The Ho Chi Minh City People's Committee has just sent a document to the Prime Minister on a plan to remove difficulties for the project to solve flooding caused by tides in the Ho Chi Minh City area, taking into account climate change factors (phase 1).
This important project started in mid-2016, aiming to control flooding caused by high tides and respond to climate change over an area of 570 km², serving about 6.5 million people in the central area and along the Saigon River.
Although 90% of the work has been completed, the project has had to suspend construction three times, the most recent of which lasted from November 15, 2020 to present.
According to the Ho Chi Minh City People's Committee, the total investment of the project is likely to exceed VND10,000 billion - a national important project criterion. The authority and implementation procedures for the project that is in the process of being implemented have not been clearly defined. Ho Chi Minh City said it will propose an implementation plan and report to the Government during the process of adjusting the project's investment policy.
According to the HCMC People's Committee, the total disbursement value for the project is nearly VND8,300 billion, of which VND7,100 billion is from loans and more than VND1,181 billion is from the investor's own capital. The project still needs about VND1,800 billion more to complete.
The biggest difficulty is that the investor does not have the capital to continue construction. BIDV Bank - the capital sponsor - cannot sign the credit contract appendix with the investor to submit to the State Bank to extend the time for disbursing re-lending capital. The reason is that the State Bank has recovered about VND 3,560 billion of re-lending capital for BIDV. Even though the disbursement extension is granted, BIDV still cannot continue to disburse because the project has not been paid.
To resolve the difficulties, the Ho Chi Minh City People's Committee proposed that the Government Working Group consider submitting to the Government a Resolution allowing Ho Chi Minh City to entrust the city budget to the Ho Chi Minh City State Financial Investment Company (HFIC) to provide loans for investors to complete the project.
However, the Ministry of Finance believes that this option is not suitable because the 2015 State Budget Law does not stipulate the use of local budgets to entrust local development investment funds.
Therefore, HCMC currently has no basis to mobilize entrusted capital. The solution that HCMC proposed is to review and adjust the payment terms in the contract. Accordingly, payment will be made to investors using the identified land funds, creating capital to continue construction and completion of the project.
In addition, the project is also facing difficulties due to the lack of a basis for payment under the BT (build-transfer) contract. Ho Chi Minh City has negotiated and signed a contract, along with a contract appendix, under which the investor will be paid 16% of the final settlement value (about VND 1,588 billion) in land funds and the remaining 84% (about VND 8,380 billion) in cash.
To ensure the legal basis and adjust payments to suit reality, it is necessary to make overall adjustments to the project. This requires a lot of time and is complicated, because it is necessary to negotiate and agree with BIDV and investors on loan interest.
Ho Chi Minh City proposed to simultaneously adjust the project implementation time and adjust the payment terms in the contract.
After the adjustment, Ho Chi Minh City will have a legal basis to pay with land funds, helping to solve capital sources for investors and reduce costs arising from interest during the waiting period.
