Proposed modifications to Land Development Fund announced by Ministry of Finance
HA NOI — The Ministry of Finance (MoF) seeks public feedback on a draft decree that revamps provisions on land use, rental fees, and the Land Development Fund, aiming to enhance capital management, control operational expenses, and ensure greater transparency, consistency, and financial discipline within the fund.
The amendments address practical issues encountered during the implementation of existing regulations and align with the government's broader goals of streamlining the State apparatus and establishing a more efficient two-tier government system.
Primary attention in the draft amendments to Decree No. 103/2024/NĐ-CP and Decree No. 104/2024/NĐ-CP is given to improving the management and operational mechanisms of the Land Development Fund, particularly regarding the use of idle capital. Significant proposals include allowing the fund to temporarily invest idle capital to generate returns, consistent with its founding principle of capital preservation and development.
Currently, idle capital from the State Treasury may be placed in term deposits at commercial banks. The draft proposes a similar approach, stating that during periods when capital is not actively deployed, the fund's charter capital may be deposited in state-controlled commercial banks operating within the locality. These deposit activities must be clearly regulated in the Fund's charter and carried out safely and efficiently, without interfering with the Fund's primary functions.
The draft also proposes a new approach to calculating capital advance management costs. Under current regulations, these costs are based on the interest rate applied to Vietnam dong deposits held by the State Treasury at the SBV. However, the draft proposes fixing the cost at the rate effective at the time the initial capital advance decision is issued for a given project or task, which would apply throughout the entire funding process and be calculated based on the total amount advanced.
A social housing project in Mê Linh District, Hà Nội.
To introduce flexibility, the draft allows local governments to adjust these rates below the general ceiling, depending on specific circumstances, particularly for projects involving land clearance and compensation. This flexibility is consistent with the fund's non-profit orientation and its overarching goal of safeguarding and growing its capital.
The draft sets forth clearer definitions of allowable expenditures for projects operating under an entrusted management model. It differentiates between management fees for entrusted fund administration, allowances and other expenses for board members and executive staff, and payments to the State budget or other lawful expenditures. The draft also sets maximum thresholds for each type of expenditure, ensuring the fund maintains a healthy financial balance and adheres to its principle of capital preservation.
- The government aims to streamline the State apparatus and establish a more efficient two-tier system, aligning with its broader goals, as demonstrated in the draft decree regarding land use and the Land Development Fund.
- In the revised Land Development Fund management, AI could potentially be employed to optimize the use of idle capital by generating returns, adhering to the founding principle of capital preservation and development.
- The housing industry could benefit from the proposed change in calculating capital advance management costs, as it fixes the cost at the initial advance decision rate and allows local adjustments for specific circumstances, such as land clearance and compensation.
- Businesses engaging in projects under an entrusted management model with the fund must be mindful of the clearer expenditure definitions and maximum thresholds set forth in the draft, ensuring they maintain a healthy financial balance and adhere to the principle of capital preservation.
