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Vietnam rail and highways to open up to private sector

The country is vowing to launch a railway PPP programme and auction off up to $10bn of highway concessions.

Vietnam targets to build between 2,300 and 2,700 kilometres of highway in the next five years as well as launch a public-private partnership (PPP) programme that would provide for the construction of three train station facilities, the Ministry of Transport officials said on Monday.

The news follows the issuance late last month of a governmental decree regulating investment in the form of PPPs, opening up more opportunities for the private sector in many fields formerly funded by the state such as transportation, electricity, water, education, transport, health, and the environment.

The introduction of the PPP model in railway services is expected to help change the current mindset of the industry. “VRC subsidiaries have been favoured 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 newspaper quoted Tran Ngoc Thanh, chairman of the Vietnam Railway Corporation (VRC), as saying during a related meeting.

The latter was also reported naming Vingroup, Bach Dang, Indo Tran Logistics, and ATH Express Trains as potential partners for the first wave of concessions.

Local media cited Tran Ngoc Thanh as saying that under the PPP mechanism, his corporation would be responsible for setting up transport infrastructure with services such as unloading equipment, installing 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).

The private sector will be invited 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. It will be able to collect fees for the services they offer, based on a pricing system approved by the state and the VRC.

With regards to highways, the state expects to be disbursing more than VND181.2 trillion (€7.9 billion; $8.52 billion) to build a total 2,708 kilometres of highway from now to 2020 if it is to follow its most optimistic scenario, according to the ministry.

The remaining capital, around VND213.3 trillion ($10 billion), will be covered by private sector participants and multilateral banks.

As part of its investment plan to 2020, the ministry said it has so far put into operation 567 kilometres of highway, with an additional 457 kilometres of highway under construction.

The three highways are a section of Mai Dich-Nam Thang Long in Hanoi, Dau Giay-Phan Thiet linking the southern province of Dong Nai and the south-central province of Binh Thuan, and a section of Tan Van-Nhon Trach in Ho Chi Minh City, with a total length of 120 kilometres.

As part of the previous investment plan, investors are also planning to build around 508 kilometres under a Build-Operate-Transfer or Build-Transfer mechanisms for seven projects throughout the country, the ministry said.

By the end of 2015, there will thus be 700 kilometres of highway in operation, 457 kilometres under construction, 120 kilometres about to be built and 508 kilometres seeking investors. The netowork's length will total 1,785 kilometres, according to the ministry.

The VND14.6 trillion Trung Luong-My Thuan Expressway project, which has just been started by a venture of six private contractors, is expected to be completed in 2018. The Asian Development Bank holds and $800 million equity stake in the project.