Vietnam Real Estate Update – BT Contracts

In Vietnam, investments in the form of Build and Transfer contracts (BT contracts) have been implemented for more than 20 years, with significant contributions made to the development of infrastructure in Vietnam. However, further implementation of such investments is going to be ceased soon.

(a bridge to connect Thu Thiem and District 1, HCMC)


ISSUES:


Under current laws, the State may use land use rights to pay investors in BT contracts. According to a document issued by the Government, the total land area used to pay the investors is more than 4,680 hectares. In practice, however, there might be risks that the value of land use rights used to pay investors in BT contracts and the total investment amounts in some cases were improperly determined.       

            

According to a recent newspaper article, the State Audit Office of Vietnam has just issued a report on, among others, auditing the investment project for construction of 4 main routes in Thu Thiem New Urban Area by a well-known local developer in the form of BT contract, and proposed to reduce payments by approximately VND274 billion (about USD11.7 million).


With efforts to address issues of BT contracts, Vietnam has recently passed the new Law on Public - Private Partnership Investment, under which:


(a) As from 15 August 2020, projects under BT contracts for which an in-principle investment approval has not been obtained have been ceased; and

(b) As from 1 January 2021:

· implementation of new projects adopting the form of BT contracts will be ceased; and

· transition for implementation of other projects under BT contracts will be carried out in compliance with particular applicable regulations.


KEY NOTES:

Given that further implementation of new projects adopting the form of BT contracts will be ceased as from 1 January 2021, it is expected that more land will be offered for auction/bidding in the future (rather than being allocated/leased to investors in BT projects as payments). As a result, the door would likely be wider with more chances for investors, especially the foreign ones (via their subsidiaries), to acquire land in Vietnam. Of note, there may be more than 60 land plots in Thu Thiem New Urban Area offered for auction/bidding in the future.


Phuc NGUYEN

Real Estate Lawyer

ZICO Law Vietnam

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