China Eximbank provides $250 million preferential buyer's credit for Cat Linh-Ha Dong Light Rail Construction Project (Linked to Record ID#63214, #73326)

Project narrative

On May 30, 2008, the Chinese Government and and the Government of Vietnam signed a preferential loan framework agreement for the Cat Linh-Ha Dong Light Rail Construction Project. This subsequently produced three different loan agreements: (1) On October 22, 2008, China Eximbank and the Vietnam Ministry of Finance signed an RMB 1.2 billion ($169 million) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL No.(14) Total No.(223)] for this railway project (see Record ID#73326). The borrowing terms of the GCL were as follows: 3% interest rate, 15-year maturity, and 5-year maturity. (2) On November 8, 2009, China Eximbank and the Vietnam Ministry of Finance signed a $250 million preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC No.2009 (24) Total No. (86)] for this railway project (Record ID#34616). The borrowing terms of the PBC were as follows: 4% interest rate, 15-year maturity, and 5-year maturity. (3) On May 11, 2017, China Eximbank and the Vietnam Ministry of Finance signed an RMB 1.678 million ($250.62 million) government concessional loan (GCL) agreement [CHINA EXIMBANK GCL No.2017 (24) Total No. (629)] for this railway project (see Record ID#63214). The loan terms are unknown. This GCL came into effect on December 28, 2017 and the fist disbursement took place on April 28, 2018. The borrower was to use the proceeds from these loans to partially finance an EPC contract with China Railway Sixth Bureau Group Co., Ltd., a subsidiary of China Railway Group. The purpose of the project is to construct a 13 km light rail — that travels at 80 km per hour — in the capital city of Hanoi that passes through 12 stations: Cat Linh, La Thanh, Thai Ha, Lang, Thuong Dinh, Vanh Dai 3, Phung Khoang, Van Quan, Ha Dong, La Khe, Van Khe, Yen Nghia. The project officially commenced on October 10, 2011 and the new railway line was originally scheduled to launch in June 2015, but the completion date of the project has been postponed at least four times. The project has encountered multiple problems and delays during implementation. In 2013, the project faced difficulties related to demolition and relocation, including the fact that the terrain was ideal for machinery and the construction site was close to traffic. Then, in 2014, the total cost of the project increased from $552.86 million to $868.04 million, forcing the Government of Vietnam to contract a supplementary loan from China Eximbank (see Record ID#63214). In January 2015, the project faced major criticism from the Vietnamese government for multiple accidents during construction. Vietnamese officials and experts have repeatedly raised concerns about the project’s safety, with several accidents killing or injuring workers and passersby. In early 2016, Vietnam’s Ministry of Transport and China Railway Sixth Bureau Group Co., Ltd agreed on a new launch date in December 2016, before correcting themselves that the line would not be launched until early 2017. In February 2017, the railway line’s completion was postponed for another year, with a new launch set for February 2018. In February 2017, the first set of trains (out of 13 total) was installed on the track . Each train is worth $63.2 million, and manufactured by China's Beijing Subway Rolling Stock Equipment Ltd. In 2018, the project manager submitted a proposal for the railway line to begin a test run in September 2018, setting the date for an official launch to be in 2021. On September 20, 2018, the first stage of a trial run was initiated, which was meant to last 3-6 months. On January 13, 2022, the project was officially completed and entered full operation. The project is 13 km long and includes 12 elevated stations. On June 17, 2022, the Vietnam Ministry of Finance notified the Ministry of Transport that it needed to pay a $740,300 fine for late loan payments related to the project. The project had not yet generated sufficient revenue in 2022 so the Hanoi People’s Committee—who took over the repayment obligations from the Ministry of Transport—had no revenue from the project (or from other sources) to repay the loans. Prior to the handover to the Hanoi People's Committee, the Ministry of Transport intended to utilize capital provided for the project to repay the loans which was deemed "inappropriate". Construction delays as well as various legal regulations in Vietnam led to late loan payments .