Vietnam's Gia Lai declines $27mn Finnish aid for wastewater treatment project

A provincial official said on Wednesday that Gia Lai had sent a formal notice to relevant ministries confirming the withdrawal from the Finnish-funded project.

The province will instead restructure it into a two-phase, fully domestically financed investment program for 2026-30.

The project, located in Pleiku along with Dien Hong, Hoi Phu, and Thong Nhat Wards, was initially approved for 2023-26 with a total investment of VND1.093 trillion (US$41.2 million), combining Finnish aid, loans, and provincial counterpart funding.

It was intended to collect and treat wastewater within the Hoi Phu stream basin and parts of Tra Da Commune, featuring a drainage pipeline system, 13 pumping stations, and a treatment plant with a capacity of 20,000 cubic meters per day.

However, implementation stalled because several conditions imposed by the Finnish side conflicted with Vietnam's procurement and investment laws.

These included requirements that the main contractor had to be Finnish, a set portion of equipment and materials had to come from Finland, the project had to be approved by Finland's official export credit agency, and Finland's foreign ministry would only finalize the loan once a contract had been signed with a Finnish firm.

Additionally, Finland's financial terms added substantial costs, including a 6.85-percent credit guarantee fee, a 1.5-percent loan arrangement fee, and a 0.25-percent loan management charge, totaling roughly VND42.4 billion ($1.6 million).

Provincial officials determined these terms were both legally incompatible and economically disadvantageous compared to domestic financing options.

Gia Lai ultimately decided to cancel the ODA component and move forward with domestic funding, saying that the revised investment structure would be more feasible, cost-effective, and consistent with Vietnam's current legal and administrative frameworks.