Vietnam high-speed railroad to cost $500M annually to operate

Vietnam’s north-south high-speed rail is expected to cost US$500 million a year to operate in the initial time, with the government footing a substantial part of the bill.

According to the Ministry of Transport, in the first four years revenues are expected to cover only operational and rolling stock maintenance costs, and the government will need to provide funds for infrastructure maintenance.

The 1,541 km line, running between Hanoi and Ho Chi Minh City, is estimated to cost $67.3 billion, with construction expected to last from 2027 to 2035.

In 2037 the annual operating costs are estimated at $477 million, with the government providing $238 million.

They are projected to rise to $524 million and $213 million, $571 million and $187 million and $618 million and $140 million in the next three years. Vietnam’s GDP last year was $430 billion, according to the General Statistics Office.

The project is expected to take 33.61 years to break even if infrastructure costs are not considered, the ministry said in a new report addressing feedback from National Assembly deputies regarding the railway project.

During the feasibility study phase, detailed calculations of financial indicators would be done based on investment plans, operational strategies and the conditions obtaining at the time the railroad begins operation, it said.

The ministry was confident of the project’s economic viability, citing quantifiable benefits such as reduced travel time, lower logistics costs, fewer accidents, and reduced CO2 emissions.

The economic internal rate of return is estimated at 12%, the benefit-cost ratio at 1.06 and net present value at $9.15 billion.

The ministry said while economic and indirect benefits had been carefully considered, they could not be included in the financial calculations.

In addition to measurable benefits, the railroad is also expected to enhance Vietnam’s competitiveness, restructure its transportation and create new economic opportunities through effective land use.

The construction is projected to boost the country’s GDP by an average of 0.97 percentage points annually.

Addressing legislators’ concerns about prioritizing the high-speed railway over other infrastructure projects, the ministry explained that the funding would be spread over 12 years, averaging $5.6 billion annually, or 16.2% of the medium-term public investment plan for 2026-30, and only account for 1% of GDP in 2027, when construction is expected to begin.

Besides, investment for 3,000 km of expressways has been arranged, and another 1,700 km are being built, meaning reaching 5,000 km of expressways by 2030 should not be difficult, it said.

Allaying concerns about increasing public debts and potential cost overruns, it said public debt indicators are projected to remain within acceptable limits through 2030.

While external debt obligations and budget deficits may see slight increases, these are manageable and considered reasonable compared to scenarios without the high-speed rail.

The railroad is designed to integrate with regional and international networks, linking up with China through routes from Hanoi via Lao Cai and Lang Son, with Laos through the Vung Ang–Vientiane route and with Cambodia through Trang Bom.

By 2050, even with significant investments in aviation and road transport, the north-south corridor is projected to have unmet passenger demand of 122.7 million trips annually.

The high-speed railroad is expected to address this, the ministry said.

It will have a double track with a 1,435 mm gauge, electrified for a designed speed of 350 kph and a load capacity of 22.5 tons per axle.

The existing north-south railroad will continue to handle freight and short-distance passenger transport.

By Doan Loan – VnExpress.net – November 25, 2024