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Further delays to metro projects may slow Japanese ODA

Released at: 20:13, 03/02/2018

Further delays to metro projects may slow Japanese ODA

Photo from news.zing.vn

HCMC authorities warn of impact of tardy use of Japanese funding for city's metro projects.

by Quang Huy

Bilateral relations between Vietnam and Japan could be adversely affected if construction of the Metro Line No. 1 in Ho Chi Minh City continues to run behind schedule, according to city authorities.

Chairman of its People’s Committee Nguyen Thanh Phong said that completion of procedures needed for adjusting investment in two of the city’s metro lines was important for its capital planning for the next several years.

Poor allocation of Japanese capital could reduce the likelihood of the country supporting Vietnam in upcoming official development assistance (ODA) projects, he added.

The city’s People’s Committee is seeking approval from National Assembly (NA) Chairwoman Nguyen Thi Kim Ngan and Prime Minister Nguyen Xuan Phuc to adjust investment and increase funding for the Metro Line No.1 and No. 2 projects.

To ensure uninterrupted construction this year, the city has asked the Ministry of Planning and Investment to prioritize capital disbursement and pay contractors on time.

The Metro Line No. 1 project, which runs from District 1’s Ben Thanh Market to District 9’s Suoi Tien Theme Park, was initially approved in 2007 with total investment of VND17.4 trillion ($766.4 million).

While being Ho Chi Minh City’s first and largest transport project, the project has fallen behind schedule and contractors have been paid late. Originally due to come into service in 2018, opening has been rescheduled for late 2020.

Authorities have attributed capital shortages to “slower than expected” disbursement of overseas development assistance by the central government. Prime Minister Phuc has ordered faster processing to speed up construction, but funds have been tardy in arriving.

Contractors have threatened to cease work if the payment delays continue. These are estimated to be running at VND500-600 billion ($22-26 million) per month. The delays have increased the cost of Metro Line No. 1 by 87 per cent, to over VND47 trillion ($2.08 billion). Though the Prime Minister has agreed to increase the amount, approval from the NA is required.

Contributing to the expense, imported machinery that was previously tax free is now subject to import duties.

The Metro Line No. 2 project, linking District 1’s Ben Thanh Market and District 12’s Tham Luong, has encountered similar issues. Initial investment was expected to be VND26.1 trillion ($1.37 billion) in 2010. However, a German consortium, which later revised the project design, suggested increasing total investment to VND40 trillion ($2.1 billion).

Ho Chi Minh City authorities announced last September a further delay to the start of Metro Line No. 2 until 2020, putting it seven years behind schedule, as more time is needed to formulate and process the project.

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