HANOI, Vietnam—Do Quoc Tai is an unlikely pain in the side of Vietnam’s ruling Communist Party. Although the construction foreman earns just US $150 per month, he and his neighbors have strong-armed the government, blocking a major ring-road that’s a symbol of the country’s push to modernize.
Nearly four decades after Vietnam emerged from war, it now faces a make-or-break choice—build new roads and subways in its sprawling cities or remain stuck in the past, allowing fear of social unrest to hijack its development.
Building a nearby one-kilometer (0.6-mile) stretch of the road took a decade, largely because residents resisted low payoffs until authorities relented. State media reported that $39 million of the $45 million cost was compensation and dubbed it “the most expensive road in the world.”
Experts and officials say inadequate infrastructure and public transport in Hanoi and other Vietnamese cities blocks the social and economic progress of a country where widespread poverty persists despite fast growth in recent years.
As construction of Hanoi’s inner ring road remains stalled, its traffic will almost certainly worsen in the coming decade as a rising middle class begins to drive cars rather than motorbikes. The World Bank says motorbikes still account for as many as four in five trips in Vietnam’s major cities.
Planners warn that if Hanoi doesn’t build more roads and efficient public transport while limiting car ownership, its narrow streets will begin to look as gridlocked as those of Jakarta and other notoriously congested megacities. Two-wheeled commuters already honk their way down Hanoi sidewalks during rush-hour traffic jams.
The major sticking point is the price of land—The government wants to seize urban neighborhoods for infrastructure but offers compensation far below market values. It might have some justification since there are indications property prices have gotten far ahead of reality for a developing country. Many residents refuse to budge, and widespread corruption and bureaucratic infighting only exacerbate delays.
In Tai’s run-down neighborhood, residents and commercial real estate agents estimate the price of the land at roughly 100 million dong ($4,800) per square meter.
Tai, who lives with 13 family members in a house the size of a small New York City apartment, says the 55 families he informally represents have been negotiating compensation with local officials since 2008. But many have yet to accept a deal.
If residents and officials can’t agree, “it’s likely the government will have to force an eviction,” Tai said in his cramped living room as neighbors picked through garbage in an adjacent alley. “Some families have nothing to lose, and if they were cornered, who could predict what might happen?”
Vietnamese consider land a relatively secure investment in a country that’s reeling from Asia’s highest inflation rate and struggling to reform faltering state-owned corporations in the wake of a major 2010 scandal that damaged the country’s credit rating.
Estimated property values near Hanoi’s dilapidated old quarter are incongruously high considering Vietnam, where average per capita income is about $1,400 per year, has only just emerged as a “lower-middle-income” economy. That’s a World Bank classification based on reaching an average yearly income of between roughly $1,000 and $4,000 a person.
The international real estate firm Cushman and Wakefield said in a report this year that downtown Hanoi office rentals—at roughly $500 per square meter ($46 per square foot) per year—rival those of Seoul and Munich.
Urban Vietnamese hold quasi-permanent land titles, many of which were issued after 1975, when US-backed South Vietnam fell to northern communists and the country was reunified.
Experts say unlike people in the countryside who typically hold 20-year leases on farmland and can be evicted for golf courses and luxury villas, residents of Hanoi and the southern economic hub of Ho Chi Minh City are often less willing to cede turf for development or infrastructure projects—particularly when the compensation price is well below market rate.
Site clearance for infrastructure projects is a “difficult problem” in Hanoi and other Vietnamese cities, said architect Tran Trong Hanh, a former member of the Hanoi people’s legislature, a city council-like body that influences key infrastructure projects.
The government’s “priority is compromise and guaranteeing the best benefit for the people, and eviction is the last resort,” he said.
State media have reported that a majority of the 670,000 petitions the government has received since 2008 related to cases in which officials seized land for infrastructure and economic development projects but paid significantly less than the market rate for the plots.
Prime Minister Nguyen Tan Dung was quoted in early May as saying that if 528 such pending cases are not properly resolved, they could sow “seeds of political and social instability.”
Organized resistance is rare in Vietnam, where a powerful government controls the media, squashes protests and imprisons political dissidents. Analysts say that unlike neighboring China, where the government razes urban neighborhoods for infrastructure projects over local opposition, Vietnam is very reluctant to seize land from city dwellers because it doesn’t want to spark social unrest and risk threatening the status quo.
Officials in Vietnam’s two major cities “can never finish a ring road,” said Nguyen Xuan Thanh, director of public policy programs at the US-funded Fulbright Economics Teaching Program in Ho Chi Minh City.
Unlike China, Vietnam “tolerates inefficiency in exchange for stability,” he said. “Efforts to redevelop existing urban areas are very likely to fail.”
Tai, the construction foreman, lives a few hundred meters from where the “most expensive road in the world” stops abruptly at a row of skinny houses. The success of other residents in blocking that road project has empowered landowners here and in other Hanoi neighborhoods to hold out for higher compensation rates—further delaying major infrastructure development.
Since 2008 the official compensation offer has crept from 11.2 million dong ($538) to nearly $30 million dong ($1,440) per square meter for many of Tai’s neighbors, but those who cannot produce official titles have been offered just 50,000 dong ($2.50) per square meter.
Local officials plan to raze the neighborhood and extend the inner ring road later this year, “but it’s unlikely they’ll meet that target,” Tai, 48, said. The officials could not be reached for comment.
A nascent $5 billion metro system that’s scheduled to begin opening in 2015 will ease the city’s traffic burden to a degree, said Robert Valkovic, a transport specialist at the Asian Development Bank in Hanoi. But he added it will be difficult for city officials to discourage car ownership and develop a coordinated road network.
“If you start building roads,” he said, “then you have to start knocking down neighborhoods.”