Vietnam plans US$67 billion high-speed railway with no foreign capital

HANOI: Vietnam plans to fund a US$67 billion high-speed railway entirely on its own in a demonstration of the Communist-run country's reluctance to accept foreign loans, though some experts said the goal may be unrealistic.

The railway from capital Hanoi to southern business hub Ho Chi Minh City would be Vietnam's largest ever infrastructure project, with annual average costs for the state budget estimated at about US$5.6 billion for 12 years, according to the transport ministry.

"With the spirit of independence and self-reliance, the Politburo has decided not to depend on foreign countries" to fund the planned 1,541km railway, Deputy Transport Minister Nguyen Danh Huy said, according to state media.

The railway, with trains travelling at 350 km per hour, would be expected to be completed by 2035. Funding would come from state revenues, and if necessary from the issuance of government bonds. Foreign loans under concessional conditions would be considered only if that proved insufficient, the deputy minister was quoted saying.

The transport ministry and the finance ministry did not immediately reply to requests for clarifications on Thursday.

Vietnam has comparatively low public debt at 37 per cent of its Gross Domestic Product (GDP) last year. It has tended to invest less than planned, falling short by US$19 billion, or a quarter of forecast public investment spending, from 2021-2023, according to the finance ministry.

It has been reluctant to use foreign aid, having forfeited billions of dollars in development aid funding in recent years, amid administrative delays, a broad anti-corruption crackdown and widespread fears of falling into debt traps.

The deputy transport minister said the funding of the railway project was devised in a manner meant to avoid debt traps.

However, experts in infrastructure funding said it could be difficult for Vietnam to build such a big project on its own.

Public spending worth US$5.6 billion a year for the railway would be equivalent to 1.3 per cent of the country's 2023 GDP and represent about a fifth of overall budget spending projected for this year.

"Theoretically it is feasible, but it's not so realistic," one Vietnam-based foreign infrastructure expert said referring to the planned exclusive use of public funding.

A second infrastructure expert said the cost would be "substantial", casting doubts over its feasibility without foreign support. Both spoke on condition on anonymity as they were not permitted to speak to media.

Over the last two decades Vietnam spent about 20 per cent of its state budget on infrastructure, mostly on rural roads, according to the World Bank.

"The decision to take the self-funding approach ... seeks a balanced approach in the political arena, consolidating the importance of central governance, independence and freedom," said Nguyen Hung, a specialist in logistics at RMIT University Vietnam.

But he added he expected Vietnam to eventually seek loans, funds and technology from China, Japan, Germany or other partners.