Ho Chi Minh City’s massive flood control project incurs cost overruns
Monday, July 17, 2023, 15:03 GMT+7
Delays in a flood control project in Ho Chi Minh City which was initially planned to require an estimated investment of VND10 trillion (US$422 million) have caused the cost to increase by over VND3 trillion ($126.5 million), including VND1.5 trillion ($63.3 million) of loan interest by the end of May.
The loan interest is increasing VND1.46 billion ($61.6 million) per day.
The city aimed at putting the first phase of the tidal flood prevention project with the impact of climate change taken into account into operation in 2018, but it remains incomplete.
The municipal Department of Planning and Investment has teamed up with other relevant agencies to remove bottlenecks plaguing the project, developed by Trung Nam Construction Investment Corporation.
The project, including six floodgates and a 7.8-kilometer embankment along the Saigon River, is aimed at solving tidal flooding affecting an area of 570 square kilometers with about 6.5 million people along the riverbank and in the downtown area.
The project is around 90 percent complete but the investor has halted work on it since November 15, 2020 due to a shortage of capital.
Under the build-transfer contract for the project signed between the investor and the municipal People’s Committee, the project was supposed to be completed within 36 months from June 26, 2016.
The investor borrowed loans from the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) and the Ho Chi Minh City administration offered guarantees for the lending. The State of Vietnam recapitalized BIDV.
However, the central bank recovered the amount recapitalized to BIDV in December 2020, causing many difficulties for the investor.
The Ho Chi Minh City People’s Committee has weighed using some land lots to make payments to the investor but the investor has yet to complete the project and has put it on hold, so the city has yet to make such payments.
As a result, the investor has no capital to pay back loans and resume work on the project.
BIDV has recently required the city to make payments to Trung Nam so that the company can pay loans and interest.
The city and Trung Nam should adjust the total investment in the project and clarify the progress and payment schedules as well, the bank requested.
In a proposal sent to the Ho Chi Minh City People’s Council, Vu Dinh Tan, director of Trung Nam, said it would take at least six months to meet the requirements of BIDV, which would extend the completion of the project.
In other words, the company cannot put the project into use at the end of this year.
Therefore, it proposed the city mobilize capital from Ho Chi Minh City Finance and Investment State-Owned Company and other resources.
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| A section of Tran Xuan Soan Street in District 7, Ho Chi Minh City is regularly flooded due to high tides. The municipal Department of Construction says the $422-million anti-flooding project will help tackle floods on the street. Photo: Chau Tuan / Tuoi Tre |
Local residents pinned high hopes on the big-ticket anti-flooding project, but it remains incomplete after seven years, causing a huge waste of the city’s budget and failing to benefit local residents, according to Dr. Pham Viet Thuan, head of the Institute of Natural Resources and Environment Economics.
“The city has hold organizations and individuals involved in the delays in the project accountable. With the current progress, it’s hard to complete the project in November 2023," Dr. Thuan said.
“To remove difficulties, a report assessing resources, finance, and especially techniques [for the project] is needed."
Lawyer Nguyen Huu The Trach from the Ho Chi Minh City Bar Association told Tuoi Tre (Youth) newspaper that the investor must assume the main responsibility for the project management and execution, resulting in the cost overruns.
The investor should be held accountable for failing to fulfill its commitments and articles in the contract with the city when the project is suspended or delayed.
It may be subject to financial consequences of the delays, including paying the loan interest.
The Ho Chi Minh City People’s Committee is responsible for supervising and managing the project to prevent delays.
If the city fails to fulfill its jobs, it may also bear responsibility for financial issues at the project, the lawyer added.
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