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Politics

Hanoi makes sharp U-turn on Japan-built bridge

Mounting debt may be behind puzzling incident

The Japanese-built Tan Vu-Lach Huyen Bridge provides a vital link between the city of Haiphong and the Lach Huyen port.

HANOI -- A dramatic about-face by the Vietnamese government on its assessment of a Japanese-built bridge in northern Vietnam, which went from "major" flaws to no issues at all in a couple of days -- suggests to some involved in the project that the Hanoi government may be playing for time to delay payment.

"It's like complaining that your house is leaning when the drywall is only a bit crooked," said one Japanese source with knowledge of the matter.

The 15.6km Tan Vu-Lach Huyen Bridge forms a vital link in a highway that will connect the northern port city of Haiphong to the new Lach Huyen port, which has been developed by Tokyo-based trading house Itochu and others. The longest sea bridge in the country has been built by a joint venture involving Japan's Sumitomo Mitsui Construction.

In early July, as the bridge was nearing completion and its handover to the government approaching, government inspectors performed a check on the span. When local newspapers reported the findings July 11-13, the situation looked grim. Many problems had been found, according to one. The bridge had subsided by as much 5cm in certain sections, claimed another. Yet only a few days later, senior officials from the Ministry of Construction inspected the structure again and declared that the bridge had no safety issues.

People close to the project were baffled by this turn of events. Some of the steel plates covering the road surface of the bridge were slightly out of place -- and that was it, according to a person close to the Japanese contractor involved in the construction.

Sinking feeling?

The government's odd behavior may have more to do with the strain on its finances than any on the bridge. Excessive borrowing via foreign aid loans and reckless fiscal management have swelled the Southeast Asian nation's public debt, which reached 64.7% of gross domestic product at the end of 2016 -- just shy of an official target of no more than 65%.

The bridge's handover is scheduled for the end of August, and under normal circumstances, the bill would arrive, too. But if delivery on the bridge were delayed -- say, for repairs -- then payment probably could be put off.

In a separate case in Ho Chi Minh City, an urban rail project involving Japanese trading house Sumitomo Corp. and Tokyo-based contractor Shimizu ran out of funding at the end of last year because the central government had provided only about 30% of the necessary costs.

China and Japan have vied with each other for such infrastructure contracts in Southeast Asia, and some Chinese media seized on the bridge story as a sign that Japanese engineering had lost its touch. The incident serves as a reminder that satisfying emerging markets' still-great demand for infrastructure requires a deft hand for risk management as well.

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