Company Cancels Bid For Major Roadway Upgrade Project in Laos

2016-07-08
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A Lao motorcyclist rides along the Dongdok-Sikeuth road in Vientiane, June 25, 2016.
A Lao motorcyclist rides along the Dongdok-Sikeuth road in Vientiane, June 25, 2016.
RFA

A company negotiating with the Lao government for a contract to upgrade a major roadway has withdrawn its bid after talks broke down over price, RFA’s Lao Service has learned.

The government had offered Tangchaleun Group Co. Ltd., whose parent company is the Lao-Chinese owned Lao World Engineering & Construction Co. Ltd., a nine-year U.S. $45-million contract with interest to upgrade the Dongdok-Sikeuth road connecting the campus of Laos National University in the capital Vientiane with the country’s Route 13 North.

But the company held out for U.S. $49 million.

Sakchai Vongmalasith, the company’s chairman, sent a letter to the government on June 28, informing it that it was withdrawing its bid, according to a copy of the document obtained by RFA from a source at the Ministry of Public Works and Transport.

“Although there have been many instances of negotiations with relevant sectors since May 6, we could not reach an agreement to sign a construction contract with the government,” the letter said. “We kindly inform you that on behalf of the company, I am withdrawing the bid for the road construction project.”

Last year, Vientiane’s Public Works and Transportation Department, which is responsible for the Dongdok-Sikeuth road project selected Tangchaleun Group Co. Ltd. to finish upgrading the road, which was originally laid out about 11 years ago.

The new government of Prime Minister Thongloun Sisoulith dropped the price to U.S. $45 million, including U.S. $40 million for the work itself and U.S. $5 million for interest payments, from a previously approved cost of U.S. $54 million under the former administration.

The current government decided to quickly issue funds to make urgent repairs to the road during the rainy season, according to an official at the Ministry of Public Works and Transport, who requested anonymity.

RFA could not reach Pheang Douang-ngeun, the ministry’s director general of the Road-Bridge Department who is in charge of the project, for comment.

Exorbitant cost

Critics of the project have blasted the exorbitant cost of the project as well as the government’s lack of transparency in conducting the bidding.

The construction cost is about twice as much as it should be, and there is no transparency in the bidding process,” a road construction expert told RFA on Friday. “This is the reality of the construction sector in Laos.”

The expert, who declined to be named, said the cost to rebuild the nine-kilometer (5.6-mile) long, 30-meter (98-foot) wide road should not exceed U.S. $25 million.

“If the work is based on the price offered by the government, the company would make a profit of about U.S. $20 million,” he said.

“But in this case, the government does not have money, so it will let the company invest in the construction in advance, and then it will pay it in installments with interest for nine years, according to the government’s proposal,” he said.

To ensure transparency, the government should let small- and medium-sized companies bid on the construction, he said.

“All technical criteria for construction are set by the government, so that companies that are awarded the contract must be given the right to complete the work,” he said.

“But the government does not need to have only one company for this,” he said. “It can have many companies work on the construction along each section of the road.”

Plagued by corruption

Road construction and renovation in Laos are usually plagued by corruption, with extremely high costs for substandard quality that becomes apparent only after completion, sources have told RFA.

Both urban and rural Lao residents suffer from terrible roads conditions with flooding during the rainy season and excessively dusty air from dirt roads during the dry season.

Many road construction projects in Laos lack transparency, and high-ranking officials are known to use state funding to build roads to their own homes, sources have said.

In addition, some of their family members have gotten involved in road construction, driving up the cost of the projects so that they themselves can profit.

Last year, Minister of Public Works and Transport Bounchanh Sinthavong began ordering independent inspections of road construction projects to lower their costs in an effort to reduce the pervasive corruption.  

Reported by RFA’s Laos Service. Translated by Ounkeo Souksavanh. Written in English by Roseanne Gerin.

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