PM orders HCMC to resolve funding dispute, resume anti-flooding project

In a government resolution signed Thursday, Prime Minister Nguyen Xuan Phuc ordered Ho Chi Minh City to guarantee completion of the project considered crucial for the city.

The project is almost complete and progress should be boosted to resolve the city's chronic flooding problem, the resolution said.

The anti-flooding project, which covers 100 hectares (250 acres) in districts 1, 4, 7, 8, Binh Chanh and Nha Be, is building a new drainage system with more pumping stations that will be able to keep dry a 750 square-kilometer area in the downtown section along the Saigon River.

Around 6.5 million people, or half of the city's population, would benefit from this, it has been estimated.

What happened

When work on the project started in mid-2016, it was meant to be completed in April 2018.

However, it was put on hold for 10 months for two reasons. In 2018, the Bank for Investment and Development of Vietnam (BIDV) could not disburse funds because the city had yet to sign the disbursement report.

This was followed by controversy after a supervision consultant found out that the project's main investor, city-based Trung Nam Group, had used Chinese steel for the valves of the project's sewer system. The signed contract stipulated that the steel had to be sourced from G7 countries.

Trung Nam later insisted that it had fulfilled all terms and conditions in the build-transfer contract it had signed with the city, and that the Construction Department had approved changes in the use of steel. The firm also gave its assurance that the quality of the Chinese steel used for the valves suited the project's functions.

When the dispute was resolved and work eventually resumed in February 2019, Trung Nam signed another contract with the city to extend the deadline for the project, setting June 2020 as the deadline for work to be completed and the entire project to become operational in December 2020.

However, the private company encountered another problem when concerned districts failed to hand over cleared sites by the promised deadline of June 30, 2019.

The project was then put on hold once again last November after a much bigger problem cropped up: the contract between Trung Nam and the city had run out of time, but the city had not signed a project extension, preventing the investor from continuing the work.

Since the contract was not extended, the bank had refused to disburse the remaining sum of VND1.8 trillion ($77.6 million) for Trung Nam to continue the project, the company's CEO Nguyen Tam Tien said at a meeting in December last year with city authorities.

"Given the current situation, we cannot continue to work on the project for more than two months; and if obstacles related to extending the contract are not removed, we would have no choice but to suspend it entirely," he said.

Since that meeting, no progress has been made and the entire project, said to be 96 percent complete, has been left untouched until now.

Work with the banks

The PM has now ordered HCMC to work with the central bank and the BIDV to provide funds for the project.

The city will also have to review the entire project towards eliminating unreasonable costs, and take full responsibility for all legal issues it has faced with Trung Nam as also issues that have affected project efficiency.

Sources told VnExpress last December that the city would not sign the contract extension because the parties are yet to reach agreement on the mode of payment.

Previously, the government had advised that HCMC will pay for the project with land and will only make cash payments when that resource runs out.

The city later asked for permission to cover more than 15 percent of the project's cost with land and pay the rest as cash. No final decision has been taken on the payment issue.

Residents of Vietnam's biggest city have been waiting for a respite from the chronic flooding they have been suffering.

For almost two decades, urban flooding has been a major headache for HCMC, but no comprehensive solution has been identified or implemented.

The city's development plan before 1975 was designed for around two million residents but that population has risen to 13 million, excluding migrants. Despite this upsurge, the drainage system has not been upgraded.

Experts have said that the drainage plans being used now are outdated. They have also warned that without a sea change in flood-fighting efforts, the current situation will not just continue, but progressively worsen.