‘Land for infrastructure’ in Ho Chi Minh City: land-based financing of transportation improvement

ABSTRACT

This paper explores how land-based financing mechanisms are currently used in Ho Chi Minh City as a public-private funding strategy. The Land-for-Infrastructure (LFI) mechanism appears as a solution to produce infrastructures. We found that the implementation of the LFI mechanism remains difficult, but eventually can lead to success. By ‘trial-error-transcend,’ the City managed to build two essential roads while the developers received attractive investment opportunities in urban development. This mechanism cannot, however, be seen as a panacea for the local authorities due to constraints to replicate it and potential undesired ‘side effects.’

KEYWORDS:

• Land value capture mechanism
• urban transport
• local finance
• urbanization

Acknowledgements

The authors would like to thank community members and experts who kindly contributed their time to discuss these projects with us, and we hope they will ultimately be the beneficiaries of any policy reforms related to Land-based Financing. Any mistakes or errors, of course, are the authors’ alone.

Disclosure statement

No potential conflict of interest was reported by the authors.

ORCID

Thanh Bao Nguyen http://orcid.org/0000-0001-8703-7372

Erwin van der Krabben http://orcid.org/0000-0002-2566-890X

Clément Musil https://orcid.org/0000-0001-7521-372X

Notes

1 The Doi Moi means renovation in Vietnamese and refers to a series of reforms introduced in mid-1980’s, marking a shift from a centrally planned economy to a ‘socialist-oriented market economy’.

2 According to the Vietnamese law, BOT refers to an investment signed by a State body and an investor in order to construct and operate an infrastructure for a fixed duration. Upon expiry of the duration, the investor shall transfer such facility to the authorities. Concerning the BT, the agreement also includes a State body and an investor but upon completion of construction the investor shall transfer the facility to the State body and the authorities shall create conditions for the investor to implement another project in order to recover the invested capital and gain profits (Saladini et al. 2009).

3 Several regulations had been adopted regarding the use of PPP notably introducing more international standards and transparent bidding processes to attract (foreign) private investors (Decrees 02/1999/NĐ-CP; 78/2007/NĐ-CP; 108/2009/NĐ-CP; decision 71/2010/QD-TTg, and recently decree 15/2015/NĐ-CP).

4 PADDI stands for ‘Ho Chi Minh City Urban Development Management Support Centre’; it is a decentralized cooperation project between the Lyon metropolitan area and the Rhône-Alpes Region (France), and Ho Chi Minh City Municipality. The workshop took place from December 8th to 12th, 2014. Between 2007 and 2017 PADDI organized training workshops to train HCMC’s people committee technical officers. The general objective of the training workshops is the transfer of knowledge. PADDI’s workshops introduce to the participants new concepts, techniques and methods in terms of urban management to be used (or applied) in the context of Ho Chi Minh City.

5 Compensation prices are based on the ‘Land Pricing Framework’, which can be considered a state-stipulated price chart to determine compensation prices paid.

Additional information

Funding

The research is partially supported by the Ho Chi Minh City Open University (Project No. E2018.06.1).