It’s too costly to build expressways in Vietnam

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Báo Tuổi Trẻ English - 25 month(s) ago 18 readings

It’s too costly to build expressways in Vietnam

The expenses required to develop expressways in Vietnam are 1.5 to 2 times higher than those of neighboring countries such as China, Indonesia, or Thailand, and even higher than in the US, creating a burden for the state as it is not easy to attract or recoup investments for these expensive roadways.

Trung Luong expressway The Ho Chi Minh City - Trung Luong Expressway requires a huge sum but also has bad reputation about its quality Photo: Tuoi Tre



The project to turn 30-km Lang – Hoa Lac Street into the modern Thang Long Highway was initiated in March 2005 with the estimated total investment of VND5.379 trillion (US$258.2 million).

This means the investment rate for the project was some VND179 billion ($8.59 million) per kilometer.

However, the project progressed slowly until October 2007, when the Ministry of Transport adjusted the total investment for the highway to VND7.52 trillion, or a $12-million-per-km investment rate.

The expensive Thang Long Highway was temporarily opened to traffic in October 2010 to mark the 1,000th anniversary of Hanoi, but it remains unfinished now.

Similarly, the Cau Gie – Ninh Binh expressway project, operated by the Vietnam Expressway Corporation, has required a huge sum of VND8.97 trillion ($430.5 million), but only 20km out of 50km have been completed.

More expensive than the US and China

“To see exactly how costly traffic infrastructure construction in Vietnam is, just compare it with its counterparts in the US and China,” said Nguyen Xuan Thanh, from the Fulbright Economic Teaching Program.

The Ho Chi Minh City – Trung Luong Expressway, for instance, is the country’s first standardized expressway, and cost $9.9 million per kilometer, while the respective rates for the HCMC – Long Thanh – Dau Giay, and Ben Luc – Long Thanh expressways are as high as $18.3 million per kilometer, and $28.2 million per kilometer, respectively.

Meanwhile, figures from China and the US show that the rates in these countries are only $6 million per km, and $8 million per km, respectively.

Paradoxically, Vietnam has lower labor cost and cheaper materials than other countries, but has higher expenses to develop expressways, said Thanh.

He added that the total expenses to build traffic infrastructure are exorbitant as investors have to pay huge sums for site clearance and compensation.

“But even if those expenses are excluded, it’s still costly to build expressways in Vietnam,” he stated.

For instance, he elaborated, if the site clearance and compensation expense worth $286 million is excluded from the HCMC-Long Thanh-Dau Giay project, it still needs $13 million for every kilometer of road built.

“This is still way higher than in China and the US,” emphasized Thanh.

Obviously, the expensive expressways will face difficulty in attracting investors, said Thanh.

The HCMC-Long Thanh-Dau Giay project is expected to receive the largest traffic flow in the country, but has still failed to attract investment, and the government eventually had to fund it through ODA and the state budget.

Meanwhile, investors in the HCMC-Trung Luong expressway still owe contractors VND800-900 billion, as the road has yet to be officially transferred.


Toll booths have been established on the HCMC - Trung Luong expressway, and yet its surface have now also cracked. Photo: Tuoi Tre


The expressway connecting HCMC and Long An now earns around VND1.1 billion on a daily basis from toll collection.

“The collection is nothing compared to the huge loan and investment sunk in this construction,” said an official from the project’s investor.

Why?

Thanh said there are four main reasons for the skyrocketing expenses to build roads in Vietnam.

The first reason is the wasteful use of technology.

“While machines and equipment used to serve the construction in other countries are sold after the projects are complete to recoup investment, in Vietnam they are liquidated,” he said.

The second cause is the weak ability of project management, which results in the sluggish progress of the projects.

Tardy progress usually increases total expenses by 50 percent, he said.

Next, in the projects funded by ODA, Vietnam has to hire experts, consultants, contractors, and machinery from the country providing the fund at higher prices.

“And the last reason is corruption, with commission promised for relevant parties,” he concluded.

Meanwhile, a former chief of the Institute for Traffic Strategy said that choosing the right contractors is an issue.

“Contractors with weak ability bid lower tenders to win the contract, but fail to appropriately complete the projects, resulting in the high overrun expenses,” he said.

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