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Ho Chi Minh City approves $51.67mn advance from budget to pay metro contractors

Ho Chi Minh City approves $51.67mn advance from budget to pay metro contractors

Thursday, October 26, 2017, 15:43 GMT+7

The chairman of Ho Chi Minh City has approved the disbursement of over US$51 million from the city’s budget to pay metro contractors while official development assistance (ODA) provided by Japan for the project continues to remain inaccessible.

Though Japan has supplied ODA loans for Vietnam to afford the massive metro project underway in its southern metropolis, red tape from the central government is keeping the city from accessing the crucial funds.

To cope with the slow capital allocation, city chairman Nguyen Thanh Phong recently approved a VND1,173 billion ($51.67 million) budget advance while it awaits the central government’s allocation of the ODA loans, according to a dispatch by the municipal People’s Committee.

The sum is expected to cover overdue payments owed to contractors from September and October, as per an earlier request by the Management Authority of Urban Railways (MAUR).

The municipal Department of Finance will be responsible for coordinating with other government agencies to ensure the funds are earmarked properly, the dispatch reads.

According to reports by MAUR, the city needs VND5,442 billion ($239.74 million) to cover metro construction costs for 2017, but so far only VND2,119 billion ($93.35 million), or 36 percent, has been allocated.

The total costs from the project’s start in 2016 through its expected completion in 2020 are forecast at VND20.93 trillion ($922.03 million), but total allocations over the past two years have only reached VND7.5 trillion ($330.4 million), or 39 percent, from the central government, according to the same source.

This is the third time MAUR has had to request an advance from the city administration to pay contractors.

In 2016, Ho Chi Minh City advanced approximately VND600 billion ($26.43 million) from its budget to pay overdue salaries to metro workers and costs of construction materials.

This past July, multiple contractors filed formal requests to slow down or put construction on hold because of overdue payments amounting to more than VND500 billion ($22.03 million), forcing the city to advance the sum in order to prevent “unimaginable consequences.”

According to the head of MAUR, advance payments are only a temporary solution to the problem, as the city cannot afford to keep paying for the project with its limited budget.

A permanent solution would be to verify the legality of the project’s total development capital to seek approval from the lawmaking National Assembly, which is needed for the disbursement of Japan’s ODA.

The original estimate in 2006 stated that the metro project would cost about $1.4 billion, but in 2008 that number was recalculated to $2.491 billion by Japanese experts, according to Le Nguyen Minh Quang, head of MAUR.

Though the new investment budget was eventually approved by the central government in 2011, it was never passed by the National Assembly, making it technically impossible for the Ministry of Planning and Investment to move ahead with the capital allocation, Quang explained.

Stretching 19.7 kilometers, Ho Chi Minh City’s first metro line will connect Ben Thanh Terminal in District 1 with Suoi Tien in District 9, with stops in District 2, Binh Thanh District, and Thu Duc District.

It is scheduled to open in 2020, but experts say that deadline could be seriously affected if sluggish ODA disbursement persists.

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