State auditor finds BT projects massively overvalued

The State Audit Office of Vietnam (SAV) has recently reported to the National Assembly, Vietnam’s parliament, that it has found numerous errors and inconsistencies in public-private BT contracts in Hanoi, which the government pays for with land-use rights in the city.

Specifically, from 2013-2017, private contractors were selected by a tendering process only in one out of 12 projects in Hanoi that the agency audited, and the rest were appointed. The SAV said that this affected the competitiveness of the projects.

In addition, the SAV pointed out that the system to grant land-use rights as payment for BT projects has not been standardized.

It said that the land use rights paid to contractors were not based on their market value.

In particular, the audit and re-evaluation of three chosen BT projects showed huge differences in value. The combined value of the three projects after the audit was approximately VND 1.73 trillion ($75.2 million), just 39 percent of the initial contract value.

BT is a form of investment contract signed between a competent state agency and a contractor for the construction of an infrastructure project. After the construction is completed, the investor transfers the project to the Government.

After completion, the government may grant permits to the investor to carry out other projects in order to recover the initial investment capital including profit, or pay the investor in the form specified in the BT contract.

At the beginning of this year, the Ministry of Finance had asked provincial authorities to stop authorizing payment in land use rights to BT contractors until a decree regulating this area comes into effects. A draft decree on this issue is currently being prepared.