Posted on 10 Mar 2008
Building material and equipment price hikes have begun to
punish construction investors and contractors amid soaring inflation.
In
Iron cost VND10,000 (US$0.63) per kilogram at the time the
contract was signed.
But a few days later the price jumped suddenly to VND14,000
($0.88).
The investor proposed delaying the construction until prices
stabilized.
But now iron prices have surged even higher to VND16,000
($1) per kilogram.
Cu said that the total construction cost estimates for the
building had risen from VND1 billion ($62,800) last December to VND1.5 billion
($94,200) due to price hikes on 90 percent of the necessary materials.
He also said that many people who had planned to build homes
no longer wanted to do so in the middle of the price storm.
Pham Quoc Bao, deputy director of the HCMC Power Company,
said that the company had planned to begin building 30 electricity stations and
networks this year but now it could not ensure its ability to pay the high
prices.
Bao said the building contractor for the Tan Binh 2 Electricity
Station project was still looking for material and equipment suppliers after
adjusting prices four times to match market value.
The company has also faced price problems with two
electricity station projects in District 6 and Binh Chanh District.
The electricity firm closed the bids for project contractors
in early 2007 and expected to finish construction in mid-2007.
But after clearance issues pushed back the schedule,
inflation hit and the contractor requested clearance for higher material prices.
But the electricity operator said that it could not meet the
new requirement and decided to re-launch the bid, leaving local areas without
sufficient electricity.
Efforts to relieve the burden
Some investors said that they have had to force contractors
to draw up strict monthly building progress plans with high penalties imposed
for schedule violations.
Le Viet Hai, CEO of the HCMC-based Hoa Binh Construction and
Real Estate Corporation, said that due to high material and labor costs, the
company had to ask for more money from investors.
The company has decided it would not sign new contracts with
full “price packages” but rather agree to temporary prices and sign contracts
with clauses agreeing to settle money issues at market value prices later, said
Hai.
He said they could also put other price conditions into the
new contracts.
According to government sources, inflation reached 15.7
percent in February, the highest increase since 1995.
