The Impact of Land Market Processes on the Poor in Rural Vietnam

Abstract

This paper examines the link between formal land tenure and poverty alleviation in the context of rural Vietnam. It assesses the relevance of the ideas of Hernando de Soto through the documentation of both formal and informal land market processes in order to identify efficiencies.The findings suggest that Vietnam has made significant progress in extending formal land use rights to agricultural land. However, obstacles remain in the issue of title on rural residential land, including high land use levies, costs of converting garden to residential land, surveying costs and the skills of cadastral officials.Transactions in agricultural land increasingly take place within the formal sector. In general, land sales and mortgages are processed quickly and at low cost by land administration authorities. However, evidence was found of informal fees, requirements for extra documentation, inconsistent land valuation procedures and government intervention to prevent sale of small plots.Where informality survives in the land market, examples were found of its detrimental effects, particularly on poor households: ownership disputes, reduced land values and difficulties in mortgaging informally held land. However, the Vietnamese evidence hints that the 'transforming effects' of formal title can also be exaggerated. Formal land title can cause its own difficulties when plot measurement is poorly executed and boundary disputes arise. The decisive role of formal title in facilitating mortgages is also questionable when banks accept other types of land document and the mechanisms for foreclosure remain complicated.Overall the research suggests that poor people may benefit more from efficient, inclusive and low cost formal land administration systems than from attempts to protect them from market forces. A series of recommendations are put forward to improve Vietnam's land administration system as the new 2003 Land Law is implemented.