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Japan’s Hitachi demands $156mn of compensation from Ho Chi Minh City’s metro line investor

Japan’s Hitachi demands $156mn of compensation from Ho Chi Minh City’s metro line investor

Wednesday, June 05, 2024, 19:30 GMT+7
Japan’s Hitachi demands $156mn of compensation from Ho Chi Minh City’s metro line investor
Authorities in Ho Chi Minh City recently pledged to have the long-awaited metro line No. 1, which runs from Ben Thanh Market in District 1 to Suoi Tien Theme Park in Thu Duc City, begin commercial operations in the fourth quarter of 2024. Photo: Chau Tuan / Tuoi Tre

Japanese contractor Hitachi recently asked the investor of metro line No. 1 in Ho Chi Minh City to pay the company nearly VND4 trillion (US$156 million) in compensation for additional costs that the contractor has incurred during the implementation of the project.

The demand from Hitachi is one of the roadblocks facing the project.

The Ho Chi Minh City Management Authority for Urban Railways (MAUR), the project's investor, is seeking solutions to these issues from the city's Department of External Relations, the Ministry of Foreign Affairs, and the national government.

City authorities recently pledged to have the long-awaited metro line No. 1, which runs from Ben Thanh Market in District 1 to Suoi Tien Theme Park in Thu Duc City, begin commercial operations in the fourth quarter of 2024.

Hitachi is in charge of the metro line’s CP3 contract package, which comprises the procurement of electromechanical equipment, metro trains, rails, and maintenance.

According to the terms of their contract, the contractor can request extensions of time (EoT) for delays caused by the investor.

Conversely, the contractor must pay compensation for any delays it causes.

The contract package was supposed to reach completion on April 8, 2018, or 244 weeks after work on the package began on August 5, 2013.

Hitachi asked for an EoT of 4,124 days if this urban railway commences commercial operations on November 20 this year.

However, the project’s general consultant NJPT proposed that the investor temporarily approve an EoT of 2,161 days.

As a result, Hitachi sued the investor at the Vietnam International Arbitration Center on April 6, 2023, demanding an EoT of at least 2,773 days and some VND527 billion ($20.6 million) in compensation.

The Japanese firm also demanded reimbursement for additional costs that it has incurred due to the extension of the completion date, with the total compensation amounting to almost VND4 trillion ($156 million).

The investor said that Hitachi unilaterally claimed the compensation for the additional costs, which should be assessed by the general consultant NJPT.

The administration of Ho Chi Minh City later asked the investor MAUR to actively work with Hitachi and NJPT to seek solutions to the dispute so as to complete the project as planned and safeguard the legitimate interests of both the project and the investor.

In May this year, the ambassador of Japan to Vietnam wrote to Ho Chi Minh City chairman Phan Van Mai noting that the first metro line would be completed in 2024.

“The Japanese side believes that it is possible to commercially operate the first metro line by the end of 2024,” according to the Japanese ambassador’s dispatch.

“Training courses will be held in August and September, while the entire metro system will undergo a test run in October and November,” the ambassador asserted.

Metro line No. 1, the first of its kind among the eight planned metro line projects in the southern Vietnamese hub, carried a price tag of VND43.7 trillion ($1.8 billion).

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Hong Ngan - Duc Phu / Tuoi Tre News

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