National Assembly passes Urban Development Law with 93 percent approval

Vietnam's National Assembly voted overwhelmingly on Monday to pass the Urban Development Law, with 93 percent of lawmakers supporting the legislation. The law introduces new mechanisms to spur development in key urban areas, including Ho Chi Minh City, major cities, and special economic zones. The emphasis is on decentralization, giving local authorities more power.

Justice Minister Hoang Thanh Tung explained that the revised law clarifies several special pilot mechanisms that can also be applied to cities not yet classified as special urban areas. The Government can issue pilot regulations with the approval of competent authorities and the National Assembly Standing Committee. These pilots must address specific State, economic, and social management requirements.

The law spans five chapters and 66 articles, with a new article added compared to the original draft. City-level People's Councils can approve a 20 percent increase in civil servants and public employees beyond central staffing levels, provided local budgets can cover the additional wage costs.

The legislation also sets rules for investment and development in reclaimed urban areas. Strategic investors can extract construction minerals, such as marine sand for land reclamation, under rules similar to those for nationally significant projects. These projects can operate for up to 70 years, and investors cannot transfer the entire project before completion, nor can they transfer more than 50 percent of completed reclaimed land.

For free-trade and integrated logistics zones, the State Bank of Vietnam Governor will set conditions for foreign banks to establish transaction offices to manage exchange and money-laundering risks. The Government will establish procedures for granting, temporarily suspending, or withdrawing preferential customs treatment for businesses in these zones.

International financial centers will have city-level People's Councils determine licensing conditions and procedures for investment banks and the issuance of international financial products, subject to agreements from the Ministry of Finance and the State Bank of Vietnam. The law removed the authority of People's Councils to decide on controlled experimental mechanisms in special economic zones.

The law will take effect on October 1, but certain provisions will come into force earlier. Clause 4 of Article 7, dealing with assessing and promulgating legal documents, will start on September 1. Tax incentives in Articles 39, 48, and 52 will apply starting in the 2027 tax year. The new law also changes the status of existing resolutions on special pilot mechanisms, with some provisions expiring in 2030.