EU competitors in railway public procurement mix

Tran Thien Canh, deputy general director of Vietnam Railways

Vietnam Railways (VNR) is one of the businesses that Vietnam will open up for the government procurement market to EU contractors under the EU-Vietnam Free Trade Agreement (EVFTA). What are the specific prospects for them in the railway sector and what are the packages available for EU investors to bid on?

The EVFTA opens the opportunities for EU contractors to directly supply high-quality products which VNR had to purchase them via intermediate companies in the past.

Potential packages that EU companies are able to join bidding are locomotives, carriages, spare parts for locomotives, and rolling stocks; rails, materials, and spare parts; and railway signalling and telecommunication products.

It is also possible for EU contractors to bid for public procurement of machineries and equipment for construction and maintenance of railway infrastructure; machineries, and mechanical processing equipment; consulting, training services, and technology transfer.

With future penetration of EU contractors, what are the possible challenges for local railway contractors, and how can domestic players prepare to stand firm in the market?

Among VNR’s affiliated units, industrial railway businesses will be the hardest affected ones with the new changes under the EVFTA, which took effect from August 1, 2020.

Industrial railway businesses are mostly small ones which have limited capital, downgraded facilities, out-of-date technlogy, traditional production, and low manpower quality, thus resulting in their weak competiveness. Therefore, when more EU firms are involved in the market, these domestic players will face with more difficulties.

In the wake of the stiffening competition ahead, domestic players will strengthen cooperation and form joint ventures with other domestic and international partners, including those from the EU that have strong technology expertise and financial capacity as a move to join supply chains to better serve domestic demands and for exports.

In addition to government procurement, what other opportunities and challenges will the EVFTA bring to the railway sector?

The EVFTA will enable VNR to select capable bidders which have strong competitiveness in technology, price, and quality in government procurement-related projects. This is also a driving force for units of VNR, urging them to have more appropriate strategies, investment plans, and increased capacity to better compete with foreign contractors.

The competent agencies of the government are working on the possible changes of the policies to make them aligned with the landmark agreement. VNR is also studying the possible opportunities for domestic units, and the challenges so as to have timely and appropriate orientations and strategies, thus creating a motivation for the railway sector to develop further.