HCM City’s metro lines are facing various issues with procedures, disbursement, and cost overrun.

On-going construction of Metro Line 1 in HCM City

The HCM City Urban Railway Management Board recently asked the city people's committee to give VND1trn (USD44m) in advance to pay contractors working on the Metro Line 1 this year. This is the fourth time the city has advanced funds because the government has been too slow with disbursement. The city had to pay VND600bn in late 2016 and in 2017, the city paid VND500bn and then VND1.2trn in advance.

According to the Ministry of Planning and Investment, the National Assembly had yet to approve the final cost and the re-lending ratio of ODA from Japan hasn't been specified. 

Metro Line 1 was approved by the city in 2007 with an investment of VND17.40trn (USD766.4m). Approval by the National Assembly was not needed at that time.

A member of the HCM City Urban Railway Management Board said at first the city hired a local consultancy company to do the pre-feasibility study report. This company wanted to make cheap metro lines but they were not up to Japan International Co-operation Agency's standards. JICA then hired two companies from Singapore to estimate the cost for higher standard metro lines and the investment cost increased to VND47.30trn (USD2.08bn).

HCM City People's Committee said the currency exchange, minimum wage increase, and inflation also played important parts in the cost-overrun.

However, in 2011, the metro line became a key national project with huge investment cost so it needs approval from the National Assembly. After the prime minister allowed HCM City to continue, they signed three loans agreement worth VND31.20trn (USD1.37bn), of which VND12trn has been disbursed. 50% of the project is completed but disbursement was stopped and the city now lacks fund to pay contractors.

HCM City Chairman Nguyen Thanh Phong has sent a letter to the National Assembly Chairwoman Nguyen Thi Kim Ngan and Prime Minister Nguyen Xuan Phuc, outlining the consequences if Metro Line 1 is not completed in time.

In addition to the relationship with Japan being affected, it may impact on future ODA projects. 

"Disputes, lawsuits and wasted capital will occur as we still have to pay commitment fees and arrangement fees for loan agreements," he said.

He asked all agencies to help speed up the NA's approval in coming meetings. The Ministry of Planning and Investment was asked to continue to disburse the funding.

Metro Line 2 also experienced a similar cost-overrun from USD1.37bn to USD2.17bn after being reviewed by foreign consultants.

Dtinews/Tien Phong