Red tape makes Metro Line No.1 at risk of suspension

The construction of Metro Line No.1 in HCMC is facing a slowdown and a possible suspension due to the complicated disbursement procedures in Vietnam, not the lack of capital, according to the HCMC Management Authority for Urban Railways (MAUR).

On October 9, MAUR sent an urgent document to the HCMC People’s Committee asking for an additional advance of VND1,173 billion (US$51.63 million) to pay the contractors of the project in October and November. Otherwise, the contractors will scale down or even stop construction work.

The Japanese government has pledged to provide sufficient official development assistance (ODA) capital for the project, but Vietnam has not completed paperwork to disburse the money.

In 2007, Transport Engineering and Design Incorporated South (TEDI South) was tasked with making a pre-feasibility study for Metro Line No.1 which connects Ben Thanh Market in District 1 and Suoi Tien Park in District 9. The company estimated the total investment capital needed for the project at VND17 trillion.

However, a Japanese consulting unit said the initial study was improper. After reviewing the project, it proposed raising the investment estimate to VND47 trillion.

The HCMC government then hired an independent company from Singapore to audit the new study, and the company agreed with the Japanese unit’s cost adjustment.

In 2010, the Ministries of Transport, Finance, and Planning-Investment agreed with the new proposal. In August 2011, the Government approved the final investment cost of VND47 trillion.

MAUR chief Le Nguyen Minh Quang said Metro Line No.1 is the first metro project in HCMC. Therefore, the lack of experience in the field together with price escalation led to the cost spike.

At a meeting of the National Assembly Standing Committee on October 12, Minister of Planning and Investment Nguyen Chi Dung said the project was initially approved with an estimated cost of VND17 trillion, and all of this sum had been disbursed.

The extra investment of VND30 trillion, however, must be approved by the National Assembly, but the plan has not gone before the National Assembly.

Le Nguyen Minh Quang said HCMC has annually reported the project’s progress and obstacles to the Ministry of Planning and Investment, so the ministry shall be responsible for delays in sending relevant reports to the Government and the National Assembly.

Quang said making advance payments using the city’s budget is just a temporary measure. If slow disbursement continues, the project could be suspended, causing serious consequences.

Firstly, the city would have to pay huge compensation for the contractors for late payments and contract termination. The city earlier had to pay the contractors about VND2.5 billion per day for delayed site handover in 2013.

Besides, equipment and tools as well as foreign experts would leave the city after the project is suspended. When the city resumes the project, it would cost much more to import equipment and invite experts back.

Long delays will also result in a further investment cost spike due to price volatility. Therefore, HCMC should closely work with the ministries, the Government and the National Assembly to complete necessary disbursement procedures and overcome other obstacles to avoid project suspension.


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