Railway investments to pick up steam

10:58 | 24/05/2018
Private investors are expected to receive new opportunities to venture further into railway projects in Vietnam on the back of new rules on railway asset management and use.
railway investments to pick up steam
With a new decree, Vietnam Railways is now the official owner of state assets indirectly used for train operation

The government recently issued Decree No.46/2018/ ND-CP governing the management and use of railway infrastructure assets. The major highlight of the decree is the allocation of part of the national railway infrastructure assets to the operator – Vietnam Railways (VNR) – to own, use, and develop with state capital to be recorded in the business.

This is considered breaking the rules of the railway sector, as said assets were always completely state-owned, with VNR merely acting as manager and operator.

Under Article 4 of Decree 46, national railway infrastructure assets are divided into two categories: assets directly used for train operation – railways, bridges, tunnels, rails, depots, and others – and assets indirectly used for train operation – station squares, warehouses, inland container depots (ICD), service and training facilities at railway stations, and others.

As per Article 6, the national railway infrastructure assets are recorded as state capital contribution to the operator. This is the first time that the country has such a regulation for the railway sector.

Accordingly, the assets directly used for train operation remain owned by the state, with VNR still the manager and operator, while the assets indirectly used for train operation will be handed over to VNR to own, use, and develop.

“At present, all railway assets are owned by the state, thus VNR has to depend on state capital to upgrade and develop infrastructure. With the right to own, use, and develop the railway assets with state capital recorded in the business, we are enabled to take the initiative in our investment plan and to call on more favourable private investments,” VNR chairman Vu Anh Minh told VIR.

“The move will help us fast-track investment procedures. For example, when we own a land lot, we can reach agreements with credit organisations to develop infrastructure more easily than we do currently, as we are only the manager,” he went on to say.

As the decree officially took effect in late March, VNR is gearing up the drafting of a master plan on how to use and develop the railway assets before submitting it to the prime minister for approval.

According to Minh, the railway operator plans to co-operate with other investors to develop ICDs and warehouses along the railway network from Song Than Station in the southern province of Binh Duong to Dong Anh Station in Hanoi as well as to Lao Cai and Dong Dang, to increase transportation capacity.

“We are co-operating with Saigon Newport Corporation, Vietnam’s largest port operator, to build ICDs at Song Than and Phan Thiet stations, and calling on other investors to build ICDs at Dong Anh, Yen Vien, Dong Dang, Danang, and Vinh stations.”

Foreign investors still hesitate to make investments in railway infrastructure and/or rail transport due to the lack of incentives and risk-sharing mechanisms between the state and investors.

“The current Law on Railways does not include clear regulations on investments in commercial centres and service facilities at railway stations. There are no specified incentives and no specific organ of the state to manage railway infrastructure assets,” said a lawyer at Vietnam International law firm.

With the new rules and a number of special incentives (e.g, land use fees) offered in the revised Law on Railways, which takes effect on July 1, the railway sector is expected to become more attractive to foreign investors in the near future.

Recently, a number of foreign investors, including Siemens, Russia’s EVRAZ – the world’s largest producer of rails – and Russia Export Centre Group, as well as several others have expressed interest in doing business with VNR.

By Bich Thuy

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