The North-South Express railway project will change Vietnam’s transportation landscape if put into operation, however, its feasibility has yet to be determined.
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| Minister of Transport Ho Nghia Dung said, “The North-South Express railway construction is a massive project.” |
“The North-South Express railway construction is a massive-scale project so it’s necessary to consider every possible factor, determine if it is feasible and then decide if we should proceed," shared Minister of Transport Ho Nghia Dung at the 12th National Assembly's 7th session.
Dung believed that the North-South Express railway project would play a key role in distributing the country’s transportation infrastructure and lessening traveling time between the two largest economic centres of Hanoi and Ho Chi Minh City.
According to his presentation, the number of passengers travelling on the North-South route will be 534,000 people per day or 195 million per year in 2030, which is equivalent to an annual average growth rate of 6.59%. If the high speed railway is not available by that time, the whole transportation system on this route will meet demands of only 138 million passengers per year.
Thus, 57 million passengers per year or 156,000 people per day would not have access to a means of public transportation. According to estimates, the high-speed railway will carry 48,000 passengers per day in 2020.
However, according to the Committee of Science – Technology & Environment of the National Assembly, with the development of transportation system including roadways, railways and airways; high speed railway will not be the only option for all the 57 million passengers. If the bullet train ticket fees are equal to 75% of air-ticket fees, many would not be able to afford this mode of transportation.
On the other hand, the project investment report revealed that only 53 pairs of passenger trains working days and nights would be required in 2030 yet the project could potentially provide 160 pairs of trains which means only 33% of its designed capacity will be deployed.
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| In order to complete the project timely, construction would need to begin in 2012 at the latest. (Illustrative photo) |
The North-South Express railway would have a departure terminal at Ngoc Hoi Railway Station in Hanoi and an arrival terminal at Hoa Hung Railway Station in Ho Chi Minh City. The route would cover 1,570 km and have 27 railway stations in-between. The travel time between Hanoi and Ho Chi Minh City is estimated to take five hours.
If the bullet train system is put into operation, it would help decrease individual transportation pressures on roadways and address traffic congestion and accidents.
The project developer decided to adopt Japan's Electric Multiple Unit (EMU) technology for the future bullet train project.
The total estimated investment cost for the project is about $55 billion dollars meaning each kilometer would cost USD35.6 million.
According to Dung, this huge project would account for 50% of the GDP for a whole year and wouldn't be totally completed until 2035 costing over USD4 billion per year.
Vietnam’s current investment in transportation accounts for 7% of its total social spending. If the bullet train project were to be implemented, the investment in transportation will take 10 - 15% of the total social investment. Dung argued that this would be at an acceptable limit without effecting other investment portfolios of the government.
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| Chairman of NA's Committee of Science – Technology & Environment Dang Vu Minh wants to explore the project's feasibility (Photo by Viet Hung) |
However, the Chairman of the NA's Committee of Science – Technology & Environment, Dang Vu Minh, said that the country’s GDP was about USD110 billion with a growth rate of 6-7% per year and Vietnam did not have enough capital for many economic sectors, yet this would require huge amounts of money.
Each year Vietnam would need to mobilise an average amount of nearly USD4.4 billion for the project from the state budget, official development assistance (ODA) projects, preferential loans and enterprises. The Committee pointed out that this meant that the project would depend heavily on foreign loans and low-preferential loans. As Vietnam's foreign debt already accounts for 38.9% of the GDP, government debt takes over 42% of the GDP and domestic and foreign currency reserves are low, it will bring a dramatic increase to national debt if Vietnam borrows more money for this project.
In the case that the bullet train ticket fees are equal to 50% of economic class air-ticket prices, the Economic Internal Rate of Return (EIRR) would be maximised at 10.6%. However, when return of investment will be completed remains a question.
According to the Committee, even the EIRR of 10.6% is unacceptable because it stands below the required standard level of 12%. When the ticket fees are equal to 75% of air-ticket fees, Financial Internal Rate of Return is only 2.4-3% and return of investment will take at least 45 years. Meanwhile, it normally takes about 10 years for a project to be considered effective.
