Vietnam is moving to advance its North-South high-speed rail project, a national undertaking estimated at $67 billion, as China emerges as a strong rival in the global bidding race. With a public-private partnership, or PPP, seen as the likely approach, financing capacity is shaping up as a decisive factor.
According to the construction industry on the 28th, Vietnam has completed a feasibility study and is preparing plans to tender construction for some sections under a PPP structure.
The project calls for building a 1,541-kilometer, 350 kph-class high-speed rail line linking Hanoi and Ho Chi Minh City. It also includes related infrastructure: 23 passenger stations, five freight stations and nine depots. With more than half of the route running through urban areas, bridges are expected to account for an estimated 60% of the construction work.
Under PPP arrangements, private companies build and operate public infrastructure such as urban development, transport networks and plants, while the public sector provides compensation and policy support. Vietnam, facing costs too large to cover with public funds alone, has sought to boost investment incentives since 2020 by establishing a PPP law. It also introduced a loss-sharing mechanism under which the government covers part of the shortfall if revenue falls below 75% of projections.
In South Korea, a dedicated task force has been formed centered on Korea Railroad Corp., with the Korea Overseas Infrastructure & Urban Development Corp., or KIND, assigned a financial support role. Because a PPP deal is more likely than a standard construction contract, industry officials say competitiveness will hinge not only on technology but also on the ability to raise funds.
China, in particular, has risen as a formidable competitor, leveraging its capital strength and experience in infrastructure projects in Vietnam. Chinese President Xi Jinping recently underscored rail cooperation in talks with Vietnam’s leadership, signaling Beijing’s intent to pursue the project. China has already won and advanced the Lao Cai-Hanoi-Hai Phong railway. Japan and France are also expected to join the competition, citing high-speed rail technologies such as the Shinkansen and the TGV.
A key challenge is South Korea’s capacity to provide financing. While KIND can increase its capital up to the statutory limit of 2 trillion won, its paid-in capital stands at 658.6 billion won, limiting its ability to back a project of roughly 100 trillion won. Additional bond issuance is also capped at no more than five times the combined total of paid-in capital and reserves. Because KIND typically participates through equity investments, its capital ceiling effectively becomes an investment ceiling, sharply reducing support capacity as project size grows.
Park Yong-jeong, head of the industrial research office at Hyundai Research Institute, said large projects make it difficult for domestic companies to raise all needed investment funds on their own, increasing the need for government support. “Countries or companies that can bring in financing smoothly will inevitably have an advantage,” Park said, adding that KIND’s overall limits leave “not that much” room for investment on a project-by-project basis. He called for stronger institutional measures to address capital-limit constraints so equity participation and investment capacity can expand.
* This article has been translated by AI.
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