We often hear voices saying, "I'm considering an agriculture business in Vietnam, but I don't know how to secure land." Because Vietnam's farmland system is fundamentally different from Japan's, proceeding without understanding it leads to major trouble.
This article systematically explains everything from the basics of Vietnam's farmland system to how foreign capital can make use of it, and the revised Land Law that took effect in 2024.
The Basic Premise of Vietnam's Land System: Land Is the "Property of the Entire People"
In Vietnam, all land is the "property of the entire people" and is managed uniformly by the state. This is a principle based on the socialist system.
Unlike in Japan, individuals and companies cannot "own" land. Instead, they are granted "land-use rights" by the state. These use rights function as substantive rights, and buying, selling, leasing, and creating collateral are also possible.
Without understanding this point, confusion arises at the time of contracts and registration. The key is to reinterpret "buying land" as "acquiring use rights."
What Is the Red Book (Land-Use Rights Certificate)?
Overview of the Red Book
The "Red Book" is the common name for the land-use rights certificate (Giay chung nhan quyen su dung dat). It is called this because its cover is red.
The Red Book is the official certificate of land-use rights, and it records the following information.
| Recorded Items | Details |
|---|---|
| Location of the land | Province, district, commune, lot number |
| Area | In square meters |
| Use | Agricultural, residential, commercial, and so on |
| Use period | Agricultural use is up to 50 years (extendable) |
| Rights holder's name | Individual or corporation |
In the case of agricultural land, the use period is up to 50 years, and after the period expires it can be extended by application.
The Importance of the Red Book
Without a Red Book, legal proof of land-use rights is not possible. In Vietnam there is much unregistered land, and land without a Red Book still exists in rural areas.
When making a transaction, it is important to always confirm the Red Book and carry out formal transfer registration. A verbal contract without a Red Book becomes a cause of later trouble.
The Agricultural-Land Lease System
Leasing Land from Farmers
The most common way for a foreign-capital company to secure agricultural land in Vietnam is to lease land-use rights from farmers.
The basic flow of leasing is as follows.
- Negotiate directly with the farmer (the land-use rights holder)
- Draw up a lease agreement
- Notify the local People's Committee
- Register the transfer of land-use rights as needed
The rent is decided by agreement between both parties, but it varies greatly by region and soil fertility. The rice-growing area of the Mekong Delta and the Central Highlands'coffee-producing regions have different going rates.
Use of State-Owned Land
There is also a method of leasing state-managed agricultural land directly from the state. In this case, the province-level People's Committee is the point of contact.
The rent for state-owned land is calculated based on the reference land price set by the state. The procedures take time, but it is suited to securing a large-scale farm.
How Foreign Capital Can Use Farmland
Forms of Agricultural-Land Use Permitted to Foreign-Capital Companies
Under Vietnamese law, foreign-capital companies cannot "own" agricultural land. The forms of use available are limited.
| Form of Use | Details | Period |
|---|---|---|
| Lease from the state | Directly rent state-owned agricultural land | Up to 50 years |
| Sublease from farmers | Borrow the farmers' use rights | According to the contract |
| Via a joint-venture company | Indirect use through a joint venture with a Vietnamese company | According to the joint-venture agreement |
For foreign capital to enter agriculture, in principle an agriculture-related Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) are required.
Practical Points to Note
When a foreign-capital company consolidates land from multiple farmers, individual negotiations are required. Building relationships with farmers and trust with the local community is the practical key.
Also, agricultural land has use regulations. It is limited to use for agricultural purposes, and changing the use without permission is subject to penalties.
Main Points of the 2024 Revised Land Law
Vietnam's revised Land Law took effect in January 2024. It is the first major revision in about 10 years, since 2013. It has a significant impact on the farmland system as well.
Main Revisions
Promotion of agricultural-land consolidation
Regulations on the consolidation and exchange of agricultural land were eased, and the policy of promoting a shift to large-scale farm management became clear.
Revision of the land-price calculation method
It shifts from the conventional fixed land-price list to a calculation method based on market prices. As a result, the calculation of expropriation compensation changes.
Development of the environment for foreign agricultural investment
To make it easier for foreign-capital companies to invest in agriculture, the procedures are being made more transparent and simplified. Because the specific implementing rules are set by each province, attention to regional differences is needed.
Clarification of the procedure for extending land-use rights
The procedure for applying for an extension after the 50-year period expires has been put into writing, and the continuity of rights has come to be protected.
Challenges of the Revised Law
The revised Land Law is a step forward, but challenges remain. The development of province-level implementing rules is taking time, and there are differences in application by region.
In actual farmland transactions, building relationships with local-government officials and checking the latest local rules remain important.
Practical Points When Japanese Companies Make Use of Vietnamese Farmland
Thorough Due Diligence
Before leasing farmland, always confirm the following.
- The authenticity of the Red Book and that it matches the current situation
- The land's use classification (confirm whether it is agricultural land)
- History of past disputes
- The farmer's family structure and inheritance situation
In Vietnam there is much land held in a family's name, and there are cases where the consent of a spouse or children is required.
Making Use of Local Partners
On the legal side, engaging a local lawyer is essential. The ideal combination is a Vietnamese lawyer well versed in the agricultural field together with a firm that can handle Japanese.
On the practical side, cooperation with local agricultural cooperatives and the agriculture bureau leads to smooth business operations.
A Land Strategy from a Long-Term Perspective
Vietnam's farmland rents are rising year by year, and demand is especially increasing in the Mekong Delta and the Central Highlands. Securing good-quality farmland early leads to a competitive advantage.
Summary
Vietnam's farmland system, on the basic premise of "ownership of land by the entire people," conducts agricultural business in the form of land-use rights. Let us summarize the main points.
- The Red Book is the official proof of land-use rights. Confirmation before a transaction is essential
- The use period for agricultural land is up to 50 years, with extension by application possible
- Foreign capital cannot own agricultural land, but use through leasing or joint ventures is possible
- The 2024 revised Land Law developed the environment for large-scale agriculture and foreign investment
- Because implementing rules differ by locality, making use of local experts is important
Entry into Vietnamese agriculture becomes a major business opportunity with a proper understanding of the system and cooperation with local partners.
At VN AGRI, we share the latest information on Vietnamese agriculture.
