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Vietnam to borrow additional $250mn from China for urban railway project

Sunday, July 19, 2015, 18:14 GMT+7
Vietnam to borrow additional $250mn from China for urban railway project
A wavelike part of the Cat Linh-Ha Dong urban railway is seen in Hanoi on June 25, 2015.

Vietnam will borrow US$250.62 million more from China to partly offset the additional capital needed for the completion of the Cat Linh-Ha Dong urban railway project in Hanoi by next year following the prime minister’s recent approval.

Besides giving the go-ahead for the borrowing, the premier also agreed to adjust the timing of the project so that it will be commercially operational in 2016.

Prime Minister Nguyen Tan Dung has required the Ministry of Transport to urgently adjust the capital needed for the project and coordinate with relevant ministries to evaluate the adjustment in accordance with the law.

On that basis, the transport ministry will have to work out the corresponding funds that should be supplemented and arranged by the Vietnamese side according to the project schedule.

In addition, the ministry will have to direct the developer and the contractor to accelerate the implementation work and set out a disbursement schedule for the borrowing under the credit agreement already signed with the Chinese side.

The Cat Linh-Ha Dong urban railway project in Hanoi is built with China's official development assistance (ODA) loans under the Framework Agreement signed on May 30, 2008 between the Vietnamese and Chinese governments.

The project broke ground in October 2011, at an initially estimated investment of $552 million, $419 million of which comes from Chinese ODA.

In early 2014, the project developer proposed adjusting the total investment to $868 million.

The Vietnam Railway Authority, under the transport ministry, is the project developer, whereas China Railway Sixth Group, a subsidiary of construction conglomerate China Railway Group, is the EPC (engineering, procurement, and construction) contractor.

Under an EPC contract, the contractor designs the installation, procures the necessary materials, and builds the project.

The under-construction urban railway late last month captured the attention of passers-by with its wavelike railroads, the latest in a grim series of scandals to hit the Chinese-funded project.

The wavy parts of the urban railway, constructed by a Chinese firm, can now be seen easily with the naked eye, raising safety concerns among local experts and members of the public.

But Le Van Duong, deputy director of the project management unit, told Tuoi Tre (Youth) newspaper the wavelike rails were deliberately designed to “optimize the operation of the trains in terms of efficacy and energy consumption.”

Last month, the decision to purchase 13 Chinese-made trains for the project from the Chinese side was blasted by local experts.

However, Minister of Transport Dinh La Thang called for public sympathy as it was an unavoidable circumstance because the EPC contractor has the decisive say in procurement, as stipulated in an agreement.

The scandal-rigged Cat Linh-Ha Dong project has made headlines several times since groundbreaking.

Construction had been scheduled for completion in November 2013, and later delayed to December 2015. But it might not be finished until the end of the first quarter of next year, according to current construction progress.

In mid-November 2014, construction was suspended for several weeks after one passer-by was killed and two others were injured by falling reels of steel from a construction site of the project.

When construction resumed in December that year, a 10-meter-long scaffold at a project construction site collapsed and nearly killed four people in a taxi running in the area at the time of the accident.

In late January, Nguyen Huu Thang, head of the Vietnam Railway Authority, the project developer, was found dead for an unknown reason in his office in Hanoi.

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