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Endless suffering for construction contractors
A lot of contractors are giving up construction projects because investors are not promising to accept higher than previously estimated construction material prices. Meanwhile, their working capital is nearly exhausted as they cannot access bank loans.
A lot of construction projects have been slowing down due to the material price increases, including power plant projects, which need to be completed soon to ease the current electricity shortage.
A lot of contractors have decided to withdraw capital from power plant construction, which has made experts believe that power plant projects will not finish as scheduled. The experts have warned that the slowdown in power plant construction will make the electricity shortage more serious in 2009.
Analysts say that a series of bidding calls failed recently as no contractors want to join bids at this moment as they cannot anticipate construction material price increases. Meanwhile, investors cannot make any decisions themselves related to adjustments of projects’ estimates.
Local authorities also admit that contractors are facing a lot of difficulties. Material prices fluctuate daily, while it takes a lot of time for agencies to approve adjustments of projects’ estimates. Experts have warned that the disbursement rate of projects using state-funded capital in 2008 will be far below the targeted level if no breakthrough in disbursement procedures is made.
The state-funded projects are mostly infrastructure development projects that serve local socio-economic development. Meanwhile, according to Dan Duc Hiep, Director of Hai Phong Planning and Investment Department, the tardiness in disbursement will badly affect the disbursement of other investment projects, especially foreign direct investment. Foreign investors will not be able to operate until infrastructure items are completed.
In Hai Phong, further commodity jams at the port are expected as the port has the designed capacity of 26.5mil tonnes a year, while it is estimated that 30mil tonnes will go through the port this year. Dinh Vu wharf, which was designed to receive 1mil tonnes of commodities a year, is now receiving 2mil tonnes a year. “If we don’t make investment in upgrading ports and building new wharfs, serious deadlocks will occur,” he said.
VNN
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