High costs slow construction projects

14:24' 23/04/2008 (GMT+7)
Land clearance process also slowing needed developments
A sharp increase in the cost of construction materials and difficulties in land clearance led to the slow disbursement of basic construction capital in the first quarter of 2008, according to Pham Sy Liem, deputy chairman of Viet Nam Federation of Civil Engineering Associations.
The Phap Van overpass linking Thanh Tri Bridge with National Highway No 1 is under construction.
"Although the Government has had corresponding policies for contractors to deal with the high costs of construction materials, it takes time for them to come into effect," Liem told Viet Nam News.
The Ministry of Transport (MoT) reported that they spent less capital on basic construction in the first three months of the year than targeted.
Only VND651bil (US$40.7mil) was disbursed out of VND742bil ($46.4mil) spent from the budget, meeting only 10.5% of the year's plan.
From the Government's bond capital, VND770bil ($48mil) was disbursed out of VND1.7tril ($106mil) spent on the MoT's basic construction projects in the first three months of the year, meeting 7.5% of the year's target, the MoT reported.
On average, only VND470bil ($29.4mil) was disbursed every month while usually VND1.5tril ($93.8mil) should be disbursed monthly to meet the year's target of about VND18tril ($1.1bil).
Over the rest of the year, as much as VND2tril ($125mil) must be disbursed in each month to meet the year's target.
Construction costs have increased from 150-170% because of the price hike of materials, forcing many projects to come to a halt, Liem said.
The Ministry of Construction has allowed previous contracts to be reviewed to deal with the increase in material costs, however, many procedures have to be taken to avoid contracts from being overestimated, Liem said.
He proposed that the ministry earmark capital for basic construction projects in advance before carefully evaluating and establishing professional teams headed by high-ranking Government officials who can issue immediate decisions to tackle hindrances in each project.
Investment in basic construction should follow the general Government guideline of limiting or cutting ineffective or non-urgent projects while using more capital for projects which can be finished sooner and are socio-economically beneficial.
Land clearance speed, a traditional hindrance for construction in Vietnam, also continues to challenge the disbursement of basic construction projects, Liem said.
According to the MoT's Department for Transport Construction Appraisal and Management, land clearance speed is slower than planned in most of MoT's basic construction projects, negatively impacting the projects' progress.
Projects with serious land clearance problems include 4B Lang Son national route, Thanh Tri bridge, 32 Nhon - Son Tay national route and an upgrade to bridges along N1 national route in its third phase.
The Ministry of Construction early this month presented to the Government a document outlining 16 major hindrances on land clearance activities.
The speed of land clearances could be improved if more professional and scientific methods, and the principle of satisfactory compensation, were strictly applied, Liem said.
"The slow disbursement of basic construction projects doesn't directly affect any individual but has huge negative impacts on the economy. If a national route is completed months after planned, how much money does it cost the economy?".