Investment rate per land area according to the current law on investment: Needs to be more specific

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    Investment rate per land area according to the current law on investment: Needs to be more specific
    Posted on: 20/05/2024

    In this article, our Managing Partner Nguyen Van Phuc and Lawyer Nguyen Nhat Duong (HM&P) will mention some problems related to regulations on investment rates when investors carry out investment procedures, in some provinces and cities in practice. This article was published in the Legal Electronic Magazine on May 14, 2024.

    At present, attracting foreign investors to invest in Vietnam has been strongly implemented in most localities in the country. In addition to other favorable conditions for investment in Vietnam, the reform of administrative procedures and transparency in the implementation of investment procedures are also Vietnam's plus points for foreign investors. However, in reality, investors in some provinces and cities still face some problems in implementing investment procedures related to investment rate regulations. This is also a common problem faced by many foreign investors at present. 

    New regulations but not clear 

    Pursuant to Clause 2 Article 38 of the Law on Investment 2020, if the investment project is not subject to approval for its investment guidelines, the investor shall be issued with the Investment Registration Certificate if the following conditions are met: 

    1. The investment project does not involve a prohibited business line; 

    2. There is a location for the implementation of the investment project; 

    3. The investment project is compatible with the planning specified in Point a Clause 3 Article 33 of this Law; 

    4. The investment rate per land area (or investment rate per employee) is not less than the minimum requirement (if any); 

    5. The market access conditions applicable to foreign investors are met. 

    In general, the above conditions are not too different from the provisions of the 2014 Investment Law and its guiding documents. Only the condition of meeting the condition of investment rate per land area ("investment rate") is a new regulation that investors must ensure. 

    However, at present, the regulations on the investment rate are very few and are almost exclusively regulated in Point d, Clause 3, Article 36 of Decree No. 31/2021/ND-CP. Accordingly, the investment rate is prescribed by the Provincial People's Committee according to local conditions and approved by the Standing Committee of the Provincial People's Council. It can be seen that this regulation only refers to the agency that develops and promulgates regulations on the investment rate, without specifically defining this concept, and also does not provide a clear basis for the development of regulations on the investment rate. 

    Similarly, at present, the Construction Law has the concept of "construction investment rate". According to the provisions of Article 25 of Decree No. 10/2021/ND-CP, the construction investment rate is the cost necessary for a unit of measurement by area, volume, length, capacity or capability of structures by design, and serves as the basis for determining the preliminary total investment and the total construction investment. 

    Based on this regulation, we can imagine that the investment rate will be the amount of investment capital that the investor needs to invest per land area (for example, square meter or hectare). This amount will depend on the actual situation in each locality, and may be based on the existing land fund for investment activities, the industries that the locality prioritizes to attract investment, etc. 

    However, this is only our understanding and may depend on the actual situation in each locality. The current lack of specific regulations on investment rate causes many difficulties for investors in implementing investment projects in different provinces and cities. 

    Many licensing agencies are still struggling with the new regulations 

    In the process of assisting foreign investors to implement investment registration certificate procedures in many localities across the country, we have not found any local regulations on investment rate at present. However, in reality, there is still a lot of information about some localities that will not issue Investment Registration Certificates unless the investor's investment capital is guaranteed at a certain amount. For example, in the case of Bac Ninh Province, we received a lot of unofficial information during the implementation of investment procedures here that the Department of Planning and Investment of Bac Ninh Province will only grant Investment Registration Certificates to investors with capital contribution of 500,000 USD or more. Although this information has been answered and confirmed as incorrect by the Department of Planning and Investment of Bac Ninh Province. However, the lack of specific regulations on the investment rate also makes investors confused when receiving this information. 

    The lack of specific regulations on investment rate is also a difficulty for relevant authorities in developing regulations on investment rate in their localities. For example, in Lang Son Province, the People's Committee of this province also sent a document directly to the Ministry of Planning and Investment on October 5, 2021, requesting guidance on how to calculate and determine the investment rate according to the Law on Investment. Specifically, the People's Committee of Lang Son Province has requested the Ministry of Planning and Investment to regulate or provide specific guidance on the content of the conditions to be met regarding the investment rate in order to have a basis for developing regulations on the investment rate in their province. Also, specific regulations or instructions on investment rate, methods to calculate and determine the investment rate. 

    For some specific localities, such as Ho Chi Minh City, where land for investment is no longer too abundant, we realize that promulgating regulations on investment rate will help investors to be more active in choosing investment locations. Not only that, with regulations on investment rate in each province and city, the conditions for obtaining an investment registration certificate will also be transparent, and the situation of investment applications being rejected for reasons related to the amount of investment capital will also be limited. To this end, we believe that the Ministry of Planning and Investment should soon issue specific guidelines on investment rate regulations so that localities can develop them in practice. For localities, depending on the planning and land use plan of the locality, they can provide a specific figure on the investment rate suitable for their locality. For investors, at a time when the regulations on investment rate are not clear, investors should specifically consult the opinions of the approval agency where the investment project is expected to be implemented when choosing an investment location, in order to avoid undesirable problems.

    Read more at: Suất đầu tư trên một diện tích đất theo Luật Đầu tư: Cần được quy định rõ ràng, cụ thể hơn