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Cost for first metro line to be cut by $146m

Update: November, 14/2019 - 22:52
An elevated section of HCM City’s Bến Thành – Suối Tiên metro line runs along Hà Nội Highway. — VNS Photo Mạnh Linh

HCM CITY — Investment for the city’s first metro line between Bến Thành Market in District 1 and Suối Tiên Theme Park in District 9 will be reduced by VNĐ3.4 trillion (US$146.8 million).

The decision was made on Wednesday by the city People’s Committee after a review of all of the project’s related costs.

The decision will be submitted to the People’s Council before its issuance of a resolution on allocating reciprocal capital from the city budget at the year-end meeting. 

Võ Văn Hoan, vice chairman of the city’s People’s Committee, said: “Although the total investment of the first metro line has been cut significantly, it will not affect the project’s quality. Seventy-five per cent of the total workload has been completed.”

Usually, after the city’s People’s Committee signs a decision to adjust the capital of the two metro line projects, the central government will disburse the money. But the procedures for money transfer and payment take time, so the city is expected to receive the money in March or April next year, Hoan said. 

The city has advanced a VNĐ1.7 trillion payment to investors, construction units and labourers so that work on the project can continue.

The project was funded in part through an official development assistance (ODA) loan from the Japan International Cooperation Agency (JICA).

Since construction began in 2012, the first metro line has faced numerous problems, including slow budget disbursement and a personnel crisis. 

According to the city government, it has signed three loan agreements worth VNĐ31.208 trillion, of which VNĐ11.929 trillion has been disbursed, accounting for 38 per cent of the total signed loan agreements.

HCM City authorities recently asked the National Assembly to increase investment for the city’s first two metro lines.

The city proposed an adjusted total investment of VNĐ47.3 trillion and nearly VNĐ48 trillion for metro line No 1 and No 2, respectively.  

Metro line No 1 was approved by the city in April 2007 with an investment of VNĐ17.4 trillion ($766.4 million). Approval by the NA was not needed at that time. 

After investment costs were re-calculated by consulting agencies, costs increased to more than VNĐ47.300 trillion in 2010.

The city administration attributed the rising costs to price changes for construction materials, an increase in the minimum wage, and the depreciation of the Vietnamese đồng and Japanese yen, among others.

In August 2011, the Prime Minister agreed to the city’s proposed project adjustments. But with investments reaching more than VNĐ47.3 trillion, the National Assembly then had to approve the amount. 

Meanwhile, metro line No 2 connecting Bến Thành and Tham Lương in District 12 is now scheduled to open in 2026, a two-year delay from its 2024 goal. 

The metro line 2 project has also seen costs nearly double, from VNĐ26 trillion to VNĐ48 trillion. This funding has not been approved. Construction on the second metro line was supposed to start in 2014 and be completed last year, but so far only an operating centre has been built. 

Last month, Nguyễn Thành Phong, chairman of the People’s Committee, said the construction of the first metro line could stop as contractors who have not been paid are likely to stop work, which could result in legal issues. As a result, the second metro line could also lose its funding, he noted. — VNS

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