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Concerns on the development track
By Son Nguyen
Thursday,  Nov 15, 2018,20:57 (GMT+7)

Concerns on the development track

By Son Nguyen

The grim reality has still persisted after a decade since the Government first initiated a scheme to develop the North-South high-speed railway in 2008: scarcity of resources. This time, preparations for this scheme have been made more prudent, as seen in a presentation organized this Monday by the Ministry of Transport, but numerous questions remain to be answered over how to pool tens of billions of U.S. dollars for the megaproject.

Needless to say, a high-speed railway will create strong momentum for the country’s socio-economic development, and is to benefit all respects of the country. This fact was undisputed at the presentation in Hanoi, but participants pointed to the unbridgeable gap between the end and the means, as widely mirrored in local media these days.

At the day-long seminar in Hanoi, the consulting consortium Tedi-Tricc-Tedisouth gave a deep insight into the project. As envisioned, the cross-country rail line will stretch over 1,500 kilometers from Hanoi to HCMC. The total construction cost is still an eye-rolling one: US$58.7 billion, not much different from the US$56 billion estimate ten years ago.

To convince authorities as well as the public, the consultant also gave a seemingly doable roadmap, focusing on the phased development of the project. In the first phase to 2030, two sections will be built first: Hanoi-Vinh and HCMC-Nha Trang, with a combined cost of US$24.7 billion, and as such, the project will require only US$2.46 billion a year, while in the next phase, the remaining section of 900km will be developed, linking Nha Trang and Vinh, all through by the year 2045.

Funding requirements for the first phase can still be satisfied with three scenarios. With the first option, all capital will be sourced from the State budget, while the second option requires US$10.7 billion from the State budget, US$14 billion in foreign loans – mostly official development assistance (ODA) – and US$1 billion from the private sector. The third scenario suggests State funding should be US$5.7 billion, private investment US$5 billion, and foreign loans the balance.

The consultant said that when in place, the high-speed railway designed for passenger transport only will be able to compete with aviation given the speedy velocity, at some 320km an hour.

Such mammoth sums give way to concerns, however.

“Where does the money come from?” asks Dinh Trong Thinh from the Finance Academy on Dat Viet news site. The expert says that Vietnam’s public investment hovers around US$5.8-6 billion a year, and if the country commits to the high-speed railway project, it would not have funds left for other capital construction programs over the next ten years.

Bui Xuan Phong, chair of the Railway Economy Association, says in Tien Phong that a high-speed railway is imperative for any advanced economy, “but high-speed railway development also requires a sound financial scheme.” He says it is difficult to rely on ODA, since such loans are no longer concessional as Vietnam has become a middle-income economy.

On news website Dan Tri, Professor Vo Dai Luoc, former head of the Vietnam Institute of Economics, says that if the costly railway project is to be implemented, it would pile high pressure on the State budget. “Since much of the capital comes from foreign loans, the State budget would face huge pressure, now that public debts remain high, near the threshold,” the veteran economist is quoted as saying. He suggests that just when the public debt pressure deflates and the country’s per capita GDP reaches some US$10,000, the Government could think about such a high-speed railway project.

Given the scarcity of investment capital, even the Ministry of Transport admits that it would take long decades to complete the project. However, the ministry still doubles down on the ambitious scheme.

Minister of Transport Nguyen Van The in an earlier encounter with reporters projected that the amount approved by the National Assembly in each tenure of five years should be around US$10 billion, so it could take some five tenures to secure enough funding for the project, according to Vnexpress. “We will report the project to the National Assembly to seek approval for implementation, whether it will take five tenures or seven tenures,” he is quoted in the news site.

Fretful about the colossal investment required, many experts ask the ministry to rethink the plan.

Vu Hoai Nam, a lecturer from Hanoi Construction College, says experiences from developed countries show that high-speed railways do not create a magic wand for economic growth. Nam also ponders the need to build a high-speed railway now that other means can still meet the transport need. “The North-South Expressway, the Ho Chi Minh Road, and the coastal road among others are able to transport 160 million passengers a year… so the capacity of all such transport modes combined is more than enough to meet the need,” he is quoted by Kinhtedothi.vn.

Dinh Trong Thinh of the Finance Academy asks why the high-speed railway is for passenger transport only while railway is the most efficient cargo transport means. “It is cargo transport by railway that creates strong momentum for the economy as it helps boost movement of commodities, cut transport costs and bolster production,’ he says in Dat Viet.

Vo Dai Luoc says on Dan Tri that the high-speed railway project could wait, and the country should instead invest in other transport modes, especially waterway.

To date, waterway accounts for only some 18% of the transport market, while investment in waterway has been modest, at only some 2.5% of the total investment in the transport sector, the economist says on the news site. In order to cut logistic charges and fuel economic growth, “let us increase this investment by ten times,” he suggests.

Despite such concerns, both the Ministry of Transport and the Government have shown strong support for the high-speed railway scheme.

At the aforesaid seminar in Hanoi, Deputy Minister of Transport Nguyen Ngoc Dong asserted that after canvassing opinions from experts, the ministry will complete the feasibility study right in November so that it can be screened by the State Appraisal Council from December. The ministry expects to send the final study to the Government next August for submission to the National Assembly late next year.

Meanwhile, Deputy Prime Minister Trinh Dinh Dung has also ordered that relevant ministries join forces to secure enough funding for the first stage of the project, which is deemed necessary as the existing railway has deteriorated, according to Tuoi Tre.

Vo Dai Luoc recalls that the National Assembly in 2010 strongly rejected the high-speed railway project due to the high cost, estimated at US$56 billion then, due to high public debts and the lack of funding.

The situation has not changed much, as public debts remain high and capital shortage is still a big headache for the transport sector now. Development, needless to say, has always been the goal for any economy, but a high-flying aim on the development track in this case can be derailed.

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