Pursuant to Sub- Decree № 146 dated 27 December 2005 (“SD 146”), many Economic Land Concessions (“ELCs”) have been granted to investors in the agro-industrial sector.
An ELC can only be granted for land that meets all of the following five criteria:
- private State land;
- having a land-use plan approved by the Provincial/Municipal State Land Management Committee;
- having conducted environmental and social impact assessments;
- resettlement in accordance with the laws and procedures in force; and
- public consultation with the territorial authority and the community.
The contracting authority is responsible for ensuring that each ELC meets all of the above specified criteria. Failure to comply with the requirements of SD 146 would entitle the Government to revoke the concession in accordance with Article 55 of the Land Law.
Pragmatically, it seems that the abovementioned criteria has not been implemented properly and that land disputes between the concessionaire/concessionaire companies and local residents are occurring more frequently.
As a result, the Government has issued a new policy on ELCs under order № 01 dated 17 May 2012 (“Order”).
The Order aims to settle land disputes between the concessionaire/concessionaire companies and land occupants and to strengthen the management of ELCs through the implementation of new policies by implementing the following:
- Temporarily ban the issuance of new ELCs;
- Ministry-institutions and relevant authorities shall implement the policy and all conditions of the decision of the Royal Government on granting ELCs effectively and focus on the implementation of the concession agreements, particularly in the interest of the villagers;
- in a case whereby a company has obtained approval from the Government, but has not complied with the legal procedure in force and the concession agreement and has operated illegal activities on granted lands, the Government will revoke the concerned ELC and put the land under the management of the State;
- ELCs which have been granted approval in principle from the Royal Government prior to the issuance of the Order, shall continue to exist in accordance with the laws and procedures in force.
Pursuant to the Order, it appears that there will be no new ELCs granted by the Government as of the date of the Order. It has not been specified when the Order will be revoked.
In respect of the settlement of the land disputes, the Government has implemented land re-measurement procedures for ELCs and therefore existing ELCs and ongoing disputes between concessionaires and local occupants are subject to the Government’s review.
Additionally, according to Letter № 660 regarding requests for the determination of land concession royalties/fees and payment of the deposit for all economic land concessions (both old and new land concessions) dated 22 June 2012 (“Letter”), we understand that, in addition to the above measures, the Government aims to levy an annual land concession royalty on ELCs at the rate of USD 5 per hectare, commencing from the sixth year of the ELC. Please note that the USD 5 tax will increase at the rate of 5% annually. Furthermore, companies operating on an economic land concession shall be required to pay a deposit of USD 10 per hectare of the granted concession land upon contracting with the relevant authority. Seventy percent of the deposit will be returned to the companies when the planting has been completed in accordance with the master plan. The remaining 30% of the deposit shall be used for the payment of the land concession royalty at the final period of the contract, as described above. The Government also announced its aim to restrict the assignment of the existing ELCs (except for joint-ventures). However, to date, there have been no regulations issued by the Government to confirm this position.
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2 November 2012