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China's projects in Vietnam earn reputation for poor quality, delays

Hanoi stuck with rising costs on 'cheap' projects with poor expectancies

China-backed infrastructure projects have caused public discontent in Hanoi by adding to congestion. (Photo by Ken Kobayashi)

HO CHI MINH CITY -- Hanoi's first elevated railway line has had its trial run in September cancelled without an alternative being proposed by the builders from China.

On Monday, Vietnamese authorities told reporters that further work on the project is not possible until China disburses $250 million in official development assistance (ODA) promised last year.

Construction of the Vietnamese capital's first urban railway was planned to run as a project from 2008 to 2013 at a cost of some $552 million with $419 million loaned from China.

Ground was not broken until 2011. Costs were then projected to run to $868 million by 2016 with an additional $250 million pumped in by Chinese lenders. The final disbursement is now due in March, but complicated procedures applied by China Eximbank have hindered the Chinese consortium headed by China Railways Sixth Group.

The delayed test run is the latest problem on the controversial project, which has been dogged by accidents, fatalities, and injuries to passersby.

Poor quality materials, faulty installations, and untrained workers have raised safety concerns. During his first official visit to Beijing, Prime Minister Nguyen Xuan Phuc said the slow pace of work and accidents have among other things contributed to congestion in Hanoi, causing public dissatisfaction. There are plans to ask the Chinese embassy to work with the consortium on ameliorating the situation.

The Hanoi metro has been seized upon by critics as a prime example of problematic China-backed projects. Surveys suggest most projects suffer from quality concerns, delays, and cost overruns. These include: the $69 million My Dinh National stadium in Hanoi; the $360 million steel complex expansion in Thai Nguyen province; the $264 million iron and steel mill in Lao Cai Province; a $1.4 billion bauxite-alumina project in the central highland; waste-treatment and energy-related projects; and a number of textile factories.

Common to all the projects were low bids and cheaper cost of investment arrangements. According to Pham Chi Lan, a Vietnamese economic analyst, this will turn out to be very expensive in the long run -- costs will continue escalating for low quality results.  

Mistakes, shoddy work, obsolete machinery, and accidents have become commonplace, causing a general loss of confidence in China-backed projects. Many are being reappraised, including 12 under the ministry of industry and trade.

Viwasupco, a company implementing a water supply project in Hanoi, last year cancelled a contract with China's Xinxing Ductile Iron Pipes, a supplier for the second phase of a pipeline on the Da river. The company quoted 10% below the approved amount for the project, which is intended to supply clean water to nearly 200,000 households. The contract cancellation followed 17 pipeline fractures on the first phase.

In the northern province of Quang Ninh close to the border with China, a Chinese ODA offer of $300 million for a highway project was turned down because local contractors could do the work better.

The thirst for capital has nevertheless spurred some local investors to disregard public sentiment and take on Chinese partners. Geleximco, a local import-export company, and its Chinese partner, Sunshine Kaidi New Energy Group, last month submitted a joint proposal for approval in principle to develop the multibillion-dollar Long Thanh International Airport near Ho Chi Minh City as a public-private partnership. The companies promised to finish work in three to five years at "the lowest possible cost" for a new airport.

The proposal has been heavily debated, and the government has been urged to be selective with investors, particularly with so much capital at stake. Economist Ngo Tri Long told reporters that Vietnam needs to learn its lessons without prejudice from past experiences with Chinese investors.  

Vietnam's defense ministry also raised national security concerns after the country's two main airports, along with the website of flag-carrier Vietnam Airlines, were attacked last year by hackers believed to be from China. China's forceful tactics in the disputed South China Sea have also not gone down well.


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