Consider adding capacity for investors to participate in the auction

No regulations on the capacity of investors participating in the auction

The draft Land Law (amended) prepared for submission to the National Assembly for consideration has clearly stated the cases of auctioning land use rights when the State allocates land with land use fees collected, or leases land with one-time payment for the entire lease term. The draft stipulates the cases of auction, auction conditions, responsibilities of individuals and organizations as well as responsibilities of People's Committees at all levels. In particular, organizations participating in land use rights auctions must meet all conditions such as being subjects to which the State allocates land, leases land; Ensuring conditions for implementing investment projects according to regulations such as deposits or other forms of guarantees, etc.

However, the draft does not stipulate auction principles or sanctions, personal responsibilities when participating in auctions but not fulfilling financial obligations and abandoning the auction. Meanwhile, in reality, there have been cases where individuals and organizations participating in auctions race to push prices too high, even "virtual" prices, but then abandon their deposits, causing many consequences for the auction organizer as well as other participants.

For example, in the auction of "golden land" in Thu Thiem in Ho Chi Minh City at the end of 2021, 4 enterprises won the auction but all of them later withdrew their deposits. These enterprises offered prices 7-8 times higher than the starting price, making it seem that the city budget would collect a large amount of money to invest in socio -economic development. However, all of these enterprises withdrew their deposits, causing the "golden land" lots in Thu Thiem Urban Area to remain motionless until now.

Many economic experts believe that through this incident, many lessons will be learned, warning investors, the market and state management agencies. That is a lesson related to the fact that enterprises or investors must consider and calculate carefully before participating in auctions in general or public land auctions in particular. It is impossible to "price" randomly because it will leave many consequences for both the company itself and the economy. Particularly for the management agency, there will be steps to review the process of public asset auctions such as the capacity of participating units or individuals; constraints on project implementation and how to bid to ensure success.

Therefore, the draft Land Law (amended) should consider regulating or supplementing the capacity and experience of investors implementing similar projects. The main principles include deposits and sanctions for organizations and individuals who do not fulfill financial obligations after the auction. The additional regulation on the capacity and experience of investors also helps to overcome the situation where after the auction, investors are unable to implement the project, leading to abandonment, resale to other investors or forfeiting the deposit.

Enterprises winning the auction but forfeiting their deposits cause many consequences for the economy.

According to Mr. Huynh Phuoc Nghia, Director of the Center for Economics, Law and Management at the UEH School of Economics, Law and State Management, the lessons learned from the land auction in Thu Thiem Urban Area (HCMC) have once again affirmed that in the story of bidding for project development, the crucial issue is to choose the right investor and correctly assess the investor's capacity.

The capacity of the investor can be determined through factors related to the scale of the project, the capital capacity of the enterprise, experience in implementing similar projects and the need for legal constraints and responsibilities after the auction. At the same time, it is necessary to unify and connect criteria for assessing the capacity of the investor as well as the responsibilities associated with the project in related laws such as the Law on Bidding, the Law on Property Auction, decrees, regulations, etc.

Enterprises winning the auction but forfeiting their deposits cause many consequences for the economy.

The law will be stricter.

Regarding cases where the winning bidder abandons the deposit after the auction, lawyer Bui Quang Nghiem, Ho Chi Minh City Bar Association, emphasized that this causes great costs and consequences for the entire economy. Firstly, the winning bidder abandoning the deposit will cause the property and land auction organizer to waste resources to re-conduct the auction process.

At the same time, cases of deposit cancellation are often related to the fact that land prices have been pushed up too high, "virtual" prices, causing the state land area to be pushed up. From there, the state will also encounter difficulties in the process of land acquisition, compensation, and site clearance for subsequent projects. At the same time, when land prices are pushed up too high, the project's investment rate also increases sharply.

The project investor will have to recalculate the entire investment cost and even no unit will participate in developing the project. This means hindering the general socio-economic development of that locality. Even the people who want to buy houses, real estate, etc. will also face difficulties when land prices have increased too much.

Lawyer Bui Quang Nghiem emphasized: "The conditions for property auctions have been specified in detail in the Property Auction Law. However, it is possible to consider adding to the draft Land Law (amended) this time the regulations on the capacity and experience of investors implementing projects when participating in land use rights auctions. That addition will be stricter, aiming to limit cases of deposit abandonment like the auction of "golden" land in Thu Thiem in Ho Chi Minh City".

Agreeing, lawyer Nguyen Van Hau, Chairman of the Vietnam Lawyers Commercial Arbitration Center, said that the auction principles or sanctions when individuals participate in auctions but do not fulfill financial obligations, violate... have been fully regulated in the Law on Property Auctions. In recent times, the number and quality of successful auctions have increased but there are still shortcomings.

Specifically, the quality of the auction team is still limited in terms of expertise and professionalism, there are violations leading to many auctions having to be canceled due to violations of procedures and order... The quality of auctions is generally ineffective, the situation of "blue team - red team" lowering prices is increasingly sophisticated and complicated, the auction mechanism still reveals many limitations. In particular, many violations have been discovered in the auction of land use rights, especially for projects with public assets, leading to speculation and profiteering, and the risk of state loss.

Therefore, Mr. Hau proposed that from the provisions of specialized laws, the Land Law (amended) also needs to supplement regulations to create a suitable and effective mechanism for auctioning land use rights. Specifically, supplement regulations on assessing the financial capacity and experience of investors, and regulations on deposit time in accordance with the provisions of law. At the same time, prescribe severe sanctions for projects that exploit land use rights such as deposits and penalties for organizations and individuals who do not fulfill financial obligations after the auction to limit the increase in land prices in the area surrounding the land auction area.

Resolution 98 on special mechanisms for Ho Chi Minh City also allows the city to proactively select investors, which stipulates standards and criteria for evaluating the capacity and commitment of enterprises after participating in auctions and bidding... Along with decrees and circulars guiding the Land Law in detail, it helps to overcome the situation where investors cannot implement the project after the auction, leading to abandonment, resale to other investors or forfeiting deposits.

Mr. Huynh Phuoc Nghia , Director of the Center for Economics, Law and Management, School of Economics, Law and Public Administration, UEH

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