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Vietnam to open doors for private investment in railway infrastructure

Wednesday, April 22, 2015, 21:19 GMT+7
Vietnam to open doors for private investment in railway infrastructure
In this file photo, a train is running on the north-south railway system in Vietnam.

The Vietnam Railways Corporation (VRC) on Monday put forward a proposal to allow private investors to build logistic facilities and offer associated services in three railway projects under the public private partnership (PPP) model in a meeting on implementing the PPP in railway infrastructure in Hanoi.

>> An audio version of the story is available here

Local media cited Tran Ngoc Thanh, chairman of the VRC, as saying that under the PPP mechanism, his corporation will be responsible for setting up transport infrastructure like unloading equipment, train stabling facilities, and warehouses at three stations Yen Vien (Hanoi), Dong Dang (Lang Son Province in the north), and Song Than (Binh Duong Province in the south).

Meanwhile, private firms will be allowed to invest in facilities to serve the transport of goods by rail, focusing on cargo yards, storage, cargo-handling equipment, and warehouse management systems, Thanh said.

Regarding business conditions, investors from the private sector can collect fees for the services they offer, based on a price frame approved by the state and the VRC, Thanh said.

According to the chairman, the introduction of the PPP model in railway services will help change the current mindset of the industry: only VRC subsidiaries are allowed to join.

"VRC subsidiaries have been favored when it comes to investing in those projects, but the situation will change. We are inviting investors from the private sector, and even allow them to buy trains to run on the railroads we built and use the associated services we are offering,” Thanh Nien (Young People) newspaper quoted him as saying at the meeting.

He named some firms like Vingroup, Bach Dang, Indo Tran Logistics, and ATH Express Trains Ltd.

Poor performance

The existing mechanism only allows state-run firms to develop railway infrastructure and offer related services so the business performance of the rail sector has been so poor, Lao Dong (Labor) newspaper said.

As a result, the sector has been unable to attract private investors, the newspaper remarked.

Currently, the railway sector generates around VND400 billion (US$18.4) a year, but its cost amounts to VND2 trillion ($92 million).

Vice Minister of Transport Nguyen Ngoc Dong said that his ministry will coordinate with other relevant agencies to review and amend the Railway Law in order to renovate the sector.

The Ministry of Transport will transfer the rights to operate the entire Hanoi-Lao Cai railroad route to private investors in the near future, he said.

Tran Tuan Anh, a representative of Indo Tran Logistics, said the firm wants to join in railway transport development as a good logistics supply chain cannot be complete without railways.

A Vingroup representative, Tran Thanh Son, said his company is eager to invest in railways for tourism development, but the country must have quality trains meeting European standards to cut the travel time to less than five hours and attract more passengers.

Legal framework

Government Decree No.15, which regulates investment under the PPP form, was issued in February this year, opening up more opportunities for the participation of the private sector in many fields exclusively reserved for state-owned firms before, including infrastructure, electricity, water, education, transport, health, and the environment.

According to experts, the decree is a prerequisite for infrastructure projects, particularly in the area of transport, to be implemented more effectively.

At the meeting, Minister of Transport Dinh La Thang asked relevant state agencies to review existing laws, decrees, and circulars on railway management to ensure a legal basis for the implementation of the PPP by the end of the second quarter.

The private sector has seen the potential for investment in railways as they can both earn profit and improve the sector’s performance, he said.

Minister Thang also urged the VRC to speed up its restructuring and equitization.

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