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Transportation project delays cause serious consequences

Update: October, 08/2014 - 09:30

Transportation project delays are a major problem, Tran Huu Minh, a lecturer from the University of Transport and an expert in project evaluation, told Hai Quan Cuoi Tuan (Weekend Customs) newpaper.

What do you think about the slow progress of transport projects?

I think the situation is alarming. The problem is not just the slow progress, but also the fact that most transportation projects cost much more than initial estimates. In reality, there are many projects that have exceeded initial estimates by 40 to 50 per cent, meaning hundreds of millions of dollars of additional expenditure. In a country where the annual per capita income is less than US$2,000, this is a serious problem.

Contractors of these projects often blame the problems on careless project formulation and inflation. Are these acceptable justifications?

There are two main scenarios where transport projects are very slow. In the first one, the chances are high that the contractors are inexperienced and trying to learn on the job. Viet Nam's metro projects are in this situation.

In the second scenario, it is the irresponsibility of investors that comes into play. There are many investors who are experienced and have acquired adequate technological knowhow, but still fail to complete the projects on time.

Regarding the cost overruns, it would be rational to ask for extra funds if inflation occurs and investors have followed all the right procedures. In my practical experience, I have come across many cases when the investors are incompetent both in terms of financial resources and technological knowhow, which has resulted in substandard work that requires them to start over.

What are the real consequences of slow projects with cost overruns?

It's necessary to understand that investment capital for infrastructure development, especially current transportation projects, mainly comes from the State budget, which means, through people's tax payments. The slower the projects are, the slower people can benefit. And if costs exceed initial estimates, people have to pay more for them, while such money could be be spent on housing, education, health care and other needs.

Besides, part of the capital for transportation projects come from official development assistance (ODA) loans. To get these loans, Viet Nam had to make certain compromises or meet certain conditions. In many ODA projects, Viet Nam has had to pay experts up to 90 per cent of the total loans. This means that the country only benefits from a small part of the loans, but still has to repay huge debts.

In general, ineffective use of investment capital harms the people and hurts the nation's economy.

What are potential solutions for these problems?

From a long-term perspective, education or awareness is the core element. We need to improve our education so that each individual understands that the slow progress of projects and excessive spending have serious impacts on their own lives. But this is a long journey; it might take from 20 to 30 years for this to happen.

In the meantime, what we need to do is to improve our policies on managing investment projects and have stronger punishments for violations. However, it has to be noted that when we tighten regulations on investors' responsibilities, we also have to think about their rights so as to motivate them.

It is also necessary to mobilise involvement of the community in the planning, designing, implementing and supervising of transport projects. This will enhance transparency and result in better supervision as well as improved performance. — VNS

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