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No legal foundation

Released at: 15:49, 10/10/2014

No legal foundation

A range of property projects have been suspended because of legal violations or the absence of construction licences.

by Nguyen Quynh

Like someone famous caught in a scandal, Muong Thanh Hospitality has been doing its best to restore its reputation after being found to have built a number of hotels without proper licences. The Dien Bien No 1 Construction Private Enterprise, owner of Muong Thanh Hospitality, is also reported to have been working on many projects without building licenses. The decision by authorities to suspend its projects has thrown the group’s plans into disarray. 

Creating chaos

The Muong Thanh Saigon project, a subsidiary of Muong Thanh Hospitality in Ho Chi Minh City, was suspended because of legal violations. The project was permitted to build a 20-storey office block, with completion expected before April this year. However, when the completion deadline passed, the investor continued working on construction. According to Decree No 64/2012 from the Ministry of Construction, all construction projects must be licensed before building begins and any changes must be approved. Moreover, where construction is completed after the date regulated in the licence, the investor must register for a new licence. As a result, Muong Thanh Hospitality’s plans cannot continue until it secures a new building licence.

The Dien Bien No 1 Construction Private Enterprise built a five-star hotel in Can Tho without a licence. The group did obtain a licence to build the foundations, but intended to build up to six floors. Under the law, if a builder wants to build more than one floor it must have a new licence, and for this reason construction was suspended. The company has had similar problems elsewhere, including in Hanoi, Nha Trang and Nghe An.

Unfortunately, such events are not rare. In south-central Binh Thuan province, the Coco Mui Ne Resort project was also suspended after legal violations. It was licensed to build a four-floor resort but went on to build seven. In Hanoi, the Thang Long Complex was caught violating the law. Its initial scheme, approved by the city’s Department of Planning and Architecture, was to build 17 floors. The investor then added ten more floors and also changed its function from office space to a mixed complex, without seeking a change to its licence. In May, the N04B1 project, invested by the Tu Liem Urban Development Co., (Lideco) was fined VND40 million ($1,180) by the Cau Giay People’s Committee for not having a building licence for one of its projects. 

There are also other illegal constructions underway, such as at 16B Nguyen Thai Hoc Street, the Millennium Tower in Ha Dong District, and Complex X1-26 in Ba Dinh District. Although local people have complained about the situation for many years, satisfactory answers have been hard to find. 

Losing control

The latest report from Construction Inspection shows that more than a thousand projects have broken building regulations, including 642 that were built without planning permission and 174 that violated the law in some way. However, Mr Phan Van Bao, Deputy Inspector at the Hanoi Department of Construction, argued that projects prohibited from proceeding are mostly small scale. But many large-scale projects in urban areas continue despite the fact that they are not properly licensed. 

It’s clearly a common occurrence and damages both developers and contractors, said Mr Pham Sy Liem, Deputy Chairman of the Vietnam Construction Association. So the question is, why do investors work on projects that are not licensed. According to Mr Liem, it is impossible for inspectors and local authorities to claim ignorance of the situation. The main problem is that local authorities tend to favour investors and provide cover for their violations. In fact, businesses would never break the law in the first place without tacit approval from local authorities.

Back to Muong Thanh Hospitality, where Mr Truong Xuan Danh, Deputy Director of the Dien Bien No 1 Construction Private Enterprise, acknowledges that many of Muong Thanh Hospitality’s project are unlicensed. “We have received invitations from local authorities to invest,” he said. “And they promised to simplify procedures.” 

Some property analysts say that local authorities want to better develop infrastructure by providing favourable conditions to investors. But this creates room for investors and business to break the law. Inaction by local authorities is behind the appearance of so many illegal projects. According to Mr Liem, the loss of control by local authorities is the main reason there are numerous unfinished projects and land resources wasted. “The government needs to strictly punish local authorities rather than investors,” he believes,

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