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Cost escalations delay transport projects   2009-03-16 - VietNamNet/Viet Nam News

Severe cost overruns have delayed many large transportation projects, mostly funded by Japanese official development assistance, the Government has said.

The Ministry of Transport (MoT) estimates the shortfall at 132 billion yen (US$1.39 billion).

It attributed the cost escalation to fluctuations in raw material prices from the time estimates were made to the time work began.

The third phase of a project to upgrade bridges on National Highway No1A in September 2008, for instance, saw an upsurge in the prices of five main materials - steel, cement, sand, cobble and diesel oil - from a year earlier.

Though raw-material prices began to ease last December, the ministry said costs remained 40 to 50 per cent higher than the prices contractors had bid.

Some analysts, however, slammed the slipshod and long-drawn preparations made by official agencies, blaming them for the cash crunch.

The total initial estimate to improve the safety of railway bridges along the Ha Noi-HCM City route was 19.9 billion yen ($210.1 million), with funding to be provided by Japan International Co-operation Agency (JICA). The loan was approved in November 2006 but it was not until last year that tenders were invited. By then, almost all bids far exceeded the estimates.

A particular package, involving 17 bridges, attracted only one bidder whose rate was twice the estimate and more than the entire loan amount.

Cash crunch

A further VND500 billion ($29.4 million) was needed to make up for the price hikes and ensure the National Highway No1A third phase to upgrade bridges could be completed on schedule.

Begun in March 2007 and originally scheduled to finish this month, the project will see nine weak bridges on the Can Tho-Ca Mau section reinforced.

But a mere 30 per cent of the work has been completed thus far due to problems with site clearance and heavy losses incurred by Chinese contractor CSCEC, according to the Viet Nam Road Administration.

The Can Tho Bridge project requires additional funding of 5.73 billion yen ($60.5 million), the Cai Mep-Thi Vai International Port $174.2 million, and the railway-bridges improvement project $119.3 million.

Many other projects that are yet to be started too have seen costs escalate.

Building beltway No3 around Ha Noi, between Mai Dich and Bac Linh Dam, slated to break ground in the third quarter, requires a fresh $83.4 million in addition to $295.7 million pledged by JICA.

The MoT said the agency had promised to provide the additional funds required for all the projects.

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