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Habitat International 41 (2014) 1e7

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Agricultural land for urban development: The process of land conversion in Central Vietnam Nguyen Quang Phuc a, *, A.C.M. van Westen b, Annelies Zoomers b a b

Hue University, Vietnam Dept. of Human Geography and Planning, Utrecht University, The Netherlands

a b s t r a c t Keywords: Land conversion Stakeholders Compensation Participation Vietnam

Since the 1990s, Vietnam’s progressive integration into the global market economy has triggered major economic and social transformations. In spatial terms, these are marked by a massive conversion of agricultural land for industrial and urban development. While this process has attracted considerable attention from media and researchers, much of the research on land conversion has focused on the largest cities. Little attention is devoted to similar processes occurring in medium-sized cities where urban expansion has been rapidly increasing in recent years. In order to identify the issues and consequences, this paper attempts to analyze how the conversion of farmland for urban uses takes place in the medium-sized city of Hue in Central Vietnam. The analysis shows that land conversion for urban development purposes has increased social tensions and complaints from affected people. Two key issues are identified: i) the state uses its extensive powers in the decision-making process while the participation of affected people is passive and weak; ii) land conversion from agricultural to urban uses results from profit-seeking by multiple stakeholders. Data was collected through fieldwork in Hue and secondary sources such as newspapers, legal documents on land policy and urban development. Ó 2013 Elsevier Ltd. All rights reserved.


established rights holders’ considerable protection. Conversely, in countries without private land ownership, land conversion is dominated by the government. Vietnam is a socialist country where ‘all land belongs to the state’ (Land Law, 2003). Currently the country experiences rapid social and economic development based on a strategy of increasingly integrating into the globalized world economy. A logical corollary of this development process is a rising demand for suitable land for urban and industrial growth (Phuong, 2009). In order to accommodate that demand, the government uses the mechanism of land conversion for ‘public purposes’ to open up massive expanses of agricultural land in rural and peri-urban areas. In fact, it is estimated that nearly 1 million hectares of farmland was converted to nonagricultural uses between 2001 and 2010 (World Bank, 2011). The question now arises whether public sector ownership and management of land leads to more equitable outcomes than marketdriven conversion processes. In principle, state control over land could safeguard weak stakeholders from being crowded-out by market forces. On the other hand, we also know that land conversion has caused social tensions, attracting considerable attention from the media and researchers. Thus it is important to ask: to what extent do state-based land governance systems actually differ? Much of the research on land conversion in Vietnam is concentrated in mega-cities such as Hanoi and Ho Chi Minh City.

Land conversion is widely defined as a process characterized by the transference of land from one type of use and user to another. In most cases, as in this paper, conversion involves transforming agricultural land for urban uses (Azadi, Ho, & Hasfiati, 2011). This is a worldwide phenomenon (Firman, 1997) that is seen as inevitable during periods of economic development and population growth (Tan, Beckmann, Berg, & Qu, 2009). In many parts of the world, governments have devised policies to facilitate the acquisition of scarce land for such purposes in order to achieve socio-economic goals. This process, however, is implemented in different ways in different countries. Differences in land tenure regimes lead to different conversion processes; land rights determine the methods of purchase and sale and also affect the distribution of benefits produced by land conversion (Tan et al., 2009). For example, in the Netherlands and Germany, farmland is often privately owned and compensation prices are thus set according to market prices. Private land ownership in these European countries therefore offers

* Corresponding author. Tel.: þ84 54 3529139; fax: þ84 54 3529491. E-mail addresses: [email protected] (N.Q. Phuc), [email protected] (A.C.M. Westen), [email protected] (A. Zoomers). 0197-3975/$ e see front matter Ó 2013 Elsevier Ltd. All rights reserved.


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Little attention is devoted to similar processes taking place in medium-sized cities where land conversion for urban expansion is rapidly increasing. This paper, analyzing the conversion of agricultural land for urban expansion in a smaller city, focuses on identifying the stakeholders involved and their participation in the process as well as the distribution of benefits in the land conversion process, such as agricultural land acquisition for resettlement and new urban areas in the peri-urban zone of Hue City. Our findings show that participants in the land conversion process include affected households as well as local authorities and developers, including government agencies and state-owned enterprises. While the role of affected people tends to be passive and weak, state and government agencies are seen to play an active role in the process of decision-making and implementation of land conversion. Likewise, developers are also active in the process and particularly resourceful in seeking strategies to successfully promote land conversion. The paper also finds that the profits from land conversion are mostly seized by the developers and local authorities. The remainder of the paper first provides an explanation of the methodology used in this research. The paper then explains the legal framework for land conversion in Vietnam. The next section presents the results of the study: the agricultural land conversion players in the research area and their role in the conversion process, which is followed by a section discussing the two selected cases in Hue City. The last section provides the conclusions. Locality and methods This study was conducted in the peri-urban areas of Hue, a medium-sized city of some 400,000 inhabitants. Hue is the capital of Thua Thien Hue Province in Central Vietnam and well known as the historical capital of Vietnam under the Nguyen Dynasty (1802e 1945). Many monuments testify to this glorious past and a large part of the city has been recognized since 1993 as a World Heritage Site under UNESCO’s Convention on the Protection of World Cultural and Natural Heritage (Nguyen, 2008). Since the start of the 2000s, the urban area has expanded rapidly into the peri-urban spaces where 60% of the population depends on farming. Three key reasons explain these processes. First, the changes in the economic structure of the city have vitally contributed to urban expansion. Tourism has increased at a fast pace and is identified as one of the main sources of local development. The share of tourism in the gross local product increased from 30% in 1990 to 43% in 2010 (HSO, 2011). Second, and in line with the economic transformations, the urban population rose from 291,000 people in 1997 to 400,000 in 2011; this created a considerable demand for new dwellings and urban services. Third, local leaders pursue a deliberate urban growth strategy with the conviction that the creation of a modern urban image and urban expansion will attract investors and create more opportunities for economic growth (VCCI, 2011). The urban expansion of Hue City affected a large area of farmland in the peri-urban areas. In the period between 2000 and 2012, over 393 ha were converted for urban development projects. This process has affected the interests of 2770 households. Among wards and communes of the affected urban fringe, Thuy Duong and Huong So were selected as research sites. Thuy Duong is the ‘gateway’ to Hue City for travelers from the South; here the Dong Nam Thuy An, a new housing project, is being realized. Huong So is located in the North of Hue City and about 8 km from the commercial center. It is also the location of a resettlement project for the boat people completed in 2011. These two projects were selected to explore the process of land conversion for urban development (Fig. 1).

Secondary data, including newspaper articles, legal documents on land policy, statistical sources, and unpublished documents relating to the new urban developments of Thuy Duong and Huong So, was used to understand the nature and extent of land conversion in Vietnam. Additionally, fieldwork conducted between September and December 2012 included interviews with persons either responsible for or affected by land conversion processes as well as a household survey. Initial interviews were conducted with government officials from the Department of Natural Resources and Environment at district and commune levels. These interviews explored the land conversion process at each step as well as the roles and interests of the stakeholders involved. At the village level, interviews were conducted with older villagers and village/hamlet leaders. These interviews investigated the level and nature of community participation in the land conversion process. To fully understand how affected people perceive the land conversion process, the research also included 5 in-depth interviews with representatives of affected household groups. One interviewee was selected from each of the three land loss groups determined by the central government: 1) households losing less than 30% of their farmland, 2) households losing between 30 and 70% of their farmland and 3) households losing over 70% of their farmland. Two additional interviews were also conducted with respondents from different generations (young and old). A household survey was also used in this study. According to local reports, 192 households in both Thuy Duong and Huong So lost almost all of their agricultural land to the resettlement and new urban area development projects. For the study, a total of 105 households (45 households in Huong So and 60 households in Thuy Duong) were selected. Legal framework for land conversion In the property rights literature (Denyer-Green, 1994), much attention is given to the protection of private property rights because it allows property owners to control their assets and to secure benefits deriving from the use, sale or change in land value. Governments have commonly reserved legal rights as a policy instrument to acquire private property for public uses while paying just compensation to those whose property is taken (Phuong, 2009). Land acquisition for economic expansion is a typical example. In practice, there is considerable differentiation in the way that governments are able to apply such powers to acquire rights of land ownership or use. In the United States, where property rights are clearly defined and markets well-developed, property owners who relinquish their property for public use are entitled to a payment based on the market value of the subject property, which is the best offering price in the open market by a willing seller to a willing buyer (Han & Vu, 2008). In the United Kingdom, compensation is based on the principle of value to the owner, consisting of the market value together with other losses suffered by the claimant. Australia provides compensation largely for raw land value only (Chan, 2003). However, in emerging socialist countries such as China and Vietnam, the principle of just compensation is less well defined. Unsurprisingly, in view of the dynamic changes taking place in these countries, land conversion for public purposes is now causing social conflict. The question raised here concerns how land conversion takes place in countries where private land ownership is not recognized. The transformation of Vietnam from a centrally-planned, stateled economy to a market-oriented economy goes hand in hand with corresponding changes in the institutional settings; this includes the role of the government. The central state dominance in economic and social affairs has been restructured by a new division of

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Fig. 1. Map of Hue City and the selected peri-urban wards.

administrative and fiscal responsibilities between central and local authorities. The 2002 State Budget Law gave provincial governments the authority to raise their own revenue and spend an increasing share of the state budget. Together with the growing level of fiscal decentralization, the government has transferred responsibilities to lower administrative levels. For instance, the 2003 Land Law delegated responsibilities of land allocation, titling, land administration, land registry, and the creation of formal real estate markets to the local governments. In other worlds, it decentralized land use authority not only to provincial and city government but also to district governments within larger cities (Kim, 2011). In addition, the 2004 Construction Law increases decentralization to the three lower levels of government e i.e., provinces, districts, and communes/wards e in preparing spatial plans. The planning system is comprised of three main instruments: socio-economic development planning, spatial planning, and sector development plans. Spatial planning plays a fundamental role in urban development. It is prepared in four levels of detail: orientation plans (national policy), regional plans, master plans (province or city), and detailed area plans (covering a commune, ward, or industrial zone). The preparation of a detailed plan is normally the first step in pursuing an urban development project and is a prerequisite for obtaining the planning certificate and for approval of land allocation and construction from a higher government level. The 2003 Land Law stipulates that ‘all land belongs to the state, and land is allocated by the state to individuals and organizations for stable long term use’ (Land Law, 2003). The law is seen as a foundation for the development of formal land markets that profoundly affect land conversion processes. The reforms in the 2003 Land Law

consist of: 1) expanding the user’s rights further by granting these rights as a gift, and as a contribution to capital formation in business; 2) communities, religious establishments, overseas Vietnamese, and foreign organizations and individuals investing in Vietnam are recognized as new land users and thus rights holders; 3) providing more flexible arrangements to convert garden and pond land to residential land without having to pay a levy; and 4) assigning local authorities the right to convert land for purposes of national defense, security, public interest, and economic development. The public interest and economic development purposes are defined broadly, and may consist of construction of public infrastructure, sites for establishing state agencies and foreign organizations, other non-profit development projects, construction of commercial centers, new urban areas, and resettlement and other residential areas. If agricultural land is to be converted for other uses, it first must undergo a process of state requisition to be returned to the state and subsequently be reassigned to new land users. The current users will be compensated according to a pricing framework set annually by the provincial authority. Decree 69 issued on 13 August 2009 guides the land acquisition process since 1 October 2009. It distinguishes three stakeholders in the conversion process: farmers or ‘sitting tenants,’ local authorities, and developers. Developers consist of domestic and foreign investors. Government agencies and state-owned enterprises (such as those discussed in this study) are also considered to be developers. However, authorities at provincial, district and commune levels would not normally involve themselves in land acquisition for private projects. Local authorities are only involved in large public projects (e.g., projects that relate to national security and public welfare, but also foreign investment projects). If the proposed projects do not relate to public security or public welfare, the


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developers in principle have to negotiate with the residents on the basis of the government pricing framework. In practice, however, there is little negotiation activity between developers and households due to the fact that households usually want to receive compensation according to market values. This is usually unattractive for developers and so in most cases developers rely on the government to use its powers of land acquisition. First, a Site Clearance and Compensation Council is set up at the level of the district where the land to be acquired is located. The Council is headed by the president of the district/city People’s Committee and has representatives from the Departments of Finance, Environment and Resources, and from local government, as well as the developers and affected people. The Council is charged with formulating and appraising the compensation plan as well as organizing the site clearance and the compensation process according to the approved plan. Based on the 2003 Land Law and Decree 69, the land conversion procedure for development projects consists of five steps as shown in Fig. 2.

Table 1 Land use planning for DNTA new urban area. Category

Area (m2)

1. Residential land High-rise apartment buildings Villas Town houses Hotels Offices Social houses

113,064.2 17,043.9 30,927.3 40,692.2 7892.2 9551.3 6957.2

49.3 7.4 13.4 17.7 3.4 4.1 3.0

2. Land for transportation 3. Parks and lakes

82,481.4 19,364.1

35.9 8.4

4. Land for public use Schools Hospitals Restaurants Commercial centers Public works Sports fields

12,611.7 3761.9 2902.2 2292.5 1770.9 744.0 1140.0

5.5 1.6 1.2 1.0 0.7 0.3 0.5





5. Land for car parks


Total project area

Huong So: land conversion for resettlement

Source: People’s Committee of Thua Thien Hue province, Decision No. 1147/QÐ-UB signed August 20, 2004.

The Huong So resettlement area is one of the public interest projects funded by the central and provincial Governments since 2009. The total investment for the project amounted to US$ 4.6 million. Of this sum, 59% was invested by the central government; the province contributed the remainder. The total area of the project is 8.35 ha 64% of the farmland was planted with paddy (rice) while the remainder held dry vegetable gardens. The project, completed by the end of 2011, was implemented to resettle dân vạn Cò or people live on the boats on the Huong River as well as households displaced for the Ngu Ha River improvement project. These two groups are recognized as ‘disadvantaged’ because they are excluded from access to such daily necessities as running water and electricity. Boat people are also seen as a main agent of water pollution of the Huong River by local authorities. Pressure from UNESCO has contributed to making relocation of the boat people an issue for the provincial government. Thus, a resettlement project was implemented in Huong So Ward; 340 households were removed from the river and from the tourist’s gaze (Phuong, 2005). According to the 2003 Land Law, the People’s Committees at two levels of Hue City and Huong So Ward are recognized as the first stakeholders involved in the land conversion process. The second stakeholder is also linked to the government in this case; the investors belong to the public sector while the Investment and Building Section (IBS) is an agency of the City’s People’s Committee that directly implements all stages of land acquisition. The third group of stakeholders consists of the occupiers of the land who hold land use rights and who have a strong interest in farming. This group is composed of 50 households and 5 agricultural production groups or cooperatives whose land was converted for the resettlement project. Households lost on average 1545 m2. As mentioned in the project document (Decision No. 1632/2009), the compensation price was 38,000 dong/m2 (1 US$ ¼ 21498.71 dong). Households losing over 30% of their agricultural land were paid an additional 3 million dong per farmer to allow them to look for a new

Land - use planning

Percent (%)

Project proposal preparation

job as well as 855,000 dong for each family member to sustain their daily life during the transition period (The People’s Committee of Hue City, 2009). As mentioned above, the Huong So resettlement area is a development project for ‘public purposes’ as it is undertaken in support of tourism development, cultural heritage conservation, and environmental protection as well as improved access to social services for the boat people. Therefore, IBS did not face any challenges during the land acquisition process. After the City government’s approval of the project, IBS conducted a survey to compile data on the households earmarked for resettlement. IBS formulated a general compensation plan and submitted it to the People’s Committee of Hue City; the plan was approved at the end of 2008. IBS, along with the local authority, informed the affected households of the acquisition decision and compensation plan. In all stages of the land acquisition process, IBS worked closely with the Council of Compensation and Site Clearance. Thus IBS was a key actor in the land conversion process. Dong Nam Thuy An: land conversion for a new urban area In order to overcome the city’s housing shortage and to avoid unplanned private construction, the provincial government has developed plans for new housing projects since 2000. Located in the ward of Thuy Duong, about 3 km south of the commercial center of Hue, the Dong Nam Thuy An (DNTA) is one of the most modern residential and commercial areas in Hue. Construction started in 2004 on 22.9 ha of agricultural land. The area provides three types of housing: terraced houses of 63e152 m2, villas with an average land area of between 220 and 267 m2, and high-rise apartment buildings of 9e12 stories high. In addition, there are commercial and office spaces, along with educational, health and

Land acquisition decision

Plan for compensation and support

Fig. 2. The land conversion procedure.

Complaints and denunciations settlement

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sports facilities as well as parks. Table 1, outlining the land use plan for DNTA project, illustrates that only 49.3 percent of the total project area is planned for residential development; the remaining land is devoted to public facilities and transportation-related projects. The investor of the DNTA project was the No. 8 Investment and Construction Joint Stock Company (CIC8). CIC8 is a 100 percent state-owned company founded in 1989 by the Ministry of Construction. It currently has 10 subsidiary companies specializing in housing development, construction, consulting, manufacturing of construction materials and other services. CIC8 has offices in Hanoi, Hue, and Can Tho City to promote its business. The DNTA is the first new urban project funded by CIC8 in Hue City. Unlike the Huong So resettlement project, and even though the developer and initiator of the DNTA project is a state-owned entity, CIC8 sought to make a profit through the conversion of farmland into a new urban area. Authorities at the district and ward levels, who have come to rely on land conversion and allocation charges as an important source of revenue, are the second participants. The farmers are the last stakeholder in the DNTA project. 147 households, comprised of 895 people, have been directly affected by agricultural land conversion for the DNTA project. Households lost on average 1557 m2 (The People’s Committee of Huong Thuy District, 2004). After the Huong Thuy District approved the development plan, CIC8 and the Council of Compensation and Site Clearance prepared a detailed compensation plan. While this plan focused mainly on compensating families for their land and property losses, it also included support for stabilization of life and vocational training. The level of household compensation for losses resulting from the DNTA was set according to decree 84/CP, signed in 2007 by the Prime Minister. Compensation was approved at 1250 dong/m2 and in line with the government compensation framework. However, according to a retired officer in Thuy Duong, the market price for property is often 9e10 times higher than the compensation prices provided by the government. Therefore, villagers disagreed and complained about the compensation amounts. Moreover, some households experienced delays in receiving their compensation. Several complained to local officers. CIC8, however, was flexible in seeking ways to overcome these difficulties and thus succeeded in acquiring the land. These strategies are discussed in the next section. Discussion Many newspaper articles have noted that land acquisition procedures and compensation are among the most difficult issues in implementing development projects. As a result, projects often are delayed. Land-related conflicts have taken place throughout Vietnam; investors face complaints and resistance from villagers over compensation prices and livelihood issues linked to losing agricultural land. In the researched cases of Hue, 105 surveyed households complained that the compensation price set by the Provincial Government is far lower than the market price for land. In fact, nearly 90 of the surveyed households did not agree with the land conversion policy. IBS and CIC8, however, successfully concluded their land acquisitions. The success of developers related to state intervention as well as to the strategies of the developers themselves, which helped to legitimize land appropriation or reduce resistance from villagers. This section discusses the role of each stakeholder involved in the land conversion process and the benefits each derives. This analysis also helps us to better understand the management of agricultural land conversion in Vietnam, a socialist country without private ownership of land.


State power and participation of affected people Land acquisition in Vietnam is closely linked to Doi Moi, or ‘renovation’ e an economic transition process initiated in 1986. Although Doi Moi has generated remarkable success in accelerating economic growth, expanding exports, and attracting foreign investment, there has been little change in the way political power is structured (Phuong, 2009). The public sector remains a one-party state and continues to intervene extensively in the economy and society at large. While the state retains ultimate ownership of all land in Vietnam, people and organizations may occupy and use land for a certain period depending on the land type. Land, therefore, can only be lawfully acquired and allocated by the state. Any existing users are to be paid compensation for land use loss according to the rates prescribed by the state. However, as stated previously, the compensation framework does not account sufficiently for the increases in the market value of land that typically take place when land use changes from agricultural to urban functions (Land Law, 2003). The cases reviewed here have both been defined as development projects in the ‘public interest.’ The local authorities, therefore, have used the land acquisition mechanism to legally transfer low-value agricultural land into high-value residential and commercial land. Although several stakeholders have been involved in the land conversion process, the state played a dominant role in decisionmaking. However, this decision-making process did not include consultation with local people. State agencies made a series of important decisions, from land use planning to the compensation framework, while the participation of local people was passive and limited. According to a 55-year-old man interviewed in Thuy Duong: The state agencies made land use planning policy., They did not consult us. If we had participated and presented our ideas, we would not have agreed to set up a modern town in the rice fields; instead it would have been built close to the hills and mountains. That location is high and has fresh air. It is a pity that nobody consulted us. While the surveys show that 95.2 of respondents were invited to attend a meeting organized by the Council of Compensation and Site Clearance, more than 90 of surveyed participants who attended the meeting stated that the meeting simply received information about the land acquisition and compensation plan. Thus, affected households did not genuinely participate in important decisionmaking processes. At one meeting, for instance, several questions were raised by villagers. These questions mainly concerned compensation methods and post-land acquisition livelihoods. Most of the responses provided by the local authorities were not considered sufficiently satisfactory. For example, one member of the Compensation and Site Clearance Council in Hue City stated that as villagers’ perceptions of farmland acquisition were ‘quite simple,’ their role was naturally limited to passive participation: ‘hearing’ announcements, ‘confirming’ acquisition land areas, and ‘receiving’ compensation. Only 72.4% of affected interviewees received details concerning land acquisition and conversion. Moreover, all of affected villagers were involved in the process at very short notice and each received very little information about important issues such as the area to be converted and compensation rates. In fact, the channels for receiving information about the land conversion process appear to vary; 41% were informed by the village leader, 29% were informed through formal meetings, and 22% were informed via agricultural cooperatives. Finally, 13% of affected households were informed by mail. This limited role of the farmers significantly skewed the terms of the land conversion


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processes in favor of the state and government agencies e those who played a decisive role. It should be noted, therefore that the process as related by villagers did not comply with the principle of ‘free prior and informed consent’ (FPIC) that is recommended internationally as a guideline to be implemented prior to dispossessing inhabitants of their land (FAO, 2012). Profit-driven multiple stakeholders In Huong So, the City government and IBS played the leading roles in the land conversion process. This project was designed to promote tourism, improve water quality and also improve access to urban services for people who lived on the boats on Huong River. Indeed, one could argue that tourism-related economic development that allows for social and ecological improvement is in line with the public interest agenda, even if there are matters related to dispossession. However, rapid urban expansion results not only from government strategies aimed at economic growth but also from profit-seeking by a variety of stakeholders (Han, 2010). Unlike Huong So, the conversion of agricultural land in Thuy Duong can be seen as primarily profit motivated. The first profithungry actor is the local government at three levels: province, district/city, and commune/ward. The local government not only believes that the DNTA project will facilitate the transformation of the local economy and speed up urbanization, land conversion also offers local authorities the opportunity to increase revenues. This incites them to behave strategically by teaming up with developers and investors. Thus, a coalition was formed between public authorities and land developers; both stood to gain from the huge margin between nominal compensation rates and the increased market value of converted land. In other words, the margin created between the acquisition cost of rural land and the prices paid by urban users (Westen, 2011). In fact, costs associated with acquiring land are kept low so that investors set up businesses and facilitate local development. Meanwhile, local governments obtain important benefits from the transfer of land rights, albeit at varying levels. One key informant indicated that the provincial government received 60% of land conversion revenues while the district/city and ward/commune authorities retained just 20% for infrastructure development and social welfare. This source of revenue contributed 68.3% (or roughly 63,720 million dong out of a total of 93,200 million dong) to the budget of Huong Thuy District in 2010. Only 5.3% (or roughly 16,256 million dong of a total of approximately 308,802 million dong) went to the Hue City budget in 2008 (HSO, 2011; HTSO, 2011). CIC8, the state-owned enterprise, is the second profit-seeker. On one hand, CIC8 can rely on state support for its projects. On the other it is resourceful in finding ways to resolve difficulties related to land acquisition. In fact, CIC8 has its own strategies to avoid delays and maximize benefits. First, CIC8 recognizes that the local government plays an important role in land conversion process, particularly that of officials at the ward and commune levels. Thus CIC8 paid ward officials 100,000 dong per workday while the same officials received only 20,000 dong per day from the local budget under existing regulations. Another strategy to facilitate the conversion could be observed on the occasion of the Lunar New Year in 2004 when CIC8 presented each affected household with a Toshiba TV set, or a refrigerator, an electric fan, or gas oven, based on the quantity of land the household stood to lose. The developer also promised to hire locals to work in the new urban area. According to the village leader in Thuy Duong, an estimated 10 affected household members farmers have been employed in positions such as office guards and sanitation workers. As a result of the strategic actions taken by different rentseekers, huge profits accrued to the developers who pocketed

the largest share of the margin between nominal acquisition costs and market price sales. While the local government is the next stakeholder to benefit, its share of profits tends to be lower as land prices are kept low to keep developers competitive. Nonetheless, both parties stand to gain from keeping the costs of the compensation framework low. The affected households did not benefit from the land value increase that was brought about by the change in land use. For example, in the new urban district, farmers received only 1250 dong/m2 in compensation in 2004 while CIC8 sold the land for 5e7 million dong/m2 in 2010. Thus this study illustrates that CIC8 increasingly acts as a private company rather than as an agent of the public sector. Second, local authorities, as interested parties in land conversion, cannot be seen as neutral arbiters able to balance the interests of different stakeholders. Conclusions Through both economic and institutional transformations occurring since the mid-1980s, Vietnam continues to progressively integrate into an increasingly globalized world. Rapid economic growth combined with higher incomes and a rising population has generated a demand for urban services such as work places, housing, infrastructure and amenities. These changes have placed particular pressures on a land market characterized by a limited availability of land; because most land is already allocated to individuals, households, firms and other organizations (Suu, 2009). In response to the increasingly scarce supply of land, the government has used the mechanism of land conversion to dedicate massive amounts of rural land in peri-urban areas to urban uses (Phuong, 2009). A large number of rural households, accordingly, have been forced off of their land to make way for development projects. This paper uses two case studies in Hue City to identify the issues behind the land conversion process. Two main conclusions can be drawn from this study. First, and more so than in countries where private property rights are strong and markets welldeveloped, the state at different levels of government in Vietnam is the key agent in decision-making on land conversion. The participation of affected people, meanwhile, is passive and limited. The land conversion mechanism is possible in Vietnam because the state has ultimate ownership rights over all land; the state may acquire land lawfully for broadly defined purposes including national defense, security, and public interest. Moreover, compensation for existing users is determined according to a government-set framework. However, this compensation scheme does not account for increases in land value that occur once rural land is converted for urban uses. As a result, compensation payments often fall significantly below the prevailing land market rates. In both Hue projects, the so-called ‘land conversion for public purpose’ was applied effectively as a policy instrument. Yet local authorities decided on urban development planning and on a compensation framework without consulting local people. The outcome of this process was that financial gains were essentially diverted to developers and state agencies. The second conclusion is that land conversion results from the rent-seeking activities of multiple stakeholders. Since Hue becomes a tourist destination, revenues from tourism contribute significantly to the socio-economic development of the city. Local government leaders believe that urban expansion and upgrading projects in themselves will attract more tourists and thus investment from outside. At the same time, local authorities have also come to rely on land conversion and the accompanying as an important source of revenue. While government agencies seek opportunities to generate income for their budgets, developer i.e.

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(CIC8) who acquire rural land below market price and then convert it for commercial purposes gain huge rents. To do this, developer collaborates closely with local officials. Developers also provide financial incentives and ‘gifts’ to affected households as well as employ villagers in projects. Conversion of land from rural to urban uses is considered an inevitable corollary of industrialization and urbanization in Vietnam. The findings from Hue suggest that processes of land conversion follow similar patterns throughout the country. In fact, the findings suggest that there is not much difference that results from geographical settings or city size. This implies that problems most often associated with bigger cities are actually much more widespread. What may differ is the local response to the land conversion process. Low compensation packages, for example, often lead to negative responses such as demonstrations, legal proceedings, and other forms of resistance in the largest cities where land prices are rising almost daily. In the medium-sized city of Hue, responses are much more muted and not as public in nature. Nonetheless, social tension increases as villagers in both large and medium-sized cities are dissatisfied with the outcomes and socio-economic injustices that occur between stakeholders with different bargaining positions. Moreover, achieving a balanced outcome is made more difficult by the fact that the state and its agencies on the one hand are responsible for safeguarding the legitimate interests of all parties concerned. On the other hand, the state stands to benefit considerably from the outcomes of land acquisition in favor of developers. The government, thus, needs to pay greater, more focused and unremitting attention to resolve such issues arising from land acquisition. Acknowledgment This PhD research, conducted at Utrecht University in the Netherlands, was supported by the Ministry of Education and Training of the Socialist Republic of Vietnam (Decision No. 2634/ QÐ-BGÐT). The authors wish to thank the funding organization for helping to facilitate this research. The authors also would like to thank colleagues for feedback on earlier draft versions of this paper.


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