Valuable lessons learned from urban railway delays
Most urban railway projects in Vietnam are behind schedule, resulting in an increased need for investment capital.
Cat Linh - Ha Dong urban railway project in Hanoi is the first urban railway project in Vietnam to be put into operation and for commercial use.
According to the Ministry of Transport, there are six urban railway lines under construction in Hanoi and HCM City, including four routes in Hanoi (Cat Linh - Ha Dong, Nhon - Hanoi station, Nam Thang Long - Tran Hung Dao, Yen Vien - Ngoc Hoi) and two routes in Ho Chi Minh City (Ben Thanh - Suoi Tien and Ben Thanh - Tham Luong). These projects face capital shortages and slow progress.
The Nhon - Hanoi railway station project, the first urban railway project in Vietnam, kicked off in 2010 and it has several times failed to meet the deadline. Total investment in this project has increased from 21,912 billion VND to 32,910 billion VND (an increase of more than 10,998 billion VND). So far, about 74% (particularly 90% for the overhead section) of the workload has been completed.
Due to the delay in site clearance, since July the contractor of the underground stations S9 and S11 of Nhon - Hanoi railway station project has had to suspend construction and has three times asked the investor to compensate more than 114 million USD. The contractor may bring the case to international arbitration.
In addition to site clearance, in the period of 2018-2019, due to lack of capital, contractors cut back on activities, slowing the project progress, and some contractors brought the issue to the dispute settlement board (DB) and international arbitration.
Because of the delay, the French Government's loan also expired in May 2020 (after being extended many times), and the Hanoi People's Committee (the investor) had to ask the Government to negotiate for an extension until the end of December 2022.
In late 2020, the Government Inspectorate announced the inspection conclusion of the Nhon - Hanoi railway station project, pointing out a series of irregularities in the project. The package consulting contract with Systra Consultants was unreasonable and unfeasible, which increased the cost by 6.5 million euros; the bidding packages for mine disarming and the selection of a contractor to build the elevated section showed signs of violation of the law; and slow site clearance caused the contractor asked for additional funding, causing losses to the state budget.
In Ho Chi Minh City, the Ben Thanh - Suoi Tien urban railway route was in a similar situation. Begun in 2012, the project has seen its deadline extended many times. The target of being put in operation in 2022 may fail because only 91% of the workload has been completed.
Because of delay, the investment capital in this project increased from 17,387 billion VND to 43,757 billion VND (an increase of 26,370 billion VND). The contractor has stopped construction many times, claiming compensation because the investor was late in capital disbursement and handing over the ground.
The Yen Vien - Ngoc Hoi urban railway project (Hanoi), which was approved by the Ministry of Transport in 2008 and is expected to be completed in 2017, has not kicked off yet. The initial estimated investment in this project is 19,046 billion VND, but after a long delayed, the capital has increased to 65,175 billion VND.
The Nam Thang Long - Tran Hung Dao urban railway project (Hanoi), approved by the Hanoi authorities in 2008 and scheduled for completion in 2015, has not commenced yet. The initial estimated capital of 19,555 billion VND is now estimated to rise by over 16,124 billion VND to 35,679 billion VND. This project has problems with the location and design of the C9 station at Hoan Kiem Lake.
The urban railway project of Ben Thanh - Tham Luong (HCM City), was approved by Ho Chi Minh City in 2010 and scheduled for completion in 2018, but has been delayed to 2026. Because of the delay, the total investment will increase from 26,116 billion VND to 47,890 billion VND.
Slow site clearance
There are many reasons for the delay of urban railway projects in Vietnam but the main one is slow site clearance. The Cat Linh - Ha Dong project, which has just put into commercial use, is a typical example. Because of slow site clearance, this project was prolonged and the total investment rose greatly.
For the Nhon - Hanoi railway station route, due to slow site clearance, the contractor couldn't do their job. They asked the investor to pay 114 million USD in compensation.
To solve this problem, Deputy Transport Minister Nguyen Ngoc Dong said that for urban railway projects in the inner city, it is necessary to separate the site clearance phase into one project which must be implemented first.
The Cat Linh - Ha Dong urban railway project was supposed to be completed in 2015, but due to site clearance-related problems, this project was lengthened. If the ground had been ready, this project would have been completed within three years.
In order to ensure progress and minimize the increase in investment capital, site clearance must be done one step in advance. When site clearance is completed, construction and installation will be done very quickly, so there is no longer a situation when foreign contractors gather machinery and human resources but lack the ground for construction, leading to a claim for compensation under the contract signed with the investor.
In particular, the problems of land clearance in the Land Law must be amended.
Photo: Ben Thanh - Suoi Tien urban railway project in HCM City is behind schedule, so investment capital has increased from 17,387 billion VND to 43,757 billion VND.
Foreign contractors claim for compensation due to slow site clearance are much higher than compensation payment to land owners. Therefore, the unification in compensation policy for site clearance will help solve the problem of slow-moving projects and capital increase.
Understanding technical standards
In addition, technical standards for urban railway projects are very new to Vietnam, and most of these projects all use foreign loans. Therefore, when signing loan agreements, it is necessary to understand the technical nature of the project to avoid delaying projects due to potential technical problems, causing time and cost losses.
As Vietnam does not have technical standards for urban railway projects yet, it can use the technical standards of the lending country or European standards.
The Cat Linh - Ha Dong urban railway project is a great lesson for future urban railway projects in Vietnam. Vietnam signed an EPC contract (design - supply of technological equipment and construction), using China's standards that are not very synchronized. In the process of implementation, it took Vietnam more time to update the technical standards.
Vietnam’s railways have become out of date after 100 years of use. Developing high-speed railways is a solution that has been discussed for years but no decision has ever been made.