Vietnam’s $67B North-South High-Speed Rail Spurs Financing Race as China Emerges Rival

Vietnam is moving ahead with its North-South high-speed rail project, a national initiative estimated at $67 billion (about 98.9925 trillion won), as China emerges as a major rival in the global bidding race. With a public-private partnership, or PPP, seen as the likely approach, financing capacity is becoming a key factor in who wins contracts.

Vietnam has completed a feasibility study and is drawing up plans to tender construction for some sections under a PPP model, the construction industry said April 28.

The project would build a 350 kph rail line spanning 1,541 kilometers from Hanoi to Ho Chi Minh City. It also includes related infrastructure: 23 passenger stations, five freight stations and nine depots. More than half of the route is expected to pass through urban areas, and bridges are estimated to account for about 60% of construction.

Under PPPs, private firms build and operate public infrastructure while the government provides compensation and policy support. Vietnam, facing costs too large to cover with public funds alone, has sought to boost investment incentives by establishing a PPP law in 2020. 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., or Korail, with Korea Overseas Infrastructure & Urban Development Corp., known as KIND, assigned a financing support role. Because a PPP structure is more likely than a standard contracting model, industry officials say competitiveness will hinge not only on technology but also on the ability to raise funds.

China, in particular, has become a strong competitor, leveraging its capital strength and experience in Vietnam’s infrastructure market. Chinese President Xi Jinping recently highlighted 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 project. Japan and France are also expected to compete, citing high-speed rail technologies such as the Shinkansen and TGV.

A key concern is the scale of South Korea’s financing support. KIND can increase capital up to its statutory limit of 2 trillion won, but 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 investment, its capital ceiling effectively sets its investment limit, sharply reducing capacity as project size grows.

Park Yongjeong, head of the industrial research office at Hyundai Research Institute, said large projects make it difficult for domestic companies to raise all 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. Given KIND’s overall limits, “investment capacity is not that large when viewed on a project-by-project basis,” he said, calling for stronger institutional measures to address capital constraints so equity participation and investment capacity can expand.

* This article has been translated by AI.

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