North-South railway as fast as an airplane: Where to get nearly 60 billion USD?
To build 1,545 km of North-South high-speed railway, 58.7 billion USD is needed, but in conditions of limited capital, what mechanism can mobilize enough capital?
According to the mid-term pre-feasibility study report of the North-South high-speed railway project recently announced by the Tedi-Tricc-Tedishouth Consulting Joint Venture, the entire high-speed railway route passes through 20 provinces and cities with 23 stations.
If approved by the National Assembly, the two sections of the Hanoi - Vinh and Ho Chi Minh City - Nha Trang high-speed railway will be implemented from 2026 and put into operation in 2032. The remaining sections will continue to be built from 2035 and the entire route will be put into operation from 2040 - 2045.
With the 2 pre-built sections, the speed will be 200km/h, when the entire route is open, the speed will be 350km/h.
Train running time (including stopover time at stations) for the Hanoi - Vinh section in phase 1 is 1h48, when the entire line is open it is 1h20. For the Ho Chi Minh City - Nha Trang section it is 2h25 initially, and 1h35 in the next phase. The running time for the entire North - South line is 5h17 (train stops at few stations) and 6h50 (train stops at many stations).
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| It is expected that the North-South high-speed railway ticket price will be about 75% of the same route airfare. |
Don't rely too much on private capital
The consulting unit initially estimated the total investment cost of the project at about 58.7 billion USD, and leaned towards the possibility of choosing a Japanese design.
The consulting unit proposed to implement the capital plan in the form of public-private partnership (PPP). In which, the state budget will carry out site clearance, route construction (railway), signal information...; call for private capital for items such as stations, depots (repair and maintenance areas), trains... in which potential land funds will be used to create capital.
Regarding the capital mobilization plan for phase I, the consultant proposed 3 options. Accordingly, using budget savings for investment equivalent to 0.7% of GDP/year (from 2020-2030) equals 24.7 billion USD; Option 2, budget savings equivalent to 0.3% of GDP/year (from 2020-2030) equals 10.7 billion USD and borrowing ODA 14 billion USD (from 2025-2030).
Option 3: Using budget savings of 0.3% of GDP/year (from 2020-2030) equal to 10.7 billion USD, borrowing 13 billion USD from ODA (from 2025-2030) and calling for private capital of 1 billion USD (ship purchase and exploitation).
Regarding project operation human resources, in the 3 years of operating the initial section (it is expected to pilot the Ho Chi Minh City - Long Thanh airport section), about 600 people need to be trained.
Regarding the issue of capital and human resource training, Deputy Minister of Transport Nguyen Ngoc Dong said that it is continuing to be researched.
Regarding investment capital, calling for private investment in the high-speed railway project will be considered and evaluated very specifically before submitting to the National Assembly, because there are many items that the state must invest in and cannot rely on the private sector.
According to the Deputy Minister, Taiwan has built a 30km high-speed railway under the BOT model and put it into use since 2007. This project has been operating very well since it was put into operation, but the fact that the government only contributed 20% of the initial capital has caused difficulties for BOT investors.
The actual revenue was unbearable for private investors, so in 2010 the Taiwanese government had to "intervene" by increasing the state capital to 64%...
With the high-speed railway project, the private sector can participate in investing right from the beginning in locomotives and some central stations through bidding...
Not yet feasible
Dr. Nguyen Ngoc Long, Vice President of the Vietnam Bridge and Road Science and Technology Association, said that research results from consulting organizations up to now have assessed the financial efficiency of the project as not feasible.
“If we take into account all the losses incurred during exploitation, maintenance and repair, the investment and loss compensation costs will be huge, creating an additional burden on the state budget. Therefore, it is necessary to include maintenance and exploitation costs in the project’s financial plan,” Mr. Long noted.
The high-speed railway encounters mountains to dig tunnels, rivers, streams, residential areas... to build bridges. The consulting unit determined that about 70% of the project length is bridges, viaducts and tunnels (about 1,100km), but this number can increase, both in terms of construction volume and investment capital, so it is necessary to calculate the investment capital very specifically.
Mr. Vu Hoai Nam, Head of the Department of Urban Railway Transport (University of Construction) is concerned that the project requires a huge amount of capital so it needs to analyze risks, while this is an issue that the consultant has not mentioned.
According to him, if we do not carefully analyze the ability to recover capital, site clearance, and exchange rates, the risks are very high. Not to mention, the development of high-speed railways will affect the aviation market share, leading to general pressure on the economy.