The Government has asked the National Assembly to approve private sector participation in the $61 billion North-South high-speed railway, aiming to expand the role of private enterprises in major national infrastructure.
In a proposal to the National Assembly Wednesday, the government said although the Politburo had initially designated the project for public funding, a recent policy favoring private sector involvement has opened new opportunities.
While there is no legal provision to allow private investment in the railroad, it is not prohibited in major national projects.
The Politburo has called for “expanding private enterprise participation in critical national projects such as high-speed and urban railroad,” while a recent National Assembly resolution has opened the door wider for private sector participation in key infrastructure projects, either through direct investment or public-private partnerships (PPP).
Internationally rail infrastructure is primarily funded by public capital due to high costs, low returns and long breakeven periods. Some countries have adopted PPP models, but government support remains imperative.
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A bullet train in Hamamatsu, Shizuoka, Japan. Photo by Pexels |
In a letter to Prime Minister Pham Minh Chinh in early May, VinSpeed, a company owned by Vietnam’s richest man Pham Nhat Vuong, offered to build the high-speed rail line by contributing 20% of the funding required for it (equivalent to around $12.3 billion) and borrowing the rest ($49 billion) from the state’s coffers.
It wanted the loan to be interest-free and said it would repay it in 35 years.
It also asked the government to acquire the required land, designate it as the developer of properties around the railroad stations and provide several other incentives like tax waivers for buying equipment and rolling stock, a 99-year operating period and setting ticket prices at 60-70% below airfare ceiling prices.
Three weeks later automaker Thaco Group submitted a proposal to build the railroad, which also wanted the government to acquire the lands and resettle their owners.
It too will contribute 20% of the capital and borrow the remaining $49 billion from domestic and international financial institutions.
It wanted the government to guarantee the loans and fully subsidize interest over 30 years.
Thaco plans to establish a subsidiary to manage the project and keep the project fully indigenous.
