Eco-tourism developer faces bankruptcy after government pulls land licence
Source: 27-FEB-2008 Intellasia | 23/Feb/2008 Dien Dan Doanh Nghiep
Feb 27, 2008 - 7:10:00 AM A domestic developer involved in a multi-million dollar eco-tourism resort project has become suddenly landless and faces bankruptcy with losses in the millions after the provincial government unilaterally revoked the firm's land use right even though the company had been active on the project for three years and construction was already well under way.

The following is a full extract from the Dien Dan Doanh Nghiep newspaper, which covered the episode in detail and highlights the risk any property developer faces in Vietnam where official laws and policies or even provincial political or personal whims can—and often do-change abruptly overnight:

Phu Yen Province's People's Committee has unexpectedly withdrawn the land of Bai Mon – Mu Dien eco-tourism resort located in Hoa Tam commune, Dong Hoa district from HCM City-based Son Dung Bao Joint Stock Co within only 17 days. This decision has pushed the company on the verge of bankruptcy. However what is more notable is that the treatment manner of the local authority has made many investors worried about their upcoming investment prospects.

The Bai Mon - Mu Dien eco-tourism resort is invested by Son Dung Bao Co with total estimated investment of 121.232 billion dong (US$7.3 million). The planned three or four star 200-room resort would cover eight hectares.

Three years of construction flitted away

In mid-2005, the Son Dung Bao Joint Stock Co followed the investment encouragement policy of Phu Yen province and selected a proper investment location at Bai Mon-Bui Dien in Hoa Tam commune, Dong Hoa district in order to build the eco-tourism resort. On August 11, 2005, the company submitted Official Letter 08/2005 attached with the construction project to the province's people's committee asking for investing into a 5-10-hectare eco-tourism resort at Phu Yen. On October 6, 2005, the company submitted Official Letter 10/2005 to the province's People's Committee officially asking for investing into the resort in Bai Mon-Mui Dien. On 12 December 2005, the people's committee issued Announcement 1.235/TB-UBND allowing the company to make procedures to invest into the project and permitting the company to invest into Bai Mon-Mui Dien resort. On 30 June, 2006, Phu Yen's Construction Department issued Announcement 55/TB-SXD reporting results of appraising the project. On 13 November 2006, the Phu Yen People's Committee issued Decision1785/QD-UBND on withdrawing the land, and allocating Son Dung Co another land plot which is required to be paid land-use fee once in order to invest and build Bai Mon-Mui Dien resort. On 14 September 2007, the company paid the land use fee at the Phu Yen province's Treasury and on 20 September 2007, the company was granted the land-use right certificate AD 122520 by the Phu Yen People's Committee.

In a bid to complete the construction of the project as scheduled, on 10 October 2007, the company submitted Announcement 65/TB-Cty to Phu Yen province's authorities announcing its completion of investment preparation procedures, asking for preparing materials, equipment, and human resource and construction sites from 15 October 2007, in order to kick of the construction by early November 2007. Upon satisfying such requests, on 15 October 2007, the Phu Yen People's Committee gathered with the province's authorities to hear the company report total investment, scope of the project. At the meeting, the committee's vice chairman, Nguyen Ba Loc, said that "we require the investor to be more active in developing the project in the upcoming time." Son Dung Bao started setting up tents, hiring workers and buying materials to prepare for the construction of the project.

However, while developing the project, on 7 December 2007 the company unexpectedly received an announcement of the Phu Yen People's Committee, which said that "the Son Dung Bao must stop developing the Bai Mon-Mui Dien tourism resort project. The whole land-use fee which Son Dung has submitted once into the Phu Yen's Treasury will be paid back to the company, including interest since the company paid into the state budget."

After that, on 15 January 2008, the Phu Yen Province's Natural Resource and Environment Department released Announcement 06/TB-TNMT titled "withdrawing the land-use right certificate AD 122520" asking Son Dung Bao to return the land use right certificate before 25 January 2008.

Son Dung Bao Co should be treated fairly

On 7 December 2007, the Phu Yen province's People's Committee held a meeting with the company. According to the committee's leaders, the reason for withdrawing the land of Son Dung Bao's project was that the location of the resort lies within the corridor of the Vung Ro Oil Refinery Construction Project although not until 22 October 2007, at Official Letter 1586/TTg-DK, did the prime minister assign the Phu Yen Province's People's Committee to grant the investment certificate to the Vung Ro Oil Refinery Construction Project, which has total area of 410 hectares. At the meeting, Nguyen Ba Loc said that the Vung Ro Oil Refinery Construction Project having total investment of US$1.7 billion is expected to general annual revenue of US$2.23 billion and contribute some US$96 million a year into the province's budget. Additionally, the Vung Ro Oil Refinery Construction Project is expected to create a good foundation for development of other industrial industries in the province." Thus, the province's people's committee does not want to lose the Vung Ro Oil Refinery Construction Project and decided to ask Son Dung Bao to stop the Bai Mon-Mu Dien tourism resort project.

The province's people's committee ignored how the land withdrawal will cause big lose to the company and also failed to consider assisting the investor to find measures to settle lose and select new investment plans. Although the province's construction department had previously advised in Official Letter 148/BC-SXD dated 23 November 2007 that "the investment document, procedures have been completed. If the province decides to stop the project, the compensation for lose is very complicated, which more or less will adversely impact the province's investment call policy in the forthcoming time." It is clear that the Vung Ro Oil Refinery Construction Project will bring about great economic, social security benefits to the province however the province should have not pushed Son Dung Bao into the difficult situation.

Through the above case, what we want to emphasise is that no matter who investors are-big or small-they should be treated fairly and equally. If businesses have to suffer from loses because of administrative decisions, there should be reasonable compensation mechanisms in place.