North-South high-speed railway, a boost for Vietnam's economy: The right time

With financial resources, human resources and technological capacity all ready, the North-South high-speed railway is facing a "golden" opportunity to realize the "dream" of the project of the century.

More than 14 years ago, in 2010, when the North-South high-speed railway was presented to the National Assembly, the majority of National Assembly deputies shook their heads due to concerns that the total investment would be too large, leading to a burden of public debt. At that time, the total investment for the project was estimated at 56 billion USD while the Vietnamese economy was facing many difficulties.

Vietnamese construction enterprises will have the opportunity to learn advanced railway technology in the world.

Photo: TL

All sources of funding are possible

However, before the "historic moment" presented to the National Assembly in the next session, the Ministry of Transport expressed confidence because the conditions of our country's financial capacity are now much different. Research from a number of countries with developed high-speed rail networks by the Ministry of Transport shows that Japan decided to invest in the first railway line in 1950 when GDP per capita was only about 250 USD. China joined the race in 2005 when GDP per capita reached 1,753 USD. Indonesia invested in 2015 when GDP per capita was about 3,322 USD... As for Vietnam, according to research by the World Bank, this is the "golden" time to build a high-speed railway when GDP per capita in 2023 will reach about 4,282 USD and is estimated to reach about 7,500 USD in 2030. The size of the economy in 2023 will be about 430 billion USD, nearly 3 times higher than in 2010; public debt will be low, only about 37% of GDP. It is expected that by the time the high-speed railway is built in 2027, the size of the economy will be about 564 billion USD, so resources for investment will no longer be a major obstacle. Speaking more clearly about the ability to mobilize capital for the North-South high-speed railway, Dr. Le Xuan Nghia, former Vice Chairman of the National Financial Supervision Committee, analyzed: First of all, regarding government bonds, it is necessary to identify financial institutions such as commercial banks and insurance companies as the main buyers. 15 years ago, when the project was first submitted to the National Assembly, Vietnam's GDP was just over 100 billion USD, the total assets of financial institutions such as commercial banks, insurance companies... were only about 150 billion USD, very small. Currently, Vietnam's GDP has reached 460 billion USD, the total assets of the financial system exceed 600 billion USD, equivalent to 16 million billion VND. The number of government bonds issued by the end of this year reached about VND350,000 billion, and by 2035, it is expected to issue another VND150,000 billion for the North-South high-speed railway, which will have a total value of VND500,000 billion. This figure is only equivalent to nearly 3.2% of the total assets of the financial system. On the other hand, commercial banks always reserve a portion of their assets, about 2-6% (depending on the size of the bank) to trade government bonds because this is an asset that is almost risk-free, has good profits and very good liquidity. Not to mention, government bonds are now available on the secondary market, and can be bought and sold freely and easily. Therefore, the room for issuing government bonds to mobilize capital for the North-South high-speed railway is very large. Second, regarding local construction bonds, previously only localities with financial qualifications were allowed to issue this type of bond. For large projects, Ho Chi Minh City and Hanoi are the only two localities that meet the conditions. However, the North-South high-speed railway project passes through 20 provinces and cities, and all localities need to issue project bonds to build stations, auxiliary works and form commercial urban areas next to the stations... At this time, land prices in areas with high-speed railway stations will increase, and localities can sell land use rights around the train station area. The debt repayment capacity of local bonds is very good. Third, regarding official development assistance (ODA) loans, the public debt ceiling is low, about 37% of GDP, while the allowed public debt ceiling is 60%. The Government has also determined that ODA loans will account for a small proportion, mainly for deposits for machinery, equipment and design consultancy. At the same time, it will only access loans with preferential interest rates and favorable conditions. Therefore, there is no need to worry about the public debt ceiling in case of having to mobilize capital for the project. "We are proposing that the Government allow the State Bank (in the role of the Central Bank - NV) to act as an agent to issue government bonds. This is an international practice that has been applied by many countries in the world. If Vietnam allows this application, there will be many advantages. The Central Bank can buy back any bonds that cannot be sold, keeping them as an effective tool to regulate monetary policy. At the same time, allow commercial banks to finance loans to corporations directly participating in the project without collateral. Instead, allow banks to receive the right to collect budget debt on behalf of enterprises and manage the cash flow of enterprises for the project. This not only creates favorable conditions for enterprises to access credit capital to participate in investing in the North-South high-speed railway but also helps the State monitor cash flow," Dr. Le Xuan Nghia suggested.

Vietnamese contractors are capable of undertaking

Previously, when agonizing over the choice of a speed of 200 or 350 km/h, in addition to capital, the capacity of contractors was also a concern for National Assembly deputies. According to the Ministry of Transport, in the previous period, due to limited investment resources, the volume of work performed by domestic enterprises was not large; the design and construction of high-tech works such as tunnels and cable-stayed bridges were mainly undertaken by foreign contractors, and domestic contractors mainly participated as subcontractors. However, in recent years, a number of large corporations and groups have participated in the construction of large-scale traffic projects and works such as the North-South Expressway in the 2017-2020 period and the 2021-2025 period... This has helped Vietnamese contractors accumulate more capacity and experience in implementing large-scale, technically complex works and projects. In addition, the human resources have been strengthened, improving management and construction experience; many machines and equipment have been invested and purchased. Mr. Nguyen Quoc Hiep, Chairman of the Vietnam Association of Construction Contractors, said that from a technical perspective, in terms of construction, domestic enterprises are capable of implementing this super project. Transport projects that previously had to rely on foreign countries to implement, such as high-rise buildings, cable-stayed bridges, underpasses, etc., are now completely implemented by domestic construction enterprises. For example, with the My Thuan 2 cable-stayed bridge, Vietnam has been able to implement 100% from design to construction. In tunnel construction, we also have leading enterprises such as Son Hai, Song Da 10, Deo Ca, etc. that are completely self-sufficient. In addition, the Association has just met with member enterprises to connect and learn from the experiences of the Japan and China Association of Construction Contractors to participate in the construction of high-speed railways in Vietnam. However, Mr. Hiep acknowledged that the most difficult thing is that the potential of domestic enterprises is scattered, there are no large construction corporations. If the Government appoints contractors, it will be difficult for many domestic enterprises to participate. Therefore, each enterprise itself needs to improve its capacity, especially the level of skills and labor force. Dr. Le Xuan Nghia is more optimistic when he said that in recent times, the capacity of Vietnamese contractors has grown stronger thanks to on-site training on projects, not through school training. The learning ability of Vietnamese road and bridge construction enterprises is very good. Previously, we had to rely on Russian engineers to build Thang Long bridge, but later Vietnam was able to build Chuong Duong bridge on an even larger scale. "The North-South high-speed railway will also become an on-site vocational training school, so that the human resources of the Vietnamese construction industry can improve their skills and mature," Mr. Nghia commented.

A project with an investment capital of nearly 70 billion USD, the amount of construction work is enormous. In terms of construction techniques, it is not too difficult because modern technology projects in the world have been implemented by domestic enterprises. The key to high-speed railways is the design and construction of high-speed train tracks, so what steel to use or to produce locomotives, this technique Vietnam has not yet been able to do on its own.

Mr. Nguyen Quoc Hiep

Thanhnien.vn

Source: https://thanhnien.vn/duong-sat-toc-do-cao-bac-nam-suc-bat-cho-kinh-te-viet-nam-thoi-co-chin-muoi-185241008215227246.htm