VietNamNet Bridge – The Ministry of Transport may have to pay compensation of VND155 billion (over $7 million) to the Japanese contractor due to slow site clearance.

The Nhat Tan Bridge project.

In this case, the state budget has to bear losses for the irresponsibility of relevant agencies. But the risk is greater since the incident can create a bad precedent for many other cases of compensation in the future.

The Ministry of Transport and the Hanoi authorities must specify the names of units and individuals who are responsible for the slow site clearance and punish them seriously to set an example for other projects.

Deputy Minister of Transport Nguyen Hong Truong told Thanh Nien newspaper that the Ministry of Transport is in the process of negotiating with contractor Tokyu on the compensation for the slow site clearance for Package 3 of the Nhat Tan Bridge project in Hanoi.

Package 3 - the road to Nhat Tan Bridge in Dong Anh district – is worth more than VND1.8 trillion ($90 million), commenced from March 2009 with the deadline stipulated in the contract of 34 months or February 2012. But until March 2012, the site clearance work was completed. The Ministry of Transport proposed to and was approved by the Government for the extension to May 2014.

Truong said that the slow clearance was caused by both objective and subjective reasons. Objectively, site clearance depended on many factors such as policies, people's awareness, and the implementation involving many agencies. For the Package 3, not only houses were removed but also a 200 kV power transmission line.

However, the Japanese contractor asked the investor to give them more than VND155 billion out of the contract to cover the costs arising from the extension of the contract by additional 27 months.

The contractor’s demand is valid because the contract stated that if the site clearance is delayed, the contractor has the right to request the additional costs.

Mr. Vu Khoa, chairman of the Association of Vietnam Building Contractors, said that the association had repeatedly recommended Vietnamese investors to pay special attention to the two extremely important contents in signing contracts with contractors: handing over land and ensuring adequate capital but Vietnamese officials and investors often neglect them. At the same time, international contractors always set strict conditions on these contents.

"This is a very expensive lesson, though we lose money, it will change the unprofessional way of doing business of Vietnamese investors," Khoa said.

Dr. Pham Sy Liem, Vice President of the Vietnam Construction Association, said: "We have to pay compensation but the investor must be punished and has to pay the compensation, not the state budget."

Although most of transport projects in Vietnam run slowly but this is the first time a contractor claimed compensation for slow site clearance.

"There are so many reasons so we cannot make hasty conclusions. But investment is from the state budget so organizations and individuals involved will be punished," said Deputy Minister of Transport Nguyen Hong Truong.

The project to build Nhat Tan Bridge (cross the Red River, Hanoi) and the two roads to the bridge is part of Hanoi’s belt road No.2, which connects the city center to the Noi Bai International Airport.

The project has a total investment of more than VND13.626 billion of ODA loans from Japan (VND10,117 billion,) more than VND2,442 billion from the central budget and over VND1,066 billion from Hanoi’s budget for site clearance and resettlement. The project is divided into 3 main packages: Package 1 to build the bridge, Package 2 to build the southern bank road and Package 3 to build the northern road.

An official of a big transport project in Hanoi said that site clearance in Hanoi always delays compared with other localities is because Hanoi has "special characters." Under current regulations, local authorities are responsible for land acquisition, site clearance, implementation of resettlement assistance and handing over clear land to investors.

"In other provinces, the project management units perform all site clearance procedures but Hanoi asks investors to complete more procedures related to land acquisition while it is extremely tiring to get licenses from local departments. Foreign contractors, based on the international terms on the approach to working site, can claim compensation if there are clearance problems but if the contractors fail to meet the pace, investors cannot fine them. After the Tokyu case, the risk of compensation in other projects is huge," he added.

Deputy Minister Nguyen Hong Truong said learning from experience of the Package 3 of the Nhat Tan Bridge project, the ministry has not given the Nhat Tan-Noi Bai road contract to foreign contracts yet because site clearance is not finished.

The risk of repetition in many projects

Mr. Do Tat Binh, Chief Manager of Noi Bai T2 Terminal Project in Soc Son District, Hanoi said, this project is facing problems in site clearance. The project management unit asked Soc Son authorities to make a temporary statistical of the area for compensation and was willing to pay compensation immediately but the task has not finished yet.

"This area is very small and it should have done half a year ago, but until now it has not finished while we need land for construction next week. Although we worked with Soc Son authorities many times and transferred cash for land compensation but there is no change," Binh said.

He added that if land is not handed over as schedule, the contractor will certainly make complain.

Mr. Luong Quoc Viet, Deputy General Director of the Vietnam Highway Investment and Development Corporation (VEC) - the investor of the Hanoi - Lao Cai highway - said that this project still encounters problem in site clearance in Soc Son Province. There are only households having land disputes but the local government does not handle the dispute. The dispute has affected the ongoing project. 

Compiled by Na Son