Identify 3 land plots for payment to investors
As VietNamNet mentioned in the article “Nearly completed, why was the 10,000 billion VND flood prevention project in Ho Chi Minh City suspended?”, the project to solve tidal flooding in Ho Chi Minh City area considering climate change factors - Phase 1 (Flood prevention in Ho Chi Minh City area) was suspended for nearly 2 years due to problems with funding and legal review.
This is a project invested by Trung Nam Construction Investment Joint Stock Company (Trung Nam Company) under the form of Build-Transfer Contract (BT contract).
Reporting on the plan to remove obstacles for the project to restart, the Department of Planning and Investment (DPI) proposed that the Ho Chi Minh City People's Committee propose to the Government to allow the city to implement a parallel payment mechanism using cleared land funds and the budget.
Payment in parallel by these two forms is only made according to the progress and volume of completed works and confirmed by the auditing agency.
If approved, the Ho Chi Minh City People's Committee will coordinate with ministries and branches to report and explain related issues and propose the Government to approve the City to pay for 3 land plots to the project investor. These are land plots in District 7, Binh Thanh District and Thu Duc City.
For the capital needed to complete the project, Trung Nam Company requested Ho Chi Minh City to allow a loan of about VND 1,759 billion from Ho Chi Minh City Financial Investment Company (HFIC Company).
During the implementation of the Ho Chi Minh City Flood Control Project, Trung Nam Company borrowed thousands of billions of VND from BIDV Bank. As of May 2023, the outstanding principal and overdue interest of the project at BIDV amounted to VND 6,567.5 billion.
According to the Department of Planning and Investment of Ho Chi Minh City, with the current situation of the project, payment to Trung Nam Company is an urgent requirement, a prerequisite to remove obstacles and continue to carry out other tasks to complete the project.
Two options
Based on the report of the Department of Planning and Investment, at the end of July 2023, the Ho Chi Minh City People's Committee sent an official dispatch to the Prime Minister reporting on the project's problems and proposing two resolution mechanisms.
First mechanism, Ho Chi Minh City proposed to pay Trung Nam Company according to construction progress by land fund and cash.
For the cash payment, the State Bank needs to allow BIDV Bank to not collect the debt immediately, creating conditions for the investor to complete the project. At that time, Ho Chi Minh City and the investor will accept and pay the remaining part of the project according to the signed BT contract.
The disadvantage of this mechanism is that the implementation time cannot be proactive, and the interest costs incurred will increase due to the long project completion time.
In the second mechanism, Ho Chi Minh City proposed that HFIC Company will receive the City's budget capital, then lend it to Trung Nam Company to continue the project construction.
Specifically, the Ho Chi Minh City People's Committee will entrust the budget of about 1,800 billion VND to HFIC Company so that this enterprise can re-lend to Trung Nam Company.
When the project is accepted, the Ho Chi Minh City People's Committee will pay Trung Nam Company according to the signed BT contract. After receiving payment from Trung Nam Company, HFIC Company will have to repay this capital to the City budget.
This plan will help the Ho Chi Minh City People's Committee take the initiative in allocating budget capital and shortening project implementation time. However, to implement it, guidance from the Ministry of Finance is needed.
The risk of this option is that after construction is completed, if the project does not meet technical and quality standards for acceptance, it will be difficult to recover capital. At the same time, the possibility of loss of state budget may also occur.
After analyzing the advantages and disadvantages of the two mechanisms, the Ho Chi Minh City People's Committee proposed that the Prime Minister consider and approve the second mechanism because it is more convenient to implement. If choosing this mechanism, Ho Chi Minh City needs guidance from the Ministry of Finance and related ministries.
Ho Chi Minh City People's Committee ensures that the capital entrusted to Trung Nam Company will be used for the right purpose, effectively, and the project will be promptly completed for acceptance and put into operation.
From the proposal of the Ho Chi Minh City People's Committee, the Government Office requested relevant ministries and branches to urgently send their written opinions to this agency for synthesis and reporting to the Prime Minister.
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