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Vietnamese water firm scraps controversial $26.2mn deal with Chinese pipeline supplier

Monday, August 15, 2016, 18:16 GMT+7

The developer of a major water supply project for Hanoi residents has scrapped a multimillion-dollar pipeline contract with a Beijing-based supplier, succumbing to public pressure amid concern over the quality of the Chinese products.

On March 21, Viwasupco, the water utility subsidiary of state-owned construction firm Vinaconex, awarded the VND588 billion (US$26.25 million) contract to Xinxing Co. Ltd., for a price just under 12 percent lower than it had initially tendered the project at.

The pipes were intended for use in the second phase of the Song Da Water Project, transmitting clean water from the Da River Water Plant in the northern province of Hoa Binh to Hanoi.

The first phase of the project, launched in 2004, has suffered from multiple pipeline breaks, causing clean water shortages for thousands of Hanoi residents.

On hearing of the decision to award the contract to the Chinese supplier, the public immediately criticized Viwasupco, citing the low bid price as well as the poor quality and ultimately high cost of previous public projects involving Chinese contractors.

On March 25, Nguyen Xuan Phuc, who was then the Deputy Prime Minister of Vietnam and is currently the Prime Minister, ordered the People’s Committee of Hanoi and the Ministry of Construction to examine the project.

The People’s Committee of Hanoi recommended that the government instruct Viwasupco to delay signing the contract in order to reconsider the deal.

Viwasupco has since reconsidered the arrangement and decided to cancel it on Monday, with the local developer attributing various reasons for scrapping the contract. These included legal and financial circumstances, changes in shareholder structures, and the need to speed up the project.

Vinaconex, the parent company of Viwasupco, is currently in legal trouble, with many of its former managers prosecuted over the pipeline breaks during the first phase of the Song Da Water Project.

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