units and the management agencies of state properties. The use of state properties for above purposes must also follow the market mechanism. Profits from production, trading service, lease and joint ventures must be accounted separately in accordance with accounting regulations and be managed and used according to the financial mechanism of non-public business units.

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The above-mentioned proposals not only ensure state effective management but also facilitate the exploitation of state properties of non-public business units, increasing sources for their development as well as preventing losses and raising revenues for a state budget.