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​Official warns of ‘unimaginable consequences’ if Saigon metro ceases construction

Saturday, October 14, 2017, 14:03 GMT+7
​Official warns of ‘unimaginable consequences’ if Saigon metro ceases construction
An aerial view of the under-construction metro in Ho Chi Minh City.

If construction of the first metro line of Ho Chi Minh City has to cease due to unavoidable reasons, the consequences will be beyond imagination and control, the project manager has warned.

Le Nguyen Minh Quang, head of the management board for the urban railway project in Ho Chi Minh City, sat down to talk with Tuoi Tre (Youth) newspaper after Vietnam’s minister of investment said the project is on low progress due to massive cost overruns.

Stretching 19.7 kilometers across Ho Chi Minh City, Metro Line No.1 will connect Ben Thanh Terminal in District 1 with Suoi Tien in District 9, stopping in District 2, Binh Thanh District, and Thu Duc District along the way.

The project was initially approved at an estimated investment value of VND17 trillion (US$748.9 million), while Ho Chi Minh City authorities have proposed adding an additional VND30 trillion ($1.32 billion) to the budget, according to minister Nguyen Chi Dung.

However, Quang said the real problem for the metro project is not lack of money, but of a proper mechanism for capital disbursement.

“Someone say we are lacking capital for the project, which is not true,” he told Tuoi Tre.

Quang said the metro project has received in-principle approval from the prime minister and its total investment solution has been backed by the Ho Chi Minh City administration.

Based on these grounds, the project manager has reached three loan deals, with a total of VND31 trillion ($1.36 billion) committed, with Japan from 2007 to 2016.

Despite the available capital, there are protocol problems to have them disbursed to the contractors.

“The Japan International Cooperation Agency [JICA] has complained that while Vietnam repeatedly lamented on disbursement protocols when the Japanese side has completed all the necessary capital arrangement,” Quang said.

Engineers are seen at an underground section of the metro.
Engineers are seen at an underground section of the metro.

Japanese contractors have completed 40 percent of the project work volumes, and have threatened to cease construction if the disbursement issue is not resolved.

Quang underlined that if this worst case scenario happens, it will leave negative impacts on not only the Vietnam-Japan relations but also the Vietnamese investment environment.

“The contractors may send their workforces in Ho Chi Minh City to other projects in Singapore, Malaysia or Indonesia if we fail to clear their payments,” he added.

An aerial view of the construction site of the metro line in Ho Chi Minh City.
An aerial view of the construction site of the metro line in Ho Chi Minh City.

Root of the problem

In the Tuoi Tre interview, Quang also denied allegations that Ho Chi Minh City authorities have increased the total investment for the project without permission, and explained the bottleneck of the capital disbursement process.

In 2006, the Vietnam Railway Authority under the Ministry of Transport was assigned the developer of the metro project.

The authority then tasked the Tedi-South to prepare the investment proposal. However, as Tedi-South did not have much experience in the field, and Vietnam had no existing metro to learn from, the company estimated the total investment needed for the project at VND17 trillion.

The proposal was approved by the prime minister, who later authorized the Ho Chi Minh City administration to oversee the project.

In 2007, the project manager signed the first loan deal with Japan for the project, followed by the second agreement in 2012.

However, in January 2008, the project’s consulting unit NJPT, a consortium led by Japan’s Nippon Koei, reviewed the original proposal and deemed it improper. NJPT amended the proposal and suggested the total investment must be VND47 trillion ($2.06 billion).

An aerial view of the under-construction metro in Ho Chi Minh City.
An aerial view of the under-construction metro in Ho Chi Minh City.

Quang underlined that Vietnam has invited the Singapore Mass Rapid Transit and CPG to audit the new proposal. The two companies later confirmed that the new estimates are proper. At that time, the JICA also pledged to increase loan for the project with the higher total investment.

Under these grounds, the Ho Chi Minh City administration reported to the prime minister, who on August 25, 2011 issued a dispatch, allowing the southern metropolis to approve the total investment adjustment.

On September 21, 2011, the Ho Chi Minh City administration issued a directive, approving the total investment for the metro at VND47 trillion.

“This means it is wrong to say the Ho Chi Minh City administration has proposed higher investment for the project without any approval from higher authority,” Quang emphasized.

In 2016, the third loan agreement for the project, with the total investment stated as VND47 trillion, was closed.

However, it turns out that under the Resolution No.49 of the lawmaking National Assembly, a project of this magnitude must be reviewed by the legislature, Quang noted.

Consequently, during a meeting with Prime Minister Nguyen Xuan Phuc on June 23, 2017, Ho Chi Minh City leaders demanded that the government seek feedback from the National Assembly on the issue, as only the government is authorized to report to the legislative body.

The problem is now within the authority of the government, Quang underlined.

“The biggest wish of Ho Chi Minh City is that the government soon reports the problem to the National Assembly for the final solution, as every day the project is behind schedule results in different damages and adverse impacts,” Quang concluded.

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