Vietnam to issue limits on spiraling railway costs

By Mai Ha, Thanh Nien News

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The Ben Thanh - Suoi Tien railway project in Ho Chi Minh City is expected to finish in 2020, two years later than previously planned. Photo: Diep Duc Minh The Ben Thanh - Suoi Tien railway project in Ho Chi Minh City is expected to finish in 2020, two years later than previously planned. Photo: Diep Duc Minh


The Ministry of Transport is seeking to establish a strict cost criteria and time limits
for railway construction after investment costs on many projects surged based on recommendations from foreign designers and consultants.
“If it is necessary, a decree on urban railway projects will be issued with a unique set of criteria because the foreign sponsors of these projects have all recommended their own criteria,” Transport Minister Dinh La Thang said during a recent meeting on the issue.
Minister Thang didn't specify what he meant by criteria, analysts assume he was referring to a strict per-meter cost ceiling on railway projects as well as a strict timetable. 
According to the ministry, the costs of every ongoing railway project in Hanoi and Ho Chi Minh City has skyrocketed by between  60 and 200 percent and currently lag behind their initial timetables by 3-5 years.
Most of the money for these projects come from official foreign development funds.
Among the worst examples, the Nam Thang Long – Tran Hung Dao railway project in Hanoi increased from VND19.5 trillion to VND51.75 trillion despite the fact that work had yet to begin.
Contractors attributed the skyrocketing costs to rises in material prices and changes in the design.
Nguyen Quoc Hung, deputy chairman of Hanoi People’s Committee, said the investors can't blame difficulties in site clearance for the increasing cost and slow progress.
“[Relevant agencies] have been too weak in technical and operational management and have relied too heavily on consultants and investors,” he said.
The Nam Thang Long railway project doubled investment soon after it was approved, he said.
Questionable increases
Bui Xuan Cuong, head of HCMC Urban Railway Projects Management Unit, said Vietnam has no criteria or cost ceilings for railway projects and relevant agencies have approved any increase in investment costs that contractors propose.
A source from the Ministry of Planning and Investment said all projects relied on advice provided by foreign ODA lenders from feasibility studies to design and construction supervision.
There should be a review that results in the creation of a criteria for urban railway projects because investment costs cannot just shot up by 100-200 percent without any significant change in the technology and equipment used.
Deputy Transport Minister Nguyen Ngoc Dong said many projects were carelessly drafted with incorrect cost estimates on site clearance.
The investors must separate site clearance into an independent project, he said.
Dong also said Vietnam should develop its railway industry to avoid reliance on foreign equipment.
In conclusion, Minister Thang ordered the ministry’s planning and investment branch to make a report on the reasons for the slow progress and increasing costs of urban railway projects.
The report, which will be made public, will clearly outline the responsibilities of transportation officials in Hanoi and Ho Chi Minh City, he said.
“Otherwise, the residents will lose faith and become suspicious of the project and feel angry when the loans are not used effectively,” he said.
“The projects mostly use foreign loans and money from the state exchequer… either source, taxpayers or our descendants will have to pay off the debts.”

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