Proposal to use budget to build high-speed railway in 12 years

According to the document approving the investment policy for the North-South high-speed railway project sent to the National Assembly, the Government said that ODA loans often come with many conditions, so using domestic capital will help the project be implemented more flexibly and independently.

The government plans to complete the project in 2035. The annual capital for the project accounts for about 16.2% of the medium-term public investment plan for the 2026-2030 period, if the current medium-term public investment ratio of 5.5-5.7% of GDP is maintained. The average annual capital accounts for 1.3% of GDP in 2023 and 1% of GDP in 2027 - the year the project is expected to start.

The implementation process will mobilize diverse legal capital sources for investment. The pressure on 5,000 km of expressway by 2030 is not large, so the medium-term public investment plan in the coming period can be balanced for high-speed railway. "Investing in this project will not have a significant impact on other important national projects. Financial indicators when investing in the project and from exploiting land funds will improve revenue, and there is the ability to balance the implementation capital," the Government said.

In addition, if international donors provide preferential loan terms, the Government will recommend that competent authorities consider using them.

To ensure that the high-speed railway project is implemented continuously and on schedule, the Government has proposed a special mechanism that allows for flexible adjustments to the annual public investment plan. This mechanism will help focus resources on key projects, improve investment efficiency and contribute to promoting socio-economic development. In addition, the Prime Minister needs to decide on the use of capital sources from government bonds, ODA capital, foreign preferential loans and other legal capital sources.

The 2019 pre-feasibility study report proposed a public-private partnership (PPP) for the project's facilities and equipment; public investment will be responsible for the infrastructure works. At that time, Vietnam's economic scale would only reach 266 billion USD, with public debt at 56.1% of GDP. In 2023, the economic scale would reach 430 billion USD, with public debt at a low level of about 37%. It is expected that by 2027, when the project starts, GDP will reach 564 billion USD, "so investment resources for the high-speed railway on the North-South axis will no longer be a major obstacle".

The Government has studied the experience of 27 railway projects under the PPP model in the world and found that it is not more effective than public investment. Transferring risks to the private sector is also considered ineffective. Some countries have invested under the PPP model but failed, had to nationalize or increase the level of state support for PPP projects to a very high level. Some projects apply the PPP model but the scope of investment is mainly commercial areas, central stations or investment in means of exploiting some effective routes.

Therefore, based on economic scale, capital mobilization capacity, and international experience, the Government proposes public investment in the construction of the North-South high-speed railway to ensure successful investment in the project.

Two options for dividing the project into components

There are currently two options for dividing the project into components, of which option one is to invest in the entire route, without separating the project into independent components but only dividing it into 6 components. The Government assesses that this option has the advantage of ensuring the unity and synchronization of the project from infrastructure to equipment and means; facilitating the reception and transfer of technology. However, the disadvantage is that it requires the mobilization of large human resources, machinery and equipment.

Option two is to divide the high-speed railway into four component projects with four sections including Hanoi - Vinh (281 km); Vinh - Da Nang (420 km); Da Nang - Nha Trang (480 km); Nha Trang - Ho Chi Minh City (360 km). This option is assessed to speed up the preparation, appraisal and approval of feasibility study reports for the component projects. The disadvantage is that the handling of synchronous technology integration between the component projects is complicated. Furthermore, technology transfer is not favorable and risky due to the presence of many contractors with different technical solutions.

The Government proposes that the division of the project into components be carried out when approving the investment project. The preliminary estimate of the total investment capital of the project is about 67.3 billion USD. Of which, compensation and resettlement support costs are 5.9 billion USD; construction costs are 33.2 billion USD; equipment costs are 11 billion USD; project management costs are 0.8 billion USD; construction investment costs are 3.61 billion USD; other costs are 0.9 billion USD; and contingency costs are 11.85 billion USD.

In mid-September, the 10th Central Conference of the 13th tenure agreed on the investment policy for the entire high-speed railway project (350 km/h) on the North-South axis and assigned the Government Party Committee and the National Assembly Party Delegation to direct agencies to urgently complete the dossier to submit to the National Assembly.

The high-speed railway is expected to start at Ngoc Hoi station (Hanoi) and end at Thu Thiem station (Ho Chi Minh City). The project passes through 20 provinces and cities including Hanoi, Ha Nam, Nam Dinh, Ninh Binh, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, Thua Thien Hue, Da Nang, Quang Nam, Quang Ngai, Binh Dinh, Phu Yen, Khanh Hoa, Ninh Thuan, Binh Thuan, Dong Nai, and Ho Chi Minh City.