No need to worry about ‘debt trap’ tied to Vietnam’s high-speed train: expert

Vietnam is capable of securing sufficient finance for the long-awaited transnational high-speed railway project, an expert says, allaying concerns over a potential debt trap.

The country's GDP is projected to reach $564 billion in 2027, thus financing for the $67.34 billion project would not be a major hindrance, said Nguyen Van Phuc, a former deputy chairman of the National Assembly’s Economic Committee, at a press meeting in Hanoi on Tuesday.

Phuc recalled that the National Assembly, the country’s parliament, rejected a similar project that cost an estimated $56 billion in 2010 due to its potential threats to the country’s already troublesome public debt and budget balances.

However, Vietnam is now in a much better financial position, he stated. Its GDP per capita reached $4,282 in 2023 and is poised to hit $7,500 in 2030, much higher than the $250 in Japan in 1950 when it decided to invest in its first high-speed railway and the $1,753 in China in 2005 when that country invested in its first high-speed train.

Vietnam’s GDP hit $430 billion in 2023, nearly triple that in 2010, while its public debt per GDP has fallen to 37%.

The country is also well positioned to mobilize finances for the project, including the allocation of the state budget, sales of government bonds, in addition to local budgets.

The country can also raise funds by selling land as the high-speed railway will be developed under the transit-oriented development (TOD) model, added Phuc, a member of the expert team for the project.

Nguyen Ngoc Dong, former Minister of Transport and a member of the expert team, elaborated that differentials of land rents along the future railway will be partially sent to the central budget in order to ease the financial needs.

According to a Ministry of Transport report, the government can rake in revenues of $17 billion from TOD-related urban developments along the railway.

Dong asserted that like other countries, public investment plays a leading role in high-speed railway development.

Both Phuc and Dong agreed that revenues from ticket sales will not be able to offset the investment.

“The biggest benefit from a high-speed railway is its spillover effects on socioeconomic development, not only of 20 provinces and cities that the railway runs through but also of other localities when transport infrastructure is interconnected,” Phuc noted.