Vingroup proposes not to apply TOD in the North-South high-speed railway project

Ready for direct private investment

The Ministry of Construction is submitting a Draft Resolution on a number of specific mechanisms and policies, especially applied to the high-speed railway project on the North-South axis.

According to the Ministry of Construction, the project is still implementing investment in the form of public investment, not converting the form of investment from public investment to business investment or investment under the public-private partnership method, or investment in the form of a mixed-use investment, so it is necessary to issue specific mechanisms and policies, especially applied to the project to invest in one of the following forms of investment: Public investment, PPP investment, private investment and mixed-use investment.

Speaking to Lao Dong Newspaper, Mr. Nguyen Viet Quang, Vice Chairman and General Director of Vingroup Corporation - investor of VinSpeed - expressed that from the beginning, Vingroup had registered for a direct private investment plan.

"Accordingly, the state lends 80% without interest for 30 years, we arrange 20% ourselves. Currently, we are only registered for this option. If we do PPP, we cannot mobilize the remaining 80% by ourselves" - Mr. Nguyen Viet Quang shared.

Vingroup also added that in the next 30 years, if this project is implemented, businesses will have to compensate a lot more to pay the state, so they cannot bear the additional interest.

Analyzing the state and social benefits of converting projects to direct private investment, Mr. Nguyen Viet Quang emphasized the following 5 main benefits:

First, the state only needs to lend 80% instead of paying 100% of the total investment.

Second, the state reclaims 80% of lending capital after 30 years instead of waiting for capital recovery after 140 years, or even longer.

Third, the system will be put into operation after 5 years instead of after 10 years. This will create momentum for the country's economy to develop, transportation will be convenient, people's travel costs will decrease, and people's lives will improve.

Fourth, the state does not worry about capital increase and prolonged progress.

Fifth, the state has the high-speed railway industry without having to invest.

The General Director of Vingroup Corporation emphasized that reality has proven that the vast majority of high-speed railway projects around the world have to accept long-term losses, even without calculating the time of profit. Only the Beijing - Shanghai high-speed railway line is profitable, but Vietnam does not have billions of passenger traffic each year like China. With the North-South high-speed railway, the company expects the loss to be up to tens of billions of USD.

According to the pre-feasibility study report approved by the National Assembly, the average annual revenue (average for the first 30 years of operation) is 5.6 billion USD, of which the direct operating cost (excluding depreciation and interest) is 4.2 billion USD per year.

In addition, the investment cost to expand passenger service capacity to reach the above revenue- bringing passenger volume is 18.06 billion USD (not included in the total initial investment of 61 billion USD). Thus, the cash flow from the project's operation in 30 years is expected to be about 42 billion USD.

After that, Vingroup had to pay annual interest on a loan of 10.51 billion USD, estimated at about 1.05 billion USD per year (in the first 10 years of operation).

Thus, after 30 years, the total amount that can be collected is 10.5 billion USD (after paying interest on a loan of 10.51 billion USD), while the total amount that the enterprise must repay to the state is 49.08 billion USD, not including Vingroup's initial investment of 10.51 billion USD. In addition, on average, every 30 years, businesses have to invest in replacing or major repairs to all trains and equipment.

Proposal to the Ministry of Construction to remove the TOD part from the project

Sharing frankly about the opinion that VinSpeed registered for this project mainly to take advantage of TOD projects (urban development model oriented towards public transport development) along the route, the General Director of Vingroup Corporation affirmed that this information is completely incorrect.

We have registered to do TOD as a part of our income to compensate for the above costs and to contribute to the development of the localities where the railway line passes through, especially the Central provinces.

If we only aim to develop real estate in these localities, we can proactively grasp invitations from projects with much better locations without having to "borrow reasons" to build high-speed railways. In fact, railway stations are often far from the center of provinces and cities, far behind in terms of investment prospects, affirmed Vingroup CEO.

To clearly demonstrate its goodwill, Vingroup has proposed to the Ministry of Construction to remove the TOD part from this project.