When the Phu My Hung project was launched, no one could forecast that it would develop into an attractive residential area as it is today. Those who could - and could afford buying houses here right from the beginning - have all become millionaires.
Except for a number of insightful leaders and the investor, most others believe that the Phu My Hung project was doomed to fail. Even after the Nguyen Van Linh St. was open in late 1997, the first 80 houses offered for sale were met with a lukewarm reception. Few thought this would become a good place to reside. It took a year and half for all of them to be sold. Most of the buyers were either risk takers or those who had ample money to spare.
At that time, many people still believed that the developing of Nguyen Van Linh St. and of the Phu My Hung urban area was faced with insurmountable challenges, and expected a day would come when Lawrence S. Ting’s company would give up and flee.
A friend of mine, who had never made any investment, somehow decided to try his luck by selling his house in Da Nang and borrowing from relatives and banks to buy five villas in late 1990s - when those real estates could hardly sell. His calculation was that in the worst scenario - if the investor had fled - he would have lost his own money but the proceedings from selling the villas could still cover the loans. However, his venture paid off a few years later. He could sell four of the villas and earn billions of dong in profits, which he invested in his other business. Understandably, such risk-takers were few.
Phu My Hung now boasts a spectacular development that greatly benefits the city, local residents as well as investors like my friend. But the success could only be achieved through unimaginable patience, determination and goodwill showed by Central Trading & Development (CT&D) Group and specifically Lawrence S. Ting. Not to mention hurdles related to policies and administrative procedure, the JV has had to deal with enormous internal problems related the fulfilling of the partnership contract.
First is capital contribution. The Vietnamese party, represented by IPC (Tan Thuan Industrial Promotion Company Limited) is to contribute 600 hectares of land, which is equivalent to 30 percent of the JV’s registered capital. The foreign party, i.e. CT&D, provides 70 percent in funds.
The contributed land was in fact the area of the five zones to be developed by the JV under the blueprint master plan.
The JV, however, has so far only been able to develop Zone A, leaving the other four zones untouched. The reason is simple: the Vietnamese party has not provided all the required land.
To support IPC in reclaiming land for the project, the foreign party in the beginning provided it with a non-interest loan of US$15 million for compensation for land owners. At the common compensation rate of just about $1 per sqr.m. at the time, this fund should have been enough to compensate for not only the 600 hectares contributed to the JV, but also for most of the total area earmarked for the planned Saigon South.
However, even after the loan was repaid, the entire area that the Vietnamese party has been able to contribute so far - 22 years since the project began - was just 320.86 hectares, including 299 hectares of Zone A and 21.86 hectares of Zone E. To make matter worse, construction in Zone E is almost impossible because the cleared area intersperse with existing residential areas.
The prime minister and city leaders have time and again discussed ways to speed up the transfer all 600 hectares of land to the joint venture, yet the problem has been left unsolved for more than 10 year. Meanwhile, ever since the JV started making profits, the Vietnamese side has duly received its share of 30 percent of profits - even though it has not fulfilled its contract obligations.
The city is reportedly organizing a “working group” to reconsider the problem and find solutions. Such an agency would have to face challenging questions in case IPC would try to fulfil its land grant commitment. As land prices in the area have shot up at an exponential rate since the project was launched, how would the Vietnamese side be able to find the addition hundreds of millions of dollars needed for compensation for the taking of property by eminent domain? And with the process becoming increasingly more complicated over time, how long further would it take? Bear in mind that the project would expire in 2043.
On the other hand, if it were found to be impossible for IPC to fulfil its land commitment, the Vietnamese party would have to readjust its respective contribution to the JV down to 16 percent - equivalent to the 320 hectares of land it had contributed. Would IPC accept that? Or would there be any other feasible solution?