HCM City pinpoints reasons for metro cost overruns

Last update: 16:34 | 09/01/2018

Inexperience of domestic consulting firms is largely attributed to cost overruns at HCMC’s first two metro line projects, and the city government has recently made a report to the Government on details of such cost overruns.


An elevated section of Metro Line No.1 is seen in this file photo

As pointed out in the HCMC government’s report, there are three main reasons for surging costs at metro line No. 1 (Ben Thanh-Suoi Tien line). 

In particular, this metro line project was approved by the city in April 2007 with an investment of nearly VND17.4 trillion. At the time of approval, the project was listed in group A and hence did not need to be presented to the National Assembly (NA). Investment costs of the project were re-calculated by consulting units and soared to more than VND47.300 trillion.

According to the HCMC government, such higher-than-expected costs result from increasing workload to push up the project’s efficiency, objective reasons like price changes of materials and minimum wage hikes in 2006-2009, the fluctuating rate between Japanese yen and Vietnam dong, and backup costs.

The Vietnamese side, due to inexperience, has requested the Japan International Cooperation Agency (JICA) to pick independent consulting firms to evaluate project adjustments. JICA then selected two firms of Singapore, one of which manages most of Singapore’s metro system.

After collecting comments of ministries and agencies, the Prime Minister allowed the HCMC government to approve the project adjustments in August 2011, which the city did a month later.

With the new investment scaled up to more than VND47.3 trillion, it needed to have the NA’s approval. However, the Prime Minister gave the go-ahead for the project as it is categorized as a focal project.

Since 2011, the HCMC government has kept reporting to the Government, which then authorized the Minister of Transport to report to the NA. As proposed by the HCMC government, the Prime Minister assigns an agency to report to the NA on investment adjustments and assists the city in advancing capital to continue work on metro line No. 1.

As for metro line No. 2 (Ben Thanh-Tham Luong line), though this 11-kilometer project just got started, cost overruns have amounted to some VND14 trillion.

The HCMC government approved the design by a domestic consulting firm in 2010 with a total investment of more than VND26.1 trillion. However, a consortium of Germany, which was chosen as an international consulting firm two years later, spotted many inadequacies and thus revised the design with the total cost put at around VND40 trillion.

Currently, ministries have different views on the authority to approve project adjustments. In the view of the ministries of planning-investment and transport and the central bank, metro line No. 2 can be approved by the HCMC government but needs to seek comments of the Prime Minister before it is implemented.

Meanwhile, according to the ministries of construction and finance, the project needs to be reported to the Prime Minister before seeking approval from the NA. 

As a result, the HCMC government has proposed the Prime Minister approve the project’s investment and implementation adjustments and permit the city to assess and approve project adjustments.


HCM City pinpoints reasons for metro cost overruns, vietnam economy, business news, vn news, vietnamnet bridge, english news, Vietnam news, news Vietnam, vietnamnet news, vn news, Vietnam net news, Vietnam latest news, Vietnam breaking news