Why has the Hai Duong City Urban Transport Development Project not been implemented yet?

Expanding urban space

The Hai Duong City Urban Transport Development Project was proposed for investment by the Provincial People's Committee in early 2017, using loans from the OPEC Fund for International Development (OFID Fund).

At that time, Hai Duong proposed the Ministry of Planning and Investment to review, appraise, and report to the Prime Minister for approval of the investment policy for this project with 2 components including urban transport development and resettlement. In which, the investment in urban transport development will implement the construction of 4 items including: construction of Pho Van road, Viet Hoa ward; construction of Thuong Dat - An Chau commune axis road; construction of Ai Quoc ward axis road and construction of 62m extended road.

According to the People's Committee of Hai Duong City, due to the long time for implementing investment procedures, while the city's urban renovation needs are urgent, the city has implemented the above 4 traffic items with other capital sources. The People's Committee of Hai Duong City has reported to the Provincial People's Committee to propose investing in the construction of a bridge over the Thai Binh River (Bui Thi Xuan Bridge) and connecting roads instead of building the above 4 roads. The Provincial People's Committee has sent a document requesting the Ministry of Planning and Investment to appraise and submit to the Prime Minister for approval of the investment policy for the Hai Duong City Urban Traffic Development Project.

In March 2022, the Prime Minister approved the investment policy for the Hai Duong City Urban Transport Development Project using OFID Fund loans. The project has a total investment of more than VND 1,341 billion (equivalent to more than 58 million USD). Of which, OFID loans are more than 31 million USD, the rest is counterpart funds. The project implementation period is from 2022-2025.

The approved project includes 3 components: Urban traffic development; compensation for site clearance, resettlement and investment support. For the urban traffic development component, a bridge over the Thai Binh River will be built at the end of Bui Thi Xuan Street to Nam Dong Ward (Bui Thi Xuan Bridge). The bridge is over 1.1 km long, 23 m wide. Construction of a road connecting Bui Thi Xuan Bridge with Ring Road I, a route with a design speed of 60 km/h, a length of over 1.6 km, a roadbed cross-section of 32 m and construction of a bridge (over the Huong River) with a length of 50 m, a cross-section of 23 m. Organization of traffic connecting the bridge with Bui Thi Xuan Street and traffic in the area, including the design of a roundabout intersection...

According to the assessment of Hai Duong City People's Committee, this project aims to expand the urban development space to the east of the city in particular and the southeast of the province in general. The investment in construction of project items will significantly contribute to increasing connectivity between inner-city and suburban areas, creating dynamic and flexible relationships between urban areas to create direct momentum for the city's socio-economic development; at the same time, contributing to completing the criteria for a type I urban area.

Request for suspension

To implement this project, in May 2022, the Provincial People's Committee assigned the Hai Duong City People's Committee to be the investor. According to the Management Board of the Integrated Development Project of Dynamic Urban Areas of Hai Duong City, recently, the City People's Committee has implemented steps, organized a competition for the architectural plan of Bui Thi Xuan Bridge, and selected the architectural plan "Quintessence of Vietnam" of the Road Design Consulting Joint Stock Company. According to the plan, the city is expected to complete the investment steps for implementation.

However, the project is currently facing some difficulties in the implementation process. The winning architectural plan proposed by the Selection Council as a construction investment project plan has changes in the scale of the project (bridge type, length, number of spans, etc.) compared to the approved proposal report (cantilever bridge). Therefore, it is necessary to propose adjustments to the investment policy.

In addition, the current lending interest rate policy of the sponsor has changed, leading to difficulties in balancing capital sources for debt repayment. Through the reporter's investigation, at the end of 2022, the Ministry of Finance announced the lending interest rate of the sponsor OFID for the Hai Duong City Urban Transport Development Project. The sponsor announced a 20-year loan term, a 5-year grace period; SOFR interest rate (secured overnight interest rate for USD loans) for a term of 6 months and a fixed spread of 1.9%/year; prepayment fee of 0.5%; commitment fee of 0.25%.

According to the Ministry of Finance's assessment, the above borrowing conditions are higher than those from other international financial institutions that the Vietnamese Government is borrowing from. Currently, the high exchange rate difference between the USD and the Vietnamese currency affects the ability to repay loans in foreign currencies.

Mr. Nguyen Dinh Khanh, Deputy Director of the Management Board of the Integrated Development Project of Dynamic Cities of Hai Duong City, informed that after studying and evaluating the effectiveness of the loan source, the city's budget revenue in the period of 2021-2025 and the possibility of re-borrowing, the City People's Committee reported to the Provincial People's Committee to consider proposing the Government, the Ministry of Finance, and the Ministry of Planning and Investment to use other capital sources to invest in the project. It is proposed to allow the project to be temporarily suspended, transferred to the implementation period from 2026-2030 and support the City People's Committee to find other more suitable funding sources to ensure investment efficiency.