Investors fail to pay construction companies for years

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Complicated capital disbursement procedures have prevented construction firms from reclaiming debts from investors, even years after their projects finish.

Vu Tuan Duong, vice general director of construction corporation Licogi, said his firm has yet to receive VND20 billion, or nearly US$1 million, owed to it by the investor that hired the firm to build a new terminal at Noi Bai International Airport in Hanoi. The project was completed in 2001.

He said it was common for investors in construction projects, particularly transport infrastructure, not to pay construction firms until years after the projects finish.

"Due to overlapping investment, some investors are unable to arrange enough capital for their projects," he said. "This has affected their ability to pay construction companies that win bids for their projects. Meanwhile, investors from some state-invested projects have to wait for a long time for higher authorities to approve their capital disbursement plans."

Rigid regulations regarding project transfer, and obstacles in site clearance procedures, have also slowed payments made by investors, Duong said.

His firm conducted part of the construction of the new National Highway No. 5 two years ago.

After finishing the work, the company had to wait for the investor to find contractors for other parts of the project before it could receive payment.

Duong explained that such payments are conducted only when a project can be handed over from his firm to the new contractor. Many investors also face difficulties accessing bank loans for their projects, he added.

Ho Van Dung, general director of Song Da No. 2, said the construction firm is now implementing the Ban Ve hydropower plant project in Nghe An Province, but the investor is also finding it difficult to pay.

"You'll never know how many difficulties construction firms go through," he said. "Investors do not pay their debts for years, and we have to borrow capital from banks at high interest rates just to pay our workers' salaries each month.

"We rarely receive payment of whole debts, let alone their interest," Dung said.

Some industry insiders said investors are never fined for slow payments and lawsuits on the issue are expensive and time consuming.

On the other hand, construction companies want more work from the investors and are unlikely to cause a stir about the problem.

Tran Trong Dien, vice director of Vinaconex Xuan Mai, said his firm has also faced the problem. However, in recent years, it has agreed only to projects in which the investors are bound to conduct payment just after receiving products or finishing projects.

"This could give us fewer customers. However, profits are guaranteed, and capital could be rapidly reclaimed, helping us start on other projects easily."

Vu Gia Quynh, general secretary of the Vietnam Association of Construction Tenders, said it is necessary to draft a contract law, so that the relationship between investors and tenders can be more equal, and the capital for projects should be guaranteed by banks, he said.

Duong of Licogi said the most important thing to construction companies is checking investors' financial capacity, and offering strict regulations in contracts to avoid risks when implementing projects.

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