HÀ NỘI — Three BT (Build-Transfer) infrastructure projects in Hà Nội were found to have claimed much higher investment estimates than the actual expenditures they required, the State Audit of Việt Nam (SAV) said in a recent report.

The investors that carried out the three projects in question – the Lê Đức Thọ Street project leading to Xuân Phương new residential area in Nam Từ Liêm District, undertaken by the Tasco JSC; the intersection in the centre of Long Biên District, by Him Lam JSC; and the Hà Nội-Hưng Yên inter-provincial road, by Comaland JSC – were to receive use rights on vast tracts of land in Hà Nội from the municipal authorities with value supposedly equal to the costs of the projects (37ha, 567ha and 63ha, respectively).

The three projects initially posted a total estimated investment of VNĐ4.421 trillion (US$189.7 million), but post-audit results put the actual cost at just 60 per cent of this figure, or VNĐ2.693 trillion ($115.6 million). This represents a significant gap of VNĐ1.727 trillion.

According to the SAV, there are two reasons for the stark difference. First, the costs finally agreed upon between the investors and the contractors and the interests rate of the loans for the projects all turned out to be lower – VNĐ980 billion in total – than in the figures in the original contracts. Second, citing incorrect calculations, the SAV trimmed VNĐ747 billion from the estimated costs related to construction, land clearance, consulting fees and emergency funds.

The SAV has proposed that the Hà Nội People’s Committee sit down with the investors to rewrite the BT contracts and reduce the amount of land it would grant them to reflect the adjustments.

Direct contracting

According to the SAV,  there were 111 projects in Hà Nội under the BT model by April 2018 – either in the proposal process, already approved or underway – with combined investment estimates of VNĐ300 trillion ($12.9 billion). However, many failed to be implemented due to a “lack of feasibility”, leaving just 20 projects to be carried out with eight “basically completed”.

Out of the 12 projects with total investment greater than VNĐ26 trillion implemented in the 2013-17 period, open bidding was only held for one project – the wastewater treatment project for the West Lake area – with direct contracting used for the remaining 11.

Direct contracting lacks transparency and competitiveness, the agency said, adding that it makes it more difficult for State agencies to supervise a project’s total investment and quality.

With a constrained State budget, many critical public infrastructure projects could only be done by private investors under the BT or BOT (Build-Operate-Transfer) models. However, the application of these models in Việt Nam has come under fire due to a lack of transparency, elevated corruption risks and poor management.

The exchange of land for infrastructure projects, for example, is usually criticised for giving suspiciously oversized concessions of public land to private investors, leading to enormous losses of State assets. — VNS