1. Introduction
Vietnam’s railway sector is entering a period of strong development with many attractive investment opportunities. This development is driven by new policies and an improved legal framework, creating favorable conditions for both domestic and foreign investors.
2. Legal Framework and New Investment Policies
2025 marks many important changes in the legal framework for the railway sector. The government has issued new legal documents to simplify investment procedures and enhance transparency in project implementation.
- Railway Law 2017
- Public-Private Partnership (PPP) Investment Law 2020
- Decree No. 65/2018/ND-CP detailing the implementation of certain provisions of the Railway Law
- Circulars detailing investment conditions:
- Circular 49/2019/TT-BGTVT on the process, documentation for financial settlement, and price support procedures for railway transport businesses performing special tasks, issued by the Ministry of Transport.
- Circular 24/2018/TT-BGTVT on building train schedules and operating railway transport, issued by the Ministry of Transport.
3. Public-Private Partnership (PPP) Model
The PPP model is being promoted in the railway sector with many special incentives. This model allows the private sector to participate extensively in railway infrastructure development projects.
3.1 PPP Models in Vietnam
PPP contract forms: (Clause 16, Article 3, Public-Private Partnership Investment Law 2020)
- BOT, BTO, BOO, O&M contracts: Investors collect fees from users.
- BTL, BLT contracts: The state pays based on service quality.
- BT contracts: Investors transfer projects to the state and are paid in public assets.
Each contract type has its own advantages and is suitable for specific project goals.
3.2 Advantages of the PPP Model
- Attracts private capital: Reduces financial burden on the state.
- Increases project efficiency and quality: Private investors ensure effective and well-operated projects.
- Reduces risks for the state: The state shares risks with investors.
- Improves public service quality: Private investors enhance service quality.
- Technology transfer: PPP helps transfer technology and techniques from the private sector to public projects.
- Long-term sustainability: Long-term projects ensure sustainable development.
- Transparency and oversight: Improves transparency and oversight during project implementation.
4. Investment Incentives and Support
4.1 Regulations on Incentives and Support
State policies on railway development: (Article 5, Railway Law 2017)
- Prioritize investment in upgrading and maintaining national and urban railway infrastructure.
- Encourage investment and protect the legal rights of domestic and foreign organizations and individuals.
- Allocate land for railway infrastructure and industrial projects.
- Encourage the development of the railway industry, application of advanced technologies, and human resource training.
- Prioritize budget allocation for national railway infrastructure according to the planning.
Incentives and support in railway operations: (Article 6, Railway Law 2017)
- Railway infrastructure business, urban railway transport, and the railway industry are investment priority sectors.
- Incentives include:
- Land allocation without payment and exemption from land rental fees for railway infrastructure construction.
- Government credit loans or loan guarantees.
- Tax incentives on corporate income tax and exemption from import duties on necessary equipment and materials.
- The state ensures compensation for land clearance for railway infrastructure.
- Provide radio frequency bands for railway traffic management.
The government has issued many attractive policies to attract investment into the railway sector.
4.1 Practical Incentives and Support
According to Nhịp sống Kinh doanh, in the high-speed railway project proposal for the North-South railway, the government proposed 19 special policies, such as prioritizing contractors for technology transfer, land use, and reducing quarrying procedures to accelerate the project.
- Prioritize the use of Vietnamese products: Contractors must prioritize ordering railway industrial products from Vietnamese enterprises and commit to technology transfer.
- Investment fund allocation mechanism: Projects use sources like government bonds, ODA, and concessional loans from international donors, and adjust the public investment plan according to progress.
- Exploiting land around stations: Localities can exploit this land to contribute 50% to the central budget, with the remainder kept for the province.
- Adjusting material mining: Localities can adjust reserves and extend mining licenses to supply construction materials for the project without needing an environmental impact assessment.
- Preparing a comprehensive technical design (FEED): Instead of basic design, the government proposes FEED to shorten project preparation time.
- Other support policies: Including procedures for infrastructure relocation, workforce training, and support for forest use changes.
5. Foreign Investment
The Ministry of Transport has proposed 5 special policies to attract capital for urban railway projects in Hanoi and Ho Chi Minh City by 2035:
- Issuing Government Bonds: The Prime Minister is authorized to issue government bonds to supplement the budget and mobilize capital from increased revenue and savings to implement the projects.
- Balancing and supplementing capital for localities: The central budget will allocate additional funds for localities in the mid-term public investment plans to decide on investment in the projects.
- Local budgets: The People’s Councils of cities are responsible for balancing and allocating funds from increased revenue and savings to implement urban railway projects.
- Capital through public investment plans: Projects will be allocated capital through mid-term public investment plans with funds matching the implementation progress of each project.
- Assigning responsibilities to local governments: Local governments are assigned the task of preparing investments and deciding to allocate funds from the city budget to implement urban railway projects.
6. Urban Railway Development
According to Pháp luật và Xã hội, Vietnam is implementing many urban railway projects to improve transportation infrastructure and meet the transport needs in large cities. These projects not only contribute to reducing traffic congestion but also offer attractive investment opportunities for both domestic and foreign investors.
Some representative urban railway projects:
Hanoi:
- Line 2A (Cát Linh – Hà Đông): 13.1 km, started in 2011 and operational in November 2021.
- Line 3 (Nhổn – Ga Hà Nội): The elevated section of 8.5 km has been operational since August 2024; the underground section is expected to be completed between 2027-2029.
- Line 5 (Văn Cao – Hòa Lạc): 39 km, expected to start in 2025.
Ho Chi Minh City:
- Line 1 (Bến Thành – Suối Tiên): 19.7 km, operational.
- Line 2 (Bến Thành – Tham Lương): 11 km, expected to start in 2025.
Investment Opportunities:
Urban railway projects in Vietnam are attracting significant interest from investors due to their large scale and importance for infrastructure development. Recently, Bình Dương province approved a pre-feasibility study for urban railway Line 1 (Bình Dương New City – Suối Tiên, HCMC), 32.43 km long, expected to be submitted for approval by the National Assembly in May 2025.
7. Conclusion and Recommendations
Vietnam’s railway sector has great development potential with an increasingly improved legal framework and attractive incentives. Investors should:
- Study the new legal regulations: Mastering new laws and policies ensures compliance and maximizes benefits from supporting regulations.
- Build a long-term investment strategy: The railway sector requires sustainable, long-term investment plans to ensure effectiveness.
- Take advantage of government incentives and support: The Vietnamese government provides many incentives on taxes, loans, and land, which investors should maximize.
- Consider PPP cooperation models: The public-private partnership (PPP) model helps share risks and reduce financial burdens for investors while attracting resources from both the public and private sectors.
With new policies and incentives in 2025, Vietnam’s railway sector is becoming an attractive investment destination, promising many development opportunities for both domestic and foreign investors.
Note:
- The content of this article is for informational purposes only and should not be considered as official legal advice.
- The information provided is based on laws effective at the time of publication and may change with any amendments or updates to the law.
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