Cat Linh – Ha Dong elevated railway: China’s general contractor demands additional $50 million

After nearly 10 years from the commencement date, the Cat Linh – Ha Dong elevated railway has not been officially operated while the investment money continues to rise.

This project “has tripled capital investment, 8 times extensions of construction and it is unclear when it will be operational,” VOV electronic newspaper put such a large headline.

This is an elevated railway in Ethiopia with 31.1-km lengthg and an investment of $475 million and completed after 38 months while Cat Linh-Ha Dong has 11-km length and capital investment of $868 million and unknown date of operation

The general contractor of the Cat Linh – Ha Dong elevated railway project proposed $50 million to test the system and require full payment before handover, Thanh Nien newspaper on June 1, citing the Vietnamese government report.

The Project Management Unit has reported to the Ministry of Transport to find solutions.

Currently, the project has disbursed more than VND14.7 trillion in total over VND15 trillion (1$ equal to VND23,500).

The Ministry of Transport and the Project Management Unit have repeatedly affirmed that the Cat Linh – Ha Dong elevated railway project has completed 99%. But recent reports show that the remaining 1% is a whole “mountain” of problems, including claims of up to $50 million from the Chinese general contractor.

The Lao Dong newspaper reported on June 2 that the project was a 13km bone, citing Vietnamese ambassador to the Middle East countries, Mr. Nguyen Quang Khai, comparing the Vietnamese project with the similar in Ethiopia which has 31.1 km of length with 39 stations and train speed can reach 70 km/h also built by Chinese general contractor!

Accordingly, with the same standards, the same technology, the same capital source with the Cat Linh – Ha Dong, but the investment capital of the overhead railway project in Ethiopia is only $475 million and completed after 38 months;

While Cat Linh-Ha Dong is only 13 km long, its costs are $868 million or 4 times more expensive and the date of operation is unknown. Ambassador Nguyen Quang Khai cited the figures provided by the Ethiopian Ministry of Transport, saying that in just 9 months this project has created 13,000 jobs, reaching a profit of $3 million.

This Vietnamese project’s investment does not include $98.35 million that Hanoi will have to spend … to operate. Not to mention the $50 million that Chinese contractors have just asked us to continue to spend.

As for the effectiveness of the project, in December last year, the General Contractor of China said that although it was not in operation, all the electrical equipment in the station and rails had to cost VND100 million per day. Not to mention about VND50 billion salaries and other expenses for about 2,000 Chinese and Vietnamese officials working on the project.

Not to mention VND14.5 billion per year to stimulate demand for tickets.

And, never counting the loan interest to pay each year up to over VND600 billion.

The reason why Cat Linh – Ha Dong urban railway appears ‘winding’, Mr. Le Kim Thanh – General Director of Railway Project Management Board said it was intentional design process, he said, the bumpy sections were due to the deliberate design of the project to improve the efficiency of the operation and reduce the energy consumption for electric trains. This explanation of Mr. Thanh raised the question that the quality of this project is really big problem

The quotation below is the conclusion of the State Audit: “When analyzing the economy, the investor does not consider operating costs accounting for a large proportion in the exploitation stage, leading to ineffective project conclusions. Economically is inaccurate. The financial plan from the time of project formulation had to compensate for losses, but the related parties have not proposed effective exploitation … Specifically, the passenger traffic due to the project planning consultancy unit assumes the calculation of far higher than reported by the Transport Strategy Institute.

The audit concludes as follows: Analysis of financial efficiency shows that the internal rate of return is lower than the interest rate, the negative net present value. The ratio of costs from a financial perspective shows that losses will have to be offset.

Yes. The costs raised from $552 million to $891.92 million (VND18.792 trillion and 10 years behind schedule. Paying interest of VND650 billion. The general constructor’s request for $50 million, delivered immediately. And make sure the state budget will it will suffer losses year after year.

Tragedy of Cat Linh-Ha Dong, therefore, not only do not know when it will be finished; who would give permission for its running given a number of technical shortcomings. It is unclear how much the losses the state budget will cover every year.

Saying that it is the 13-km bone is not wrong at all.

The government report also said that the project in Hanoi has basically been completed, but 3/5 of construction items are not eligible for acceptance, so the whole system has not been handed over and put into operation.

Specifically, the project still has some problems about technology equipment, train safety assessment, the operation of the whole system …

The government report stated that because the general contractor has not determined the time to complete the above items, the project has no basis to report to the competent authority for extending the implementation time, leading to the consultancy tender package. Monitoring has no basis to allow time extension in the future.

Another difficulty is due to the effects of Covid-19 epidemic, so only 4 senior experts of the general contractor of the project are present in Vietnam.

Currently, the Project Management Board is proposing to bring 150 additional contractors from China to Vietnam by road due to the suspension of the air traffic between the two countries.

These personnel will need to be under 14-day quarantin before being able to work for the project.

In addition, French advisory personnel have not yet determined the time to come to Vietnam to assess the system safety due to the impact of the Covid-19 epidemic, Tuoi Tre newspaper reported on June 1.

Costs increase, time delay

The construction of the Cat Linh – Ha Dong elevated railway project was started on October 10, 2011 with an initial investment of VND 8,770 billion (equivalent to $552.86 million at the exchange rate of the time). The investment included the Chinese government’s preferential credit loans of CNY1.2 billion ($169 million); The buyer’s concessional loan is $250 million and the reciprocal capital of the Vietnamese government is over VND2.1 trillion.

The elevated route has a length of 13.1km, with 12 stations and was originally planned to be operational in 2015, Dan Tri newspaper reported on October 10, 2011.

The choice of Chinese general contractor along with the implementation process does not guarantee the progress and continuity of cost increase has caused much concerns in Vietnam.

Minister of Transport Nguyen Van The made the public stir with the statement before the National Assembly: “I take the position of minister to affirm that the Chinese contractor is capable of building North-South highways, faster and cheaper than Japan and the US

As of July 2019, this project has broken 8 times in progress, according to Vietnamnet newspaper. On October 1, 2019, Deputy Prime Minister Trinh Dinh Dung at a meeting on key transport projects in Hanoi directed “commercial running of Cat Linh – Ha Dong elevated railway right this year.” However, until mid-2020, there is not yet an exact deadline for the official operation date.

The latest updated figures show that the total adjusted costs of the project is now VND18 trillion (equivalent to $868.04 million), of which China’s ODA loan is VND13,8.67 trillion (%669.62 million) and the government reciprocal capital of VND4.134 trillion ($198.43 million). The disbursement amount has reached 81.9%.

Commenting on this issue on his personal Facebook page, journalist Hoang Hai Van wrote:

Accepting the designation of Chinese contractors, Chinese supervising consultants, Chinese supplies and equipment at Chinese prices makes construction costs soar compared to international bidding.”

The more capital the contractor requests, the more money Vietnam has to borrow, the investor has no power to request the constructor to hand over the project but the constructor will decide! The audit authorities pointed out a number of wrongdoings but none has been punished! The unfinished building is still in the middle of the capital city of Hanoi! Vietnamese citizens have to pay for large debts! The project is being carried out for a decade with two five-year terms of the communist party leadership and the parliament, however, none is responsible for it!

Besides time depay and costs hike, many are doubting that the technology applied in this project is “backward.” (Translated)

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