North-South Rail Investment Plans Proposed
Last month, the government announced that the new high-speed north-south rail line from Hanoi to Ho Chi Minh City (“HCMC”) will be expanded with extra track at both ends.
Following new proposals, there will now be a further 27 km of railroad passing through Hanoi and another 13 km in HCMC. The line will start from Ngoc Hoi Station – which will become a major transportation hub, integrating three urban and four national rail lines. The high-speed line will terminate in Thu Thiem Station, with construction set to begin in 2027 and end in 2035.
The Minister of Transport has now submitted a proposed investment plan to the National Assembly for approval (Document No. 685/TTr-CP). This plan envisages a public investment model, with the state budget being mobilized to fund the cost of the new north-south line. An initial USD 67 billion of funding has been earmarked for the first phase of the project – an annual USD 5.6 billion for the next 12 years.
Of this, around USD 33 billion will go towards construction; USD 11 billion to equipment; USD 3.6 billion to consultants; USD 11 billion for contingencies; and USD 6 billion to compensation, resettlement, and support. The government hopes to mobilise domestic funding to avoid the strings that often come with official development assistance (“ODA”). However, it will consider low-cost, less restrictive foreign loans. Meanwhile, on the commercial side, companies will be able to invest in commercial services at stations along the line, which will pass through 20 cities and provinces with 23 stations along its 1,500 km route.
The government has also proposed 19 individual policies to ensure the successful completion of the national line, including policies on project capital structure, capital allocation and the adjustment of public investment plans, industrial development, and balancing capital. Once the project has been approved in the National Assembly, bidding procedures will be launched to select contractors.
Interested companies can contact APFL Partners – our team can guide investors on the opportunities of investing in this new generation of rail, with decades of experience advising both foreign and domestic enterprises in Vietnam on major infrastructure projects.
Rising demand for rail
Meanwhile, last month it was also announced that two new national rail lines will be open to investors earlier than planned. The Railway Network Plan for 2021-2030, with a vision to 2050, anticipated the construction of nine new rail lines by 2030 as outlined in Decision No. 1769/QD-TTg published in 2021.
However, the Railway Network Plan is now being updated and investment plans brought forward after the publication of Document No. 2307/TTr-CDSVN in October. According to the Vietnam Railway Authority, this revision is required because the original plan was issued in the absence of guiding national strategies such as national and regional masterplans, a national land-use plan, and specific plans in sectors like travel, urban and rural planning, tourism, and so on.
This meant that predictions of socio-economic growth regions and forecasts of passenger and freight demand were unreliable. Since then, however, plans have been approved in fields such as minerals, natural resources, tourism, and power. These plans all have an impact on the rail network and future demand, such as for the transportation of coal to meet rising demand for power generation. Likewise, national and provincial plans – such as Resolution No. 81/2023/QH15 on a national masterplan and resolutions on socio-economic regions and major cities (including Hanoi and HCMC) will also impact the demand for rail.
Investment Coming Down the Tracks
In light of these changes, the Railway Network Plan needed to be updated to align it with broader socio-economic developments. One of the most significant changes in this new plan is the acceleration of the timetable for two new rail lines: The first, an electrified 380 km route running from Lao Cai to Hanoi and Hai Phong – transporting passengers and freight – and the second, an 84 km track from Chap Tham to Da Lat, promoting tourism and inward investment in the region through the partial restoration of historic lines. Both of these lines have been brought forward to “before 2030” from their original deadline of “after 2030”.
The authorities anticipate that the Lao Cai – Hanoi – Hai Phong line will need to raise around USD 11.5 billion in investment capital before 2030, with VND 500 billion in overseas aid from China funding a feasibility study. Meanwhile, the Thap Cham – Da Lat line will require around VND 25 billion. It is hoped that these projects will stimulate construction, infrastructure, and investment, building the capacities of domestic companies to complete larger projects later down the line.
In total, Decision 1769 outlined plans for nine new rail lines in Vietnam stretching almost 2,500 km, including 1,500 km for the north-south line, with an estimated USD 67 billion in investment required from the state budget and other sources.
New Infrastructure Projects Bring Opportunities… and Challenges
Rail projects in Vietnam have a chequered track record. The urban metros in Hanoi and HCMC, for instance, have both seen missed deadlines and ballooning budgets. The cost of the Hanoi metro has almost doubled from VND 18 trillion to VND 34 trillion. Meanwhile, even if it does become operational on its much-postponed completion date of 2027, it will do so almost two decades later than first envisaged.
Of course, this issue is not unique to Vietnam. Public infrastructure projects around the world are infamous for running over budget and behind schedule. And this is something that investors should bear in mind now that major new rail investment projects are coming down the line.
Disclaimer: This article and its content are for information only and are not given as legal or professional advice. they do not necessarily reflect all relevant legal provisions with respect to the subject matter. Readers should seek legal or professional advice before taking or refraining to take any action.
