Vietnam’s USD 67 Billion High-Speed Rail Project Charts Independent Path, Shunning Foreign Investment

• 26 January 2025
• Construction Focus
• 1381 Views

In a ground-breaking move that signals Vietnam’s growing economic confidence, the Vietnamese National Assembly has approved an ambitious USD 67 billion high-speed rail network connecting Hanoi to Ho Chi Minh City, with the revolutionary decision to fund the megaproject primarily through domestic sources rather than traditional foreign investment, according to an announcement from the National Assembly in Hanoi and published by Eastasiaforum.org on 30 November 2024.

The transformative rail network, which will slice through 20 provinces and reduce travel time between Vietnam’s two largest cities to just five and a half hours, represents a bold departure from the nation’s historical reliance on foreign funding for major infrastructure. Rather than turning to international donors or Chinese investment, Vietnam plans to finance this massive undertaking through a combination of state budget allocations, government bonds, and domestic low-interest loans – a strategy that underscores the country’s “spirit of independence and self-reliance.”

This self-funded approach comes after Vietnam’s mixed experiences with foreign-backed infrastructure projects. The Chinese-funded Cat Linh-Ha Dong tramline faced significant setbacks, including delays, cost overruns, and quality concerns. Similarly, other internationally funded ventures like the Tran Hoang Na Bridge and Nhon-Hanoi Station metro project encountered various obstacles, despite Japan’s generally successful track record in providing over half of Vietnam’s official development assistance (ODA).

To ensure project success while maintaining autonomy, Vietnam has implemented robust safeguards. Prime Minister Pham Minh Chinh retains the authority to issue government bonds and seek ODA if needed, while any international participation must include technology transfer and training commitments. The government has already demonstrated its capability for independent infrastructure development with the USD 13.38 billion Long Thanh Airport project, which is tracking ahead of schedule under state ownership.

The economic implications are substantial, with the rail network expected to boost GDP growth by 0.97%. As Southeast Asia’s leading infrastructure investor at 6% of GDP, Vietnam aims to leverage this project as part of its ambitious goal to achieve high-income nation status by 2045. The plan includes expanding national highways from 1,290 to 5,000 kilometres by 2030.

Dr Nicholas Chapman, a researcher at Tohoku University, Japan, emphasises that this project transcends mere infrastructure development, representing a pivotal shift in Vietnam’s economic strategy. “After three decades of carefully balancing foreign influences, Vietnam is charting a bold new course toward genuine economic independence,” he notes.

To ensure accessibility, the government has mandated that high-speed rail fares remain competitive, capping ticket prices at 75% of airline rates. This pricing strategy, combined with the project’s domestic focus, positions Vietnam to potentially influence greater regional railway connectivity throughout the Greater Mekong Subregion while maintaining strategic control over its critical infrastructure assets.

The success of this self-sustainable funding model could revolutionize how developing nations approach major infrastructure projects, potentially establishing a new paradigm for strategic autonomy in infrastructure development.

• Economy and Finance
• Policy and Strategy
• Road and Infrastructure