What is the solution to the stalled 10 trillion VND flood control project in Ho Chi Minh City?

Identify 3 land plots to be paid to the investor.

As VietNamNet mentioned in the article "Nearly Completed, Why Is the 10,000 Billion VND Flood Control Project in Ho Chi Minh City Temporarily Suspended?", the project to address tidal flooding in Ho Chi Minh City, taking into account climate change factors – Phase 1 (Flood Control in Ho Chi Minh City), has been temporarily suspended for nearly two years due to funding issues and legal review problems.

This project is invested by Trung Nam Construction Investment Joint Stock Company (Trung Nam Company) under the Build-Transfer (BT) contract model.

In a report on proposed solutions to resolve obstacles and restart the project, the Department of Planning and Investment (DPI) recommended that the Ho Chi Minh City People's Committee propose to the Government that the city be allowed to implement a parallel payment mechanism using both the land already cleared and the budget.

Tan Thuan sluice gate (District 7), one of six tidal barrier gates under the Ho Chi Minh City Flood Control Project. (Photo: Hoang Giam)

Payments made simultaneously using these two methods are only made according to the progress and volume of work completed and confirmed by the auditing agency.

If approved, the Ho Chi Minh City People's Committee will coordinate with relevant ministries and agencies to report and explain related issues and propose to the Government to approve the city's payment for the three land plots to the project's investor. These land plots are located in District 7, Binh Thanh District, and Thu Duc City.

Regarding the capital needed to complete the project, Trung Nam Company proposed that Ho Chi Minh City allow them to borrow approximately 1,759 billion VND from Ho Chi Minh City Financial Investment Company (HFIC Company).

During the implementation of the Ho Chi Minh City Flood Control Project, Trung Nam Company borrowed thousands of billions of VND from BIDV Bank. As of May 2023, the outstanding principal and overdue interest of the project at BIDV amounted to 6,567.5 billion VND.

According to the Ho Chi Minh City Department of Planning and Investment, given the current status of the project, payment to Trung Nam Company is an urgent requirement and a prerequisite for resolving obstacles and continuing with other tasks to complete the project.

Two options

Based on the report from the Department of Planning and Investment, at the end of July 2023, the Ho Chi Minh City People's Committee sent a document to the Prime Minister reporting on the obstacles of the project and proposing two mechanisms for resolving them.

The first mechanism proposed by Ho Chi Minh City is to pay Trung Nam Company according to the construction progress using land funds and cash.

Regarding the cash payment portion, the State Bank of Vietnam needs to allow BIDV Bank to postpone immediate debt collection, creating favorable conditions for the investor to complete the project. At that point, Ho Chi Minh City and the investor will conduct acceptance testing and make the remaining payment for the project according to the signed BT contract.

The drawback of this mechanism is the lack of control over the implementation timeline, and the resulting interest costs will increase significantly due to the extended project completion time.

Construction progress at the Tan Thuan culvert project has now reached 93%. (Photo: Hoang Giam)

The second mechanism proposed by Ho Chi Minh City is that HFIC Company will receive entrusted budget funds from the City, and then lend them to Trung Nam Company to continue the project's construction.

Specifically, the Ho Chi Minh City People's Committee will entrust approximately 1,800 billion VND from the budget to HFIC Company so that this company can lend it to Trung Nam Company.

Upon completion and acceptance of the project, the Ho Chi Minh City People's Committee will pay Trung Nam Company according to the signed BT contract. After receiving payment from Trung Nam Company, HFIC Company will have to repay this capital to the city's budget.

This approach will help the Ho Chi Minh City People's Committee proactively allocate budget funds and shorten project implementation time. However, guidance from the Ministry of Finance is needed for its implementation.

The risk with this option is that after construction is completed, if the project does not meet the technical and quality standards for acceptance, it will be difficult to recover the capital. At the same time, there is also a possibility of loss of state budget funds.

The Mương Chuối sluice gate project (Nhà Bè district) is currently 93% complete. (Photo: Hoàng Giám)

After analyzing the advantages and disadvantages of the two mechanisms, the Ho Chi Minh City People's Committee recommends that the Prime Minister consider and approve the second mechanism, as it offers more advantages in implementation. If this mechanism is chosen, Ho Chi Minh City will need guidance from the Ministry of Finance and other relevant ministries and agencies.

The Ho Chi Minh City People's Committee assures that the entrusted funds lent to Trung Nam Company will be used for the intended purpose, effectively, and will be used to expedite the project's construction and completion for acceptance and commissioning.

Following a proposal from the Ho Chi Minh City People's Committee, the Government Office requested relevant ministries and agencies to promptly provide written feedback so that this agency can compile and report to the Prime Minister.

The Ho Chi Minh City Department of Transport has issued its fifth directive addressing the ongoing construction of the flood control project on Vo Van Ngan Street, which is affecting the reputation of the city's transport sector and causing public outrage.

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