Three times construction stopped

The Project to Solve Tidal Flooding in Ho Chi Minh City Area Considering Climate Change Factors (Phase 1) was approved by the Prime Minister in Decision No. 1547/QD-TTg dated October 28, 2008 and approved for implementation under a special mechanism.

The project's goal is to control flooding caused by high tides and proactively respond to climate change for an area of ​​570 km2 with about 6.5 million people in the right bank of the Saigon River and the center of Ho Chi Minh City.

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The Ho Chi Minh City flood prevention project has completed over 90% of the volume. Photo: Nguyen Hue

The total investment is nearly 10 trillion VND, started in mid-2016, expected to be completed in 2018, however, up to now, the project is still stalled even though the construction volume has reached more than 90%.

It is worth mentioning that during the construction process, the project had to be suspended 3 times (66 months) due to legal barriers and payment sources.

To support Ho Chi Minh City, on April 1, 2021, the Government issued Resolution No. 40 to continue implementing the project. The Ho Chi Minh City People's Committee has met many times with the parties to resolve the problems. However, this "shelved" project has not been able to "move".

According to the Ho Chi Minh City People's Committee, among many difficulties, the main reason is the lack of capital to complete the project.

Specifically, the mobilization of capital to complete the project stems from the fact that BIDV Bank does not have enough basis to sign an appendix to the credit contract with the investor to submit to the State Bank of Vietnam to extend the disbursement time for refinancing.

In addition, because the State Bank of Vietnam has collected refinancing debt from BIDV of about VND 3,560 billion, in case the State Bank extends the disbursement period of the refinancing loan, BIDV still cannot continue to disburse to investors because the project has not been paid.

To resolve this problem, the Ho Chi Minh City People's Committee proposed that the Government Working Group consider submitting to the Government a Resolution "approving the city to implement the plan to entrust the city budget to the City State Financial Investment Company to lend to the Investor to complete the project".

However, the Ministry of Finance commented that the above plan is not suitable because the 2015 State Budget Law does not have regulations on the use of local budget capital to entrust to local development investment funds.

At the same time, in Notice No. 370 of the Government Office, the Government Working Group agreed that there was no legal basis to continue issuing a new Government Resolution to remove current obstacles of the project as proposed by the city.

“Therefore, there is currently no basis to mobilize entrusted capital for investors to continue completing the project,” according to the Ho Chi Minh City People's Committee.

Daily interest 1.73 billion VND

According to the investor, Trung Nam Construction Investment Joint Stock Company, the suspension and extension of the project due to problems resulted in daily interest of 1.73 billion VND.

Investors believe that even if the project's capital is cleared and construction continues, the additional profit will be about 845 billion VND.

Specifically, if the project continues, it will take a total of 28 months, including 12 months for investment adjustment procedures, 4 months for negotiating the BT Contract Appendix and 12 months for construction.

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The nearly 10 trillion VND anti-flooding project in Ho Chi Minh City is generating 1.73 billion VND in interest every day. Photo: Nguyen Hue

“With daily interest of 1.73 billion VND, 16 months of legal procedures would equal interest of about 845 billion VND. Therefore, when the capital source is cleared, the city must carry out the procedures in parallel to complete the project early,” the investor suggested.

Thereby, this unit proposed that the city soon adjust the total investment of the project to VND 14,398 billion (according to the expected completion schedule at the end of 2025), to avoid prolonging the project and incurring additional interest.

To remove obstacles to the project, the Ho Chi Minh City People's Committee has proposed solutions to the Prime Minister.

In particular, it is proposed to adjust the payment terms in the contract in parallel with the overall adjustment of the project; adjust the project implementation time to serve as a basis for signing the BT Contract Appendix to change the payment method.

If approved, the city can make payments using land funds, providing capital for investors to complete the project and reducing interest costs while waiting for project adjustment procedures to be completed.

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