Private investment in railway industry yet to shine

Vietnam has been making all possible efforts to increase attraction of the railway industry. How has the picture of private investment improved so far?

Tran Thien Canh, director of the Vietnam Railway Authority

Private investment in the railway industry has not brightened yet. For railway infrastructure, we have not seen any private investment in this field. Global lessons find that some public-private partnership railway infrastructure projects have been carried out in some countries. However, governments then had to buy back.

In Vietnam, before 2013, the Ministry of Transport (MoT) had some schemes to draw in private investment in the industry. However, they failed due to legal barriers. At that time, Vingroup and an airline catering service company were interested in upgrading railway stations to develop commercial areas, but they could not make next steps.

Such investments require huge investment, and the time for getting any return can be long. Meanwhile, the policies are not clear enough to facilitate them.

A few years ago, the MoT made a list of eight railway projects calling for private investment. However, only a consortium of domestic and foreign investors are studying the potential of the Thu Thiem-Long Thanh section.

Legal barriers are a reason for the dim picture. How will they be changed to brighten future outlook?

The Law on Management and Use of Public Property took effect in 2018, followed by Decree No.46/2018/ND-CP guiding the law, which covers the management, use, and operation of national railway infrastructure.

The scheme guiding the implementation of Decree 46 has finally been approved by the government in early August. Accordingly, Vietnam Railways (VNR), which is the operator of the national railway network, is working on the list of assets which it expects to own, use, and develop, with the assets to be recorded as state capital contribution to the operator.

This, once approved, will enable VNR to attract private investment.

In addition, the amended railway law is expected to be adopted in 2025, with a number of new and special policies on attracting private investment in the industry.

What are some future opportunities for private investors you foresee when the legal framework becomes more favourable?

The development of railway sections connecting industrial parks and ports has been expected for years, and will be legalised in the amended Law on Railway. Accordingly, for industrial areas and ports of 30 million tonnes capacity will have to have connecting railway sections if there are railway networks nearly. These railway sections can be built by the state or private businesses.

In addition, the development of the North-South high-speed railway project, once completed, will create opportunities for the private sector to join investment in means of transport and transportation. Lessons from other countries find that many private companies join with the state in rail transport business. In the field of devices, equipment, and technology, the railway industry is yet to master this, but it continues to be somewhat promising for suppliers.

So far, many international institutions sought lending opportunities in the railway industry. Many South Korean and Chinese firms have also shown their interest. Among them, two Chinese companies have opened representative offices in Vietnam, seeking cooperation opportunities with VNR.

With the future legal improvement prospects, positive signs in the picture of private investment in the railway is expected to be available in the near future.

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