Huge capital needed for building metro networks in HN, HCM City

June 25, 2024 - 08:17
By 2035, Hà Nội's metro network is expected to handle 35-40 per cent of public transport demand, while HCM City aims for 50-60 per cent.
The station of Metro Line 1 (Bến Thành – Suối Tiên) in Hồ Chí Minh City. VNA/VNS Photo

HÀ NỘI – The two largest cities of Việt Nam, Hà Nội and HCM City, are developing plans to mobilise capital for constructing an extensive urban railway (metro) network by 2035.

According to the plans from the two cities, the goal is to complete all planned metro lines by 2035, with a total length of approximately 580.8km - Hà Nội’s 397.8km and HCM City’s 183km. By 2045, the two cities aim to add another 369.06km of metro lines, of which Hà Nội has 200.7km and HCM City 168.36km.

The total capital demand for the construction by 2035 is estimated in tens of billions of US dollars. The funding is expected to come from four sources, the central budget, city budgets, Transit-Oriented Development (TOD) fund and local government bonds.

According to the Hà Nội People's Council, the metro project will be discussed and approved in the meeting next month (July) while the HCM City’s metro development plan has just been reviewed at the 31st session of the city's Party Committee.

The plans will be submitted to the National Assembly for a resolution on mechanisms and policies at the end-of-year session this year.

The Hà Nội metro project includes three phases.

In phase 1 from 2024 to 2030, 96.8km of metro line will be completed including lines No. 22, 33, and 5, accounting for about 24 per cent of the total planned length and investment plan for 301km will be prepared to build lines No. 1, 2A, 4, 6, 7 and 8 and connecting satellite cities. The estimated capital will be US$37.1 billion.

The second phase of 2031-2035 is for 301km, equivalent to about 24 per cent of the total planned length.

And the third phase of 2036-2045, is for 200.7km adjusted and supplemented lines, with an estimated capital demand of US$18.2 billion.

Hà Nội plans to review public investment sources, including budget funds, bond issuance, ODA loans and other lawfully mobilised funds.

Some regulations could be applied according to the draft Capital Law (amended) and growth scenarios being submitted to the National Asembly for approval.

The total capital balance by 2035 will be over $28.5 billion.

Hà Nội needs Central Government support of about $8.6 billion by 2035.

According to Lê Hồng Sơn, permanent vice chairman of the Hà Nội People's Committee, to reduce budget pressure, the city will supplement policies to attract private investment.

The budget will be used for infrastructure investment, land compensation and resettlement support while the procurement of rolling stock, control systems and information systems will be done through bids.

Private investors will purchase and provide equipment according to selected common standards and technologies, reducing the total costs compared to the current separate implementation method.

Incentive policies for investors will be stable throughout the implementation period of the projects, who will be granted the right to operate part of the infrastructure, participate in investing and developing projects in the designated TOD areas.

Sơn affirmed that if there are breakthrough mechanisms and policies, Hà Nội can absolutely achieve the set goals.

Metro bond issuance

In HCM City, along with metro line No. 1 that is almost complete, line No. 2 is expected to be completed by 2030, said Trần Quang Lâm, director of the city's Department of Transport.

The slow investment pace has not met development needs, he said.

The city aims to complete six metro lines by 2035, spanning approximately 183km with an estimated total investment of over VNĐ871 trillion (over $36 billion).

The city has proposed six groups with 28 policies including planning; land recovery, compensation, support and resettlement; capital mobilisation; investment and project implementation procedures and authority; technical and technological standards; and management and exploitation organisation.

"If these mechanisms and policies are approved by the end of this year, we can start preparing for investment next year," Lâm said.

The expected capital will be mobilised from increased budget revenues, TOD land auction proceeds and loans.

The city also proposes borrowing through local bond issuance with adjustable interest rates, loans from domestic financial institutions and re-borrowing from the Government's foreign loans, with a total outstanding loan limit not exceeding 120 per cent of the city's budget revenue, he said.

Phan Văn Mãi, Chairman of People’s Committee of HCM City, said that mobilising $36 billion at once is challenging, but raising $3.6 billion annually over ten years is feasible.

Actually, this amount of money is not too big, the important thing is the mechanism and policy, Mãi said.

The city plans to issue urban bonds under the name of HCM City Urban Railway Bonds, and if approved, the bonds will have interest rates equal to or higher than government bonds, he said.

Addressing challenges

Dr. Nguyễn Hữu Nguyên, HCM City’s Urban Development Planning Association, emphasised the need for solving financial, technological and human resource issues for successful metro project implementation.

Implementation methods must differ from past practices.

Detailed investment costs, construction timeframes, land clearance complexities and project management are critical for accurate project predictions.

The choice of technology and execution methods are equally important.

Associate Professor Dr. Vũ Anh Tuấn, director of the Việt Đức Transport Research Centre, stressed the need for metro network planning linked to urban structure and land use to ensure convenient access and increased TOD area value.

Clear land clearance policies and technology optimisation are crucial for the project to succeed, Tuấn said.

By 2035, Hà Nội's metro network is expected to handle 35-40 per cent of the public transport demand, while HCM City aims for 50-60 per cent. VNS