Vietnam eyes lower speed for North-South Railway project over efficiency concerns

Ministries of planning and transport have reached concensus on a design speed of 250 kilometers per hour for North-South Railway trains carrying both passengers and cargo to ensure investment efficiency for the gigantic project.

In a document sent to the Ministry of Transport, the Ministry of Planning and Investment said it agreed on the former’s new proposal which was also what the project consultancy had proposed.

According to the planning ministry, a high-speed railway project is necessary given that the railway sector currently accounts for only 6% of passenger transport and 1.4% of cargo transport on the North-South axis.

Such a railway will be one of the foundations to form a large-scale transport axis on the mainland, easily connecting with economic centers and forming a driving force for socio-economic development of the country and regions on the North-South economic corridor, the ministry argued.

The project will have 50 passenger stations, six for high-speed trains and 44 for inter-regional trains, and 20 freight stations.

Investment capital will come from auctions of land at urban areas surrounding the stations, public funds and private capital. The ministry recommends the project be implemented in private-public partnership (PPP) format.

Last month, the transport ministry had proposed two options. The first is upgrading the current railway system for a maximum speed of 180 kph for passenger transport and 120 kph for cargo. Using some of the existing facilities, the project will cost $42 billion.

The second is a maximum speed of 250 kph, with investment capital of $64.8 billion.

According to the transport ministry's proposal introduced in February 2019, a 320 kph North-South Railway project was expected to cost $58.71 billion, with $1.98 billion for site clearance, $31.58 billion for construction, $15 billion for equipment, and $5.82 billion for project management and consultancy. Stand-by expenses would mount to $4.07 billion.

The 1,545-kilometer railway project would pass through 20 provinces and cities including Hanoi, Ha Nam, Nam Dinh, Ninh Binh (in the north), Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Quang Tri, Thua Thien Hue, Danang, Quang Nam, Quang Ngai, Binh Dinh, Phu Yen, Khanh Hoa, Ninh Thuan, Binh Thuan (central region), Dong Nai, and Ho Chi Minh City (the south). The starting point of the project is Ngoc Hoi Station in Hanoi, and the final is Thu Thiem Station in HCMC.

The project consulting consortium had argued that a maximum speed of 320 kph might lead to investment inefficiency.

The consortium comprises the Consultancy and Construction Limited Company under the University of Transport, Evo MC Company Limited, Ove Arup & Partners Hong Kong Limited, and Hung Phu Trading and Construction Consultant JSC.

It said the 320 kph option would serve 81 million passengers by 2050, below the target of 103 million, and maximum annual revenues from passengers would only be $2.93-3.77 billion, meaning revenue risks.

Moreover, the investment duration of 30 years is too long, making costs hard to control due to price variations and leading to a loss of opportunities rising from the North-South economic corridor.

The higher-speed option also means total reliance on foreign technologies, while the alternative would provide a wider choice of technologies amidst the trend in Europe of express railways running between 200 and 250 kph.

For the 250 kph option, total investment is estimated at $61.67 billion, with $38.95 billion or 63.15% likely to be sourced from auctions of land along the planned railway system, according to the consultant.

With annual revenues of $11 billion, comprising $4.3 billion from passenger tickets, $6.1 billion from cargo, and $0.5 billion from station space leasing, the 250 kph project could ensure financial efficiency.

The slower-speed option offers a 18% reduction in operation and 28% decrease in energy consumption costs.

Construction preparations are expected to take place in 2023-2025, and the first phase of construction between Ho Chi Minh City and the central province of Khanh Hoa (361 kilometers) worth $16 billion is set for 2025-2031. Phase 2 from Hanoi to the central city of Danang (677 kilometers), also worth $16 billion, is scheduled for 2031-2038, followed by phase three to complete the Danang - Khanh Hoa section (469 kilometers).

The proposed multi-billion-dollar project, shelved a few years ago due to hefty cost estimates, may be implemented over the next 10 years to bolster the country's ailing rail network.

Its planned investment of $61.67 billion as the consortium estimated is equivalent to nearly 17% of Vietnam's GDP in 2021.

In a meeting on July 22, Prime Minister Pham Minh Chinh asked the Japanese Bank for International Cooperation to help Vietnam research and develop its North-South high-speed railway.

The PM told Maeda Tadashi, chairman of the policy-based financial institution, that the development of the giant project could be "phased out, section by section, with easier parts to commence first, followed by the more difficult."