Ho Chi Minh City requests help from NA Chairman and PM to keep alive metro projects
The Chairman of the People`s Committee of Ho Chi Minh City has presented the Chairman of the National Assembly of Vietnam and the Prime Minister documents outlining the consequences if the obstacles of Metro Line No.1, 2 are not solved soon.
While awaiting the approval of the National Assembly, he suggests that the Government should instruct the Ministry of Planning and Investment to prioritize the disbursement of advance payments to continue the implementation of the projectand to ensure payment to contractors this year.
The Chairman of the People's Committee of Ho Chi Minh City, Mr. Nguyen Thanh Phong, said that the completion of procedures for adjusting the total investment of Metro Line No.1 is a prerequisite for arranging medium-term capital plans and capital for subsequent years, allowing the project to be completed by the end of 2020 as scheduled.
In addition, the city government has expressed concerns to the head of the National Assembly and the Government that delayed projects will greatly affect diplomatic relations between Vietnam and Japan due to the ineffective use of Japanese ODA capital, affecting the ability to finance other ODA projects in the future.
Besides, the late payments to the contractor can lead to the extension of the construction schedule or even the cancellation of works. This may lead to potential litigation, disputes, and wasting the disbursed ODA because fees, such as committment fees and arrangement fees for loan agreements, will remain due.
Regarding Metro Line No.2 (Ben Thanh-Tham Luong), the city government proposed the Prime Minister to submit to the National Assembly the decision to adjust the total investment and completion schedule (2020 and completed in 2026)
The project is currently in the bidding and selection stage, which runs parallel to the adjustment of the total investment and completion schedule. In case the bidding is not adjusted promptly, packages already in progress will likely to be canceled because of the lack of conditions for contracting with contractors, according to the People's Committee of Ho Chi Minh City.
In addition, the site clearance at the ongoing project is also affected because the construction space cannot be handed over to construction contractors on schedule, affecting the people, especially the households affected by the site clearance.
The delay in capital adjustment and completion schedule shall also affect the prestige of the donors due to their inability to disburse funds under signed and extended agreements. At the same time, HCMC will have to continue to pay annual commitment fees for unallocated funds.
VND44 trillion short of "Metro dream"
The 20km Metro Line No.1 was approved by the city in 2007 with a total investment of nearly VND17,4 trillion (US$765 million). At this time, the project is identified as Group A, the investment policy of which is not necessary to be submitted to the National Assembly for approval. Later on, in 2009 the general consultant of the project has recalculated and redefined the total investment to more than VND47,300 billion (US$2 billion).
This increase was explained by the city government to come from the increased volume of construction to bring efficiency (locomotives, carriages, station equipment, etc.), the increasing price of raw materials and fuel, minimum wage increases from 2006 to 2009, the devaluation of the Japanese Yen-Vietnam Dong, and the different calculation of reserve costs and risk of inflation in accordance with new regulations.
In addition, Vietnam was not experienced in selecting the verification consultant, so the city government has asked Japan International Co-operation Agency (JICA) to select independent consultants. JICA has selected 2 units from Singapore, one of whom is now managing most of the country's metro system.
After consulting the ministries, the Prime Minister allowed the People's Committee of Ho Chi Minh City to approve the project adjustments in August 2011 with the new total investment being over VND47 trillion (US$2 billion). However, this time, the project had to be submitted to the National Assembly for approval of the investment policy. Therefore, the Prime Minister allowed the city to continue to implement the project as it is listed as one of the major projects of the nation.
At the same time, Metro Line No.2 (Ben Thanh-Tham Luong, about 11 km long) was implemented by the national consultant in 2010 with a total investment of over VND26 trillion (US$1,1 billion) and was approved by the HCMC People's Committee.
Two years later, the city selected a German joint venture company as an international consultant who found many shortcomings and unsuitable elements in the project, so the basic design had to be adjusted with a total investment of VND40 trillion (US$1,7 billion).
In 2015 and 2016, Deputy Prime Minister Hoang Trung Hai approved the Ho Chi Minh City People's Committee to adjust the project. By February 2017, the People's Committee of the city consulted ministries on project adjustment documents.
Now there are two different views: the Ministry of Planning and Investment, Ministry of Transportation, and the State Bank of Vietnam are of the opinion that Metro Line No.2 is a Group A transitional project and that the appraisal and approval are within the mandate of the HCMC People's Committee. However, it must be reported to the Prime Minister for consideration and direction before implementation.
At the same time, the Ministry of Construction and Finance believe that Metro Line No.2 is not a transitional project and the city People's Committee should report to the Prime Minister to submit documents to the National Assembly for approval to adjust the project investment.
Ho Chi Minh City requests help from NA Chairman and PM to keep alive metro projects.
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In addition, the city government has expressed concerns to the head of the National Assembly and the Government that delayed projects will greatly affect diplomatic relations between Vietnam and Japan due to the ineffective use of Japanese ODA capital, affecting the ability to finance other ODA projects in the future.
Besides, the late payments to the contractor can lead to the extension of the construction schedule or even the cancellation of works. This may lead to potential litigation, disputes, and wasting the disbursed ODA because fees, such as committment fees and arrangement fees for loan agreements, will remain due.
Regarding Metro Line No.2 (Ben Thanh-Tham Luong), the city government proposed the Prime Minister to submit to the National Assembly the decision to adjust the total investment and completion schedule (2020 and completed in 2026)
The project is currently in the bidding and selection stage, which runs parallel to the adjustment of the total investment and completion schedule. In case the bidding is not adjusted promptly, packages already in progress will likely to be canceled because of the lack of conditions for contracting with contractors, according to the People's Committee of Ho Chi Minh City.
In addition, the site clearance at the ongoing project is also affected because the construction space cannot be handed over to construction contractors on schedule, affecting the people, especially the households affected by the site clearance.
The delay in capital adjustment and completion schedule shall also affect the prestige of the donors due to their inability to disburse funds under signed and extended agreements. At the same time, HCMC will have to continue to pay annual commitment fees for unallocated funds.
VND44 trillion short of "Metro dream"
The 20km Metro Line No.1 was approved by the city in 2007 with a total investment of nearly VND17,4 trillion (US$765 million). At this time, the project is identified as Group A, the investment policy of which is not necessary to be submitted to the National Assembly for approval. Later on, in 2009 the general consultant of the project has recalculated and redefined the total investment to more than VND47,300 billion (US$2 billion).
This increase was explained by the city government to come from the increased volume of construction to bring efficiency (locomotives, carriages, station equipment, etc.), the increasing price of raw materials and fuel, minimum wage increases from 2006 to 2009, the devaluation of the Japanese Yen-Vietnam Dong, and the different calculation of reserve costs and risk of inflation in accordance with new regulations.
In addition, Vietnam was not experienced in selecting the verification consultant, so the city government has asked Japan International Co-operation Agency (JICA) to select independent consultants. JICA has selected 2 units from Singapore, one of whom is now managing most of the country's metro system.
After consulting the ministries, the Prime Minister allowed the People's Committee of Ho Chi Minh City to approve the project adjustments in August 2011 with the new total investment being over VND47 trillion (US$2 billion). However, this time, the project had to be submitted to the National Assembly for approval of the investment policy. Therefore, the Prime Minister allowed the city to continue to implement the project as it is listed as one of the major projects of the nation.
At the same time, Metro Line No.2 (Ben Thanh-Tham Luong, about 11 km long) was implemented by the national consultant in 2010 with a total investment of over VND26 trillion (US$1,1 billion) and was approved by the HCMC People's Committee.
Two years later, the city selected a German joint venture company as an international consultant who found many shortcomings and unsuitable elements in the project, so the basic design had to be adjusted with a total investment of VND40 trillion (US$1,7 billion).
In 2015 and 2016, Deputy Prime Minister Hoang Trung Hai approved the Ho Chi Minh City People's Committee to adjust the project. By February 2017, the People's Committee of the city consulted ministries on project adjustment documents.
Now there are two different views: the Ministry of Planning and Investment, Ministry of Transportation, and the State Bank of Vietnam are of the opinion that Metro Line No.2 is a Group A transitional project and that the appraisal and approval are within the mandate of the HCMC People's Committee. However, it must be reported to the Prime Minister for consideration and direction before implementation.
At the same time, the Ministry of Construction and Finance believe that Metro Line No.2 is not a transitional project and the city People's Committee should report to the Prime Minister to submit documents to the National Assembly for approval to adjust the project investment.
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