State audit finds ODA projects riddled with inefficiencies

A State Auditor report on 2018 submitted to the National Assembly says that 27 of 42 transportation projects that use official development assistance (ODA) have adjusted their registered capital upwards by a total of VND122.35 trillion ($5.24 billion).

For instance, the project to upgrade the Hanoi-Ho Chi Minh railway line has adjusted its investment capital three times, an increase of VND6.81 trillion ($292 million), or an increase of 276 percent over the capital initially approved for the project.  

The Huoi Quang hydropower project, the largest hydropower station in northwest Vietnam, adjusted its capital twice by nearly VND5.77 trillion ($247 million).

The State Audit report also says that many projects have entered into ODA contracts with onerous provisions that require the appointment of foreign contractors for excessively high remuneration.  

In particular, the Chinese contractors appointed to carry out works on the Cat Linh - Ha Dong urban railway project in Hanoi were to be paid VND13.75 trillion ($589 million), or 77 percent of the project’s total investment.

In addition, some projects have hired foreign consultants that charge many times more than Vietnamese consultants.

The project to construct a road connecting Hanoi-Hai Phong and Cau Gie-Ninh Binh expressways hired an international consultancy that cost 8.5 times the domestic prices; the project to build Vinh Thinh Bridge (Hanoi), 7.8 times; and the Lo Te – Rach Soi road project in southern Vietnam, 11 times.

Some projects accepted disadvantageous terms, such as the Ben Thanh – Suoi Tien Metro line project, Ho Chi Minh City’s first metro route, allowing its contractors to halve performance guarantees to only five percent, while allowing them to request additional capital if progress is delayed.

The project also accepted requests for additional capital, have not considered challenging proposals with unusually high costs, or agreed to consultancy costs that exceed price ceilings suggested by the ODA lender, the State Audit report found.

Latest figures show that in 2016-2017, Vietnam struck deals to borrow more than $9.19 billion, including $6.8 billion in ODA, $2.2 billion in other preferential loans and $216.8 million in non-refundable aid.

More than 91 percent of ODA and preferential loans in the past two years have come from development agencies, 35 percent from the World Bank, 33 percent from the Japan International Cooperation Agency (JICA) and 14.1 percent from the Asian Development Bank (ADB).