(Dzung Trieu Law Firm)_ VET’s Le Cam Le exclusively attended a closed-door meeting between Hanoi authorities and the South Korean developers of the long-awaited Tay Ho Tay project.
The leader of the Hanoi People’s Committee, when discussing the Tay Ho Tay project at a closed-door meeting held last month with relevant agencies and project developers, described the current situation as a mess. City authorities have been working on getting the project off the ground since 2002, but administrative procedures, then land clearance issues, have slowed down progress.
Licensed in 2006, the Tay Ho Tay project (also known as the Hanoi Urban Development Project) has been invested by a consortium of five South Korean investors, making up the wholly South Korean-invested THT Development Company (THT).
In December 2006 THT signed a contract regarding land compensation and site clearance with the Land Development Fund, an office under the Hanoi People’s Committee (HPC) tasked with implementing land acquisition procedures, land compensation and site clearance in the project area. After nearly three years, the Tay Ho Tay project is still stuck in the process of land clearance. “At the moment we cannot make any reports to you without site handover, and we must also have talks with the Hanoi People’s Committee about these issues,” said Mr Lee Seung Kook, General Director of THT.
The Hanoi New Town Development Authority (HDA) has responsibility for building roads and setting up resettlement areas. At end of April this year, Road No 4 (608m in length, starting from Pham Van Dong to the new urban area’s centre and costing VND203.7 billion ($11.38 million), funded by HPC) saw construction begin and was expected to be completed within 180 days.
But according to Mr Nguyen Van Thai, its director, the process of building the road in the first 95 days was slow due to wet weather. Construction is being implemented in parallel with land clearance and, as at August 10, 37,917 square metres out of a total of 72,927 square metres had been cleared, with VND52.19 billion ($2.9 million) disbursed.
It is expected that by the end of this year construction of Road No 1 to the centre of the urban area will begin, with Roads No 2 and No 3 to be built in the third quarter of 2010 and Road No 5 to be built in the second quarter. In the first quarter of next year HDA will begin construction of Resettlement Area 1, after gaining approval from the Hanoi Planning and Investment Authority in August. To begin these projects, HDA must have cleared land handed over by the Land Development Fund.
Since early 2008, the Land Development Fund has been investigating the present condition of land for the project in Tu Liem district, but due to a number of problems in compensation policies regulated by Decree 84/2007/ND-CP, the process was postponed for a few months, until June 2008, when HPC ratified Decision 33/QD-UBND to solve the problems. The Land Development Fund is cooperating with the Tu Liem District People’s Committee to set up compensation and support solutions for households and individuals whose land is to be taken over in the first phase of implementing land clearance, which covers 20 ha in Xuan Dinh commune.
The THT representative said there were some issues that need to be addressed. According to these solutions, most households and individuals meet the conditions to benefit from the support policy applied for those with more than 30 per cent of their agricultural/ farming land being given to the project. But THT has said that among those households and individuals, many have had most of their land taken over by other projects, with just a small part taken over for the Tay Ho Tay project.
“As the investor of the project, we think that it is necessary to review the application of this policy,” Mr Lee Seung Kook wrote in the company’s report sent to HCP on August 7. It also said that THT has responsibility for supporting households and individuals who have land taken over by its project. But as most of their agricultural land has been or will be taken over by other projects, the investors of such projects must share the responsibility.
In the report, the company’s general director also mentioned deductions for land clearance fees from land lease costs. “We think that the amount of money in cash the company supports for households and individuals, who have more than 30 per cent of agricultural/farming land taken over, should be included in the land clearance fee, which is deducted from the land leasing expenditure we will pay to the city later,” Mr Lee wrote. Recently, the Hanoi Land Fund Centre announced that the cost for land clearance for the Tay Ho Tay project is estimated at VND1,376 billion ($76.9 million).
This sum could be an unexpected amount for THT, as it is a consortium of five private companies and must mobilise capital itself rather than having financial support from the government or international organisations. In 2006, when the project was licensed, the estimated capital was $314 million. At that time, it was the largest real estate project ever seen in Hanoi.
However, many large projects have come since, including Keangnam’s Hanoi Landmark Tower project, with registered capital of $1.05 billion, construction of which began in August 2007. And with higher construction material prices and other factors, the company may have to re-evaluate the total sum they will have to invest in the project and determine its profitability.
Real estate and construction have been the fields attracting a lot of South Korean investors to Vietnam in recent times. The five largest investments from South Koreans in the last eight months have been in real estate and construction, with the largest capital belonging to the Charm Urban Development Company ($600 million) and the lowest, of $47.3 million, belonging to the Cantavil Anphu Complex.
All of these projects are in Ho Chi Minh City and Ba Ria Vung Tau and Binh Duong provinces. In 2008 were two projects in the fields: the Hue business complex in Hue ($480 million) and the Dongriwon Office complex in Hanoi ($220 million). The three biggest projects in 2007 were in the fields, with registered investment of $500 million, $180 million and $80 million.
In Hanoi, major projects of South Korean investors include the Tay Ho Tay project ($314 million), Keangnam’s Hanoi Landmark Tower ($1.05 billion), Chamvit Hanoi Plaza Hotel ($80 million) and the Dongriwon Office complex ($220 million), and the POSCO New Urban City ($210 million).
No matter how investors deal with their financial issues or re-evaluate the profitability of their projects, the Hanoi People’s Committee must keep its commitment to provide cleared land to investors, as confirmed by one of its senior leaders. “The Hanoi People’s Committee is managing and reviewing issues regarding to the projects, like investment preparation,” said Mr Phi Thai Binh, Standing Deputy Chairman of Hanoi People’s Committee, who has been assigned to manage the project and monitor the operations of all Hanoi offices involved in the project.
In its initial plan announced in 2006, the Tay Ho Tay Urban Area is located on an area of 847 hectares, bounded by four roads: Pham Van Dong, Hoang Quoc Viet, Lac Long Quan and Nguyen Hoang Ton. It will straddle the administrations of seven communes and precincts in Tu Liem district (65 per cent of the total area), Tay Ho district (25 per cent) and Cau Giay district (10 per cent).
The Tay Ho Tay Development Co., Ltd has 207.66 hectares in the centre. Total investment for the project was estimated as $314.125 million and legal capital is $94.237 million, contributed equally by five companies: the Daewoo Engineering & Construction Co. Ltd (now Kumho), the Daewon Co. Ltd, the Dong Il Highvill Co. Ltd, Keangnam Enterprises Ltd, and the Kolon Engineering and Construction Co. Ltd. Total investment capital is to be implemented over six years.
Under its business licence, THT must complete the construction of infrastructure in the entire project area within eight years of being licensed, as agreed to in a document dated October 10, 2005. The detailed planning of the new urban area, on a total of more than 210 ha, was approved and announced by the HPC in April 2008. The project is expected to be completed in 2014.
The THT Development Company will hand over more than 25 hectares to the Hanoi People’s Committee to build offices and will provide a non-refundable amount of $23.455 million to invest and build technical infrastructure outside of the project’s perimeters. The life-span of the project is 50 years.
▪ LE CAM LE (news.vneconomy)
