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Final Report - Asian Development Bank

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TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project<br />

<strong>Final</strong> <strong>Report</strong> Appendix 7<br />

77. The following issues have been identified<br />

� The shareholder arrangement proposed by QBG is illegal in Shaanxi province.<br />

� It is not clear from the contract who is the legal entity from Dianzhen village who will<br />

sign the contract. It is implied in the contract that the administrative village will be the<br />

contractor. After the cropping land /forestry land that comes under the land conversion<br />

program has been contracted to the individual household, the administrative village<br />

does not have the legal authority to contract the land use right to anybody else. The<br />

individual household is the one holding the legal right to contract the user right of their<br />

land to the third party voluntarily. It is also not clear who will be the legal entity to sign<br />

the contract from QBG side. QBG is not a legal entity which can have a shareholder<br />

arrangement under the current situation. The sample contract provided uses the name<br />

of both QBG and Shaanxi Qinyuan Ecological <strong>Development</strong> Limited inconsistently.<br />

� The contract indicates a land area including the whole of the QBG land area. It is<br />

required by law to indicate the boundary of the land for which the user right has been<br />

put into share. It also confuses the whole picture by including land acquisition land<br />

under this contract land area.<br />

� The contract indicates that the land under the contract will be used for forestry,<br />

agriculture, research, science extension, protection and tourism. But the Rural Land<br />

Contracting Act of PRC requires that contracting of user rights for any farming land<br />

can not involve changes to the land use type. Approval is required from the Forestry<br />

Authority for any Forestry Land under Land Conversion Program to change to other<br />

land use type and change the vegetation.<br />

� Term of the contract is expressed as 50 years from the day of signing the contract. It<br />

is not consistent with the Rural Land Contracting Act of PRC which requires the<br />

transfer of land use right with in the term of the Land Use Contracting Term stated on<br />

the Land User Right Certificate. In case of Dianzhen village, it is from 1998-2027. For<br />

forestry land coming under Land Conversion Program, it is from 2003-2053.<br />

� The contract does not include a clause for compensation in the event of permanent<br />

damage made to the land.<br />

� The price for 50 year land use right proposed in the contract is low based on current<br />

government compensation for land acquisition. The justification for the proposed price<br />

is not clear. It is not clear if the villagers have been all consulted.<br />

� The Village Committee has been proposed to be the representative of the households<br />

to classify the land, determine the amount share from the fixed return and revenue<br />

return per mu, and distribute returns to the householders. This arrangement is not<br />

consistent with the Rural Land Contracting Act of PRC which requires the voluntary<br />

transfer of land use right from the households. The Village Committee does not have<br />

the authority to do this. QBG has to negotiate individually with the contracted<br />

households who hold the land use right. Alternatively, all households who voluntarily<br />

transfer their land use right to QBG through this contract have to authorize the Village<br />

Committee to negotiate on their behalf.<br />

� The contract states that arbitration will be submitted to Zhouzhi County Arbitration<br />

Commission and any legal suit to a Zhouzhi court to resolve any arguments of this<br />

contract. This is not consistent with the Act of Civil Law Suit Sue; one of the two<br />

approaches has to be chosen.<br />

� The contract does not mention the requirement of approval from forestry authority<br />

above the county level on transferring user right of collective forestry land and a<br />

logging permit for logging resulting from the transfer, which is required by Forests<br />

Management Rules of Shaanxi Province.<br />

Risks<br />

� Use of forestry land and farming land under this contract could be changed to other<br />

land use type without proper approval.<br />

� Village Committee could be the entity to sign the contract. This could result in some<br />

involuntary transferring of land use right and an increase in the need for resettlement<br />

compensation.<br />

� The capital of Shaanxi Qinyuan Ecological <strong>Development</strong> Limited should be properly<br />

valued and the land use right should to be properly valued for the shareholder<br />

arrangement, otherwise inequality between two parties could result.<br />

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