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BOT project inspections reveal false declarations

Released at: 14:16, 08/09/2015

BOT project inspections reveal false declarations

Inspections of two highway projects reveal errors in estimates and project management.

by Son Ho - Song Ha

Inspectors from the Ministry of Planning and Investment have identified errors in estimates and project management at a number of build-operate-transfer (BOT) projects on National Highway No. 1A managed by the Ministry of Transport (MoT). The Nghi Son - Cau Giat Expressway and the Hanoi - Bac Giang Expressway both declared incorrect investment figures with the aim of prolonging the repayment period. Notably, the inspection result comes five days after the Vietnam Expressway Corporation (VEC) requested it increase the toll collection period to 42.5 years to repay five BOT expressway projects.

The Nghi Son - Cau Giat project falsely declared an investment figure of more than VND1.202 trillion ($53.47 billion). According to the project’s financial plan dated March 10, 2015, total investment was over VND3.581 trillion ($159.28 million), but calculations by the inspection team revealed investment was only some VND2.378 trillion ($105.77 million).

Moreover, the project began on March 26, 2013 but the construction design was not submitted until August 4, 2014, which increased costs by VND36 billion ($1.6 million). MoT did not collect VND4.9 billion ($217.952) in unused costs totaling VND5 billion ($222,400) for certain items. State control was not exerted so the investor adjusted the road construction without sufficient reason, leading to an increase in construction costs of over VND82.7 billion ($3.68 million).

There were many other errors made regarding site clearance, construction consulting, and project management. According to the inspection team the financial plan contained errors that led to an inaccurate payback time of 17 years, 5 months and 15 days.

The Hanoi - Bac Giang project, meanwhile, has seen very slow progress and its investment is higher than expected. The investors were the Ocean Group (OCG), 319 Invest, Vinaconex, and Van Phu Invest, who were assigned by MoT. Techcombank provided credit to the project.

It had an investment of VND4.213 trillion ($187.39 million) and began on February 22, 2014 with completion slated for June 2016. When the project was due to begin, however, the construction design had not been finalized. By January 2015 the project had only conducted nine of the 13 bid packages under the approved construction design.

According to the inspection team, Techcombank did not make the financial arrangements for OCG as committed. The declared data on financial capability of Vinaconex and the data in financial statements audited in 2011 were inconsistent. 319 Invest was unable to provide a financial report as requested, but MoT still approved it as an investor.

When the inspection started at the end of 2014 the investors in the partnership had contributed VND211 billion ($9.39 million) in capital, or 84.5 per cent of that committed. As at the time of the inspection the project was halfway through its scheduled timeframe but only 10.5 per cent of work had been done.

Inspectors also found many flaws in the formulation, appraisal, and approval of the total investment, which increased by more than VND819 billion ($36.43 million). If that amount was to be deducted the payback time would be shortened.

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