Saigon’s second metro line at risk of capital delays

By Gia Minh   December 28, 2020 | 12:56 am PT
Saigon’s second metro line at risk of capital delays
The front parts of houses on Cach Mang Thang Tam Street in HCMC's District 1 are demolished to give space for the city's second metro line, November 27, 2020. Photo by VnExpress/Gia Minh.
A $500 million plus loan agreement for Saigon’s second metro line expires in three days with the project lacking a key prerequisite, an independent consultant.

In a document issued Sunday, Deputy Minister of Planning and Investment Tran Quoc Phuong urged the Ho Chi Minh City People’s Committee to re-mobilize an independent consultant (IC) for the purpose.

An operating independent consultant is needed to extend a loan agreement with the German state-owned development bank KfW that expires December 30.

The loan agreement for VND12 trillion ($519.66 million) is extendable until the end of 2026, but this requires an Independent Consultant (IC) Agreement contract to be signed.

Completion of this document will set the legal basis to commence bidding for two construction packages, tunnels and underground stations, as well as land clearance to kick off procedures to acquire new loans from the Asian Development Bank (ADB) and European Investment Bank (EIB).

The ministry has requested Ho Chi Minh City to provide updates on the progress of the project, as well as the reasons for the delay in having a signed IC Agreement.

The city will also need to provide a plan on deployment of construction works as required by donors, sent to the ministry before December 30 for submission to the Prime Minister.

Earlier, in August, the ADB, KfW and EIB had sent a joint letter to the Chairman of the People's Committee of Ho Chi Minh City Nguyen Thanh Phong asking the city to accelerate the hiring of an independent consultant towards avoiding delays.

The project originally had a consortium of three German companies, one Swiss company and a Vietnamese company as the Independent Consultant, providing engineering, design and supervision consultancy services.

Their services commenced on 31st January 2012, but stopped in October 2018 after disputes broke out over fees for service packages not originally included in the first IC Agreement.

The HCMC People's Committee said it has agreed to continue negotiations with the IC consortium on disputes related to the Metro Line 2 project.

The Management Authority for Urban Railways (MAUR) has also said it is negotiating with the IC, but the Covid-19 pandemic has slowed this process as both parties cannot work directly, and have to correspond in writing. The signing of the consulting contract is expected to happen in January 2021, the MAUR had said.

Approved 10 years ago, Metro Line 2, running between Ben Thanh and Suoi Tien amusement parks in HCMC, had an original investment outlay of $1.3 billion, which then ballooned to $2.1 billion by the end of 2019 over rising materials prices as well as financial and construction costs.

Three international development banks, ADB, KfW and EIB, are funding the project with nearly VND37 trillion ($1.6 billion), with the remaining sum of over VND10.4 trillion ($450.72 million) being counterpart funds from Vietnam.

The metro line was scheduled to be completed in 2019, but the HCMC has asked the government to extend the deadline until 2024.

The Metro Line 2 Ben Thanh – Tham Luong Metro Line will run 11 kilometers from Districts 1 to 12, 9.2 km of it underground. It will have 10 stations. It is part of eight metro lines planned in the city with a combined length of 220 kilometers and a price tag of nearly $25 billion.

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