Proposal of Multiple New Regulations on the Land Development Fund

In the Draft Resolution of the Government regulating the Land Development Fund that is under consultation, the Ministry of Finance has proposed many new features. Notably, it proposes two funding options for the Fund's operating capital and also regulates the use of the Fund's operating capital...

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The Ministry of Finance (MoF) is seeking feedback on a draft Government Decree regulating the Land Development Fund, which includes several new provisions.

According to the MoF, most provinces and cities have established Land Development Funds. Once this Decree takes effect, they will only need to review and adjust their organizational structure and amend or supplement the Fund’s organizational and operational regulations.

However, to cover potential practical issues, the draft Decree stipulates that based on the local situation, the provincial People’s Committee will assign the provincial Department of Finance or another specialized agency under the provincial People’s Committee to lead the coordination with local functional agencies to prepare a proposal for the establishment of a Land Development Fund, which will be submitted to the provincial People’s Committee.

The Ministry of Finance proposes two options for the Land Development Fund’s operating capital.

The provincial People’s Committee will approve the Fund establishment proposal, issue a Decision on the establishment, and issue the organizational and operational regulations of the Land Development Fund based on the Fund establishment proposal approved by the provincial People’s Council.

The Land Development Fund is a non-budgetary state financial fund, directly under the provincial People’s Committee, which is established by the provincial People’s Committee, has charter capital, operates independently from the state budget, is not-for-profit, and preserves and develops its capital.

The Fund has legal personality, its own seal, and independent accounting. Its name is “Land Development Fund” combined with the name of the province or centrally-run city.

The Land Development Fund is responsible for receiving and mobilizing capital according to regulations to carry out the task of lending capital and recovering the lent capital as prescribed in this Decree and relevant laws.

To meet the requirements for enhanced Fund management, the draft Decree supplements and amends some of the following provisions:

The number of members of the Management Board must be odd. The Chairman of the Management Board is the Chairman of the provincial People’s Committee. The Vice Chairman and other members of the Management Board must include the Directors of the following Departments: Finance, Planning and Investment, Natural Resources and Environment, and the Director of the Fund.

In the event that a local development investment fund or financial fund is entrusted to manage the capital and operations of the Land Development Fund, the Management Board, Supervisory Board, and Executive Agency of the Land Development Fund shall be the Management Board, Supervisory Board, and Executive Agency (Executive Board) of the entrusted Fund, but the following conditions must be ensured: (i) the Chairman of the Management Board is the Chairman of the provincial People’s Committee; (ii) members of the Fund Management Board must include the Directors of the Departments of Finance, Planning and Investment, and Natural Resources and Environment.

Two options proposed for the Fund’s operating capital

In the draft Decree, the MoF proposes two options for the Fund’s operating capital.

Regarding charter capital: Option 1: The charter capital of the Land Development Fund is provided from the local budget’s development investment expenditure. Based on the actual situation and the local budget’s balancing capacity, the provincial People’s Committee will submit a proposal to the People’s Council at the same level to decide on the initial charter capital and additional charter capital to be provided to the Land Development Fund.

Option 2: Each year, based on the actual situation and the local budget’s balancing capacity, the provincial People’s Committee will submit a proposal to the People’s Council at the same level to decide on the level of additional charter capital for the Fund from the local budget’s development investment expenditure.

Regarding charter capital management: Option 1: The Fund’s charter capital will be deposited at the State Treasury of the province or centrally-run city.

Option 2: The Fund’s charter capital will be deposited at the State Treasury of the province or centrally-run city or at commercial banks with a controlling stake of the State in the locality.

The draft Decree stipulates that the Fund’s operating capital will be used to: Lend capital to units and organizations performing the tasks of compensation, support, and resettlement to carry out compensation, support, and resettlement as prescribed by the law on land. Lend capital to land development organizations to build infrastructure on land that has been assigned for management to increase the land value for auctioning land use rights to serve the local socio-economic development. Lend capital to organizations assigned to implement land support policies for ethnic minorities. Lend capital to organizations assigned to perform the task of developing housing for resettlement, renovation, and reconstruction of apartment buildings as prescribed by the law on housing.