C § E § A § L

Center for the Economic Analysis of Law









Viet Nam:  Economic Overview of Options for Mortgage Market Reform


Heywood W. Fleisig

March 1997









Viet Nam:  Economic Overview of Options for Mortgage Market Reform*


                Heywood W. Fleisig

  March  1997























*The views and interpretations expressed in this paper are those of the author and do not necessarily represent the views and policies of the World Bank or of its Executive Directors or the countries they represent; or of the Center for the Economic Analysis of Law or its Fellows or Directors.

The work set out in this paper was undertaken under the supervision of Konrad Von Ritter (EA1AE) and was written by Heywood W. Fleisig, Director of Research, Center for the Economic Analysis of Law (CEAL). 

The legal research includes applicable law passed by August 1996.

The author is particularly obliged to Lisa-Marie Monsanto for her excellent assistance in the legal research.  The author thanks Richard Eyre, Donna Haldane, Lynn Holstein, David Mulcahy, Nuria de la Peña, R. Kyle Peters, and Konrad Von Ritter for many helpful comments and much useful advice.  Any errors, however, entirely remain the responsibility of the author.

I                     Executive Summary

Residential and commercial buildings probably represent more than a third of Vietnam’s capital stock-- a value about equal to Vietnam’s GDP. In modern industrial economies, this stock of capital serves as collateral for loans -- typically mortgages.  That instrument, and its associated institutions, permit buyers and sellers to tap into society’s pooled savings in order to transfer houses and buildings from low value uses to higher value uses; it permits owners of such buildings to tap their savings in order to finance other business investments.  Almost a third of the credit given in the United States, for example, is secured by mortgages.

A properly functioning mortgage market could play an important role in Vietnam’s economic transformation. To do that, however, will require resolution of some complex policy issues in Vietnam.


·                    Developing additional public policy tools in the areas of inheritance, taxation, land use planning, and landlord/tenant relations to permit simplifying the land use rights without compromising public policy objectives

·                    Designing and modifying present systems of mortgaging and registration to permit using the minimum necessary set of land rights to create acceptable collateral for private loans

·                    Implementing that mortgage system with systems of titling, registration and enforcement


Next Steps:

1.                  Analyze the economically important restrictions on each land use right and the economic importance of any undefined land rights

2.                  Determine from Vietnamese policymakers what public policy issue they are attempting to address with these restrictions and missing land use rights; eliminate restrictions and gaps that have no public policy justification

3.                  Present a detailed action program for consideration by policymakers that offers alternative solutions to those policy problems that are less damaging to the development of the land and mortgage markets; this action program would explain how alternative control systems would be phased in to avert undesired public policy consequences of changes in the system of land rights and mortgages

4.                  Determine the minimum set of land use restrictions necessary to efficiently achieve the state social objectives

5.                  Design a legal and regulatory system that will permit getting for land the greatest value, as collateral, from the streamlined set of land use rights.

6.                  Draft laws and fund registry reforms