The tidal flood prevention project in Ho Chi Minh City, taking into account climate change factors (phase 1), has a total investment of nearly 10,000 billion VND, implemented under a BT (build-transfer) contract.
Although more than 90% of the project has been completed, the project is still facing many difficulties in terms of capital and legal issues, leading to the suspension of construction since November 2020.
According to the agreement in the BT contract and the signed contract appendices, Ho Chi Minh City will pay the investor with land fund equivalent to 16% of the project settlement value (about 1,588 billion VND).
The three land lots to be paid include: Lot C8A, Area A, New Urban Area South of Ho Chi Minh City, Tan Phu Ward, District 7 (area 5,500 m²); Land lot No. 232 Do Xuan Hop, Phuoc Long A Ward, Thu Duc City (area 17,573.5 m²); Land lot at No. 762 Binh Quoi, Ward 27, Binh Thanh District (area 4,298 m²).
In addition to the land fund, the remaining amount equivalent to 84% of the project settlement value (about VND 8,380 billion) will be paid in cash.
According to the investor's report, as of November 2023, the project has disbursed about VND 8,276 billion, of which VND 7,094 billion is from loans and VND 1,181 billion is from equity capital. Currently, the investor needs to mobilize an additional VND 1,800 billion to complete the project.
However, the investor no longer has enough financial capacity, while the loan period is prolonged, so the bank does not continue to provide capital.
Ho Chi Minh City once proposed a plan to entrust the budget to the Ho Chi Minh City State Finance Investment Company (HFIC) so that this unit could lend money to investors and complete the project. However, this plan was assessed by the Ministry of Finance as inappropriate.
The project currently has shortcomings related to the payment plan for investors. Although there are no detailed regulations on the payment ratio in land fund and money, the fact that the Ho Chi Minh City People's Committee signed a BT contract with the investor with the land fund value ratio being only 16% of the total project cost, the rest in money is considered not entirely appropriate.
In addition, Decree 15/2015/ND-CP stipulates that the competent authority on public investment must be reported to decide on the policy of using state capital before approving the PPP project. However, at that time, the Ho Chi Minh City People's Committee reported and was approved by the Ho Chi Minh City People's Council but not yet approved by the Prime Minister.
To overcome these problems, the Ho Chi Minh City People's Committee found it necessary to adjust the payment terms in the BT contract in the direction of prepayment using land funds corresponding to the value of the completed BT project, helping investors have a financial basis to continue completing the project.
The Ho Chi Minh City People's Committee has proposed to the Prime Minister to allow the overall adjustment of the project, including changing the total investment and extending the implementation period. However, this adjustment procedure is very complicated and takes a lot of time. Therefore, Ho Chi Minh City hopes to be able to adjust the payment plan in parallel with the overall adjustment of the project so as not to affect the construction progress.
After the BT contract appendices are adjusted, Ho Chi Minh City will have a legal basis to pay with land funds, helping to solve capital sources for investors, while reducing interest costs arising while waiting for completion of legal procedures.
