Vietnam's "Century Project" Again Delayed: From 2026 to 2027, Does the Math Add Up?
Hello everyone, I'm your financial observer. Today, let's talk about a project that Vietnamese people love and hate alike, and that has attracted worldwide attention in the infrastructure sector—the Vietnam North-South High-Speed Railway.
Recently, there was a rather ironic development: the Vietnamese authorities had previously claimed with certainty that construction would begin in 2026, only to later announce a postponement to 2027. Even more awkwardly, they had already hung the celebration banners in advance, which now hang in the wind, symbolizing a sense of premature joy.
This project has been in the works since 2001, and nearly 20 years later, no actual groundbreaking has taken place. Why has such a seemingly ambitious project fallen into a cycle of endless delays? Today, I'll break down the situation into five key aspects to help you understand the economic logic and practical challenges behind it.
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1. Where Does the Money Come From? The Math Doesn't Add Up for Borrowing to Build the Road
First, let's address the most critical question: money.
The Vietnam North-South High-Speed Railway is approximately 1,500 kilometers long and will connect Hanoi and Ho Chi Minh City. By today's standards, this is not just a regular railway; it's a high-speed line with speeds of over 350 kilometers per hour, which means the cost is extremely high.
- Estimated Cost: Although the official figure has not been released, industry estimates range from $60 to $70 billion.
- Vietnam's Financial Situation: Vietnam's GDP in 2023 was around $430 billion. In other words, building this railway would cost roughly equivalent to Vietnam's annual GDP for one and a half years.
The Problem: The Vietnamese government cannot afford to pay for it out of its own pocket and must borrow money. But from whom?
- Domestic Banks: Vietnamese banks have limited funds, and the interest rates are high, which could lead to inflation and a debt crisis.
- International Loans: Institutions like the World Bank and the Asian Development Bank have limited lending capacity to Vietnam and usually require strict fiscal discipline.
- China or Japan: These are the main options. China offers a "loan + construction" package, while Japan provides "low-interest loans + technology." Regardless of the choice, Vietnam would incur a huge long-term debt, with its fiscal revenue having to be used to repay it for decades.
In Simple Terms: It's like a family wanting to buy a luxury house for $5 million but only having $500,000 in savings. The bank says, "We can lend you the money, but you'll have to pay it back with your wages over the next 30 years, and the interest is not low." Would the family agree? Of course not. The Vietnamese government's hesitation stems from concerns that the cost might be too high to afford, or that even if the railway is built, there might not be enough passengers to use it.
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2. The Battle of Technical Routes: The Competition Between China and Japan Has Slowed Progress
The high-speed railway project is not just about money but also about the technical route chosen. Over the past decade, Vietnam has been wavering between China, Japan, and Europe, and this decision-making process has been time-consuming.
- Japanese Option: Japan's Shinkansen technology is mature and safe, but it's expensive, and Japan wants to use its own trains and signaling systems, which increases maintenance costs.
- Chinese Option: Chinese high-speed railways offer better value for money and faster construction, and China is willing to provide a "turnkey" solution. However, some Vietnamese elites are wary of China's growing influence and potential debt traps or technological dependence.
- European Option: Companies like Siemens from Germany also participated in the bidding but later withdrew or lost their influence.
Why the Delays?: Without a finalized technical route, the design cannot be completed, and without a design, bidding cannot begin, and without bidding, construction teams cannot start work.
In Simple Terms: It's like deciding whether to hire Company A (expensive but sophisticated) or Company B (inexpensive but fast) for a house renovation. If you hesitate for 10 years, the house remains unfinished. Vietnam's current situation is that it has chosen a direction (tending towards Chinese technology) but the previous indecision has created a lot of messy issues that need to be resolved first.
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3. Land Acquisition and Demolition: A Persistent Challenge in Vietnam
In Asia, the hardest part of building a high-speed railway is land acquisition and demolition. Vietnam's land system is different from China's; land is owned by the state, but the right to use it is with individuals or communities. This means the government must negotiate with thousands of villagers and businesses, dealing with compensation and resettlement issues, which can be highly contentious.
- Compensation Disputes: Farmers feel the compensation is too low, while the government is concerned about budget constraints.
- Complex Legal Procedures: Vietnam's land acquisition laws are very complicated, and approving a project can take years through multiple levels of bureaucracy.
- Social Resistance: In recent years, there has been increased public scrutiny of large infrastructure projects regarding environmental and resettlement issues, and any injustice can lead to protests.
Why the Delay from 2026 to 2027?: It's likely due to the slow progress in land acquisition. The government planned to start in 2026 but found that the land for many key sections had not been secured, or the compensation agreements were not finalized. To be cautious, they decided to push the start date by a year to give more time for land acquisition.
In Simple Terms: It's like trying to build a road in a residential area. You need to go from house to house, asking, "I want to build a road and take two meters of your land; I'll compensate you $100,000, do you agree?" Some agree, some disagree, and some refuse. It takes a year to convince everyone. Vietnam is going through the same process with thousands of stakeholders.
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4. Economic Viability: Can the High-Speed Railway Really Be Profitable?
The government borrows money to build the railway with the hope of generating revenue from operations to repay the debt. However, the economic feasibility of the Vietnam North-South High-Speed Railway has always been in question.
- Insufficient Population Density: The most profitable high-speed railways connect two large cities with dense populations and frequent business activities (like the Beijing-Shanghai line). The Vietnam North-South line passes through sparsely populated areas with low economic activity.
- Ticket Prices: Vietnam's per capita GDP is low, so people are sensitive to ticket prices. If the fares are too high, there won't be enough passengers; if they're too low, operations will be unprofitable.
- Alternative Transport Options: There are already established road and air networks in Vietnam. For a 1,500-kilometer journey, a plane takes 2 hours, while a high-speed train takes 4-5 hours. For business travelers, planes are more convenient; for ordinary passengers, buses are cheaper. The high-speed railway's advantage is not clear.
In Simple Terms: It's like opening a five-star hotel in a small town with only 100,000 residents. You spend 100 million on renovations, but only 10 people stay, each paying $500 per day. You can't even cover the expenses. The challenge for the Vietnam North-South High-Speed Railway is that the number of passengers may not be sufficient to cover the high construction and operating costs.
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5. Political Motivation: Why Push for This Project Despite the Challenges?
Given the difficulties in financing, land acquisition, and economic viability, why does the Vietnamese government persist with this project?
- National Symbol: The high-speed railway is seen as a symbol of Vietnam's modernization and industrialization. It represents a step forward in the country's image.
- Regional Competition: Other Southeast Asian countries (such as Thailand and Indonesia) are also advancing high-speed railway projects. Falling behind could put Vietnam at a disadvantage in regional competition.
- Internal Political Pressure: There are different factions within the Vietnamese Communist Party, and those supporting the project hope to use it to drive economic reforms and infrastructure improvements. Delaying the project could affect the political careers of relevant officials, so they are trying to gain more time rather than canceling it.
Why the Postponement to 2027?: This is a political compromise:
- Internally: It acknowledges that starting in 2026 was unrealistic to avoid further embarrassment.
- Externally: It shows lenders (like China) that Vietnam is still committed to the project but needs more time to resolve internal issues, not that it has given up.
- Buffer Period: This year can be used to negotiate loan terms, resolve land disputes, and refine the design.
In Simple Terms: It's like a person who didn't pass an exam on the first try and can't say, "I quit." Instead, they say, "I'll study for another year and definitely pass next year." This year, they need to catch up, adjust their mindset, and explain why they failed before. The Vietnamese government is using 2026 to make these preparations.
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In Summary: The Banners Hang in Vain, but the Road Must Be Built
The postponement of the Vietnam North-South High-Speed Railway from 2026 to 2027 is the result of a combination of five factors: funding, technology, land acquisition, economic viability, and political considerations.
- For Vietnam: This is a painful process of growth, revealing shortcomings in planning, financing, and execution.
- For China: It's both an opportunity and a challenge. If Vietnam chooses China's approach, China gains an important overseas high-speed railway market, but it must also be cautious about the associated debt and political risks.
- For the World: This serves as a reminder that in developing countries, large infrastructure projects cannot be pursued solely for symbolic reasons; the practical implications must be carefully considered.
In Final Words: The banners hanging in vain may be embarrassing, but they also serve a purpose. They remind the Vietnamese government to focus on the basics: lay a solid foundation, calculate the costs accurately, acquire the land properly, and then celebrate with real progress. Whether the project will actually start in 2027 depends on whether Vietnam can sort out these issues by then.
After all, the train of the times is already moving on, but Vietnam's high-speed railway still has a long way to go.