New law to
spur FDI in railway
While a
number of foreign investors have shown their interest in Vietnam’s railway
projects, few made further steps. Deputy Minister of Transport Nguyen
Ngoc Dong talked with VIR’s Bich Thuy about the existing barriers, as well as
new investment incentives in a draft law to revise the 2005 Railway Law,
making the industry more attractive.
Could you give an overview of foreign investment
attraction in the railway industry over the past years? What are the barriers
to foreign investment?
Over the
past years, foreign investment in the railway industry has remained modest.
Few foreign investors have been interested in railway infrastructure or rail
transport business because of the large investment capital required compared
with the long return-on-investment period, no specified incentives, and the
lack of a risk-sharing mechanism between the state and investors.
The 2005
Railway Law, which took effect on January 1, 2006, was the first law for the
railway industry. It regulated the management of transport activities, and
aimed to create favourable conditions for investment in the field. However,
some clauses of this law have proven problematic and inappropriate for the
current and future development of the industry.
One of the
issues is that the law does not include clear regulations on investment in
commercial centres and service facilities at railway stations. As a result,
we have no legal framework to attract investors in these activities.
In addition,
the 2005 Railway Law offers only a few incentives, and does not define a
specific organ of the state to manage railway infrastructure assets. The lack
of this regulation leads to ineffectiveness in management and use of
state-funded railway infrastructure assets.
Currently, a few foreign investors from Japan, South
Korea, China, and Spain are very keen on railway projects in Vietnam. Which
railway projects interest them the most?
Foreign
investors, including South Korea’s Lotte Group, are very interested in the
project to upgrade Yen Vien-Lao Cai railway. The others are Ho Chi Minh
City-Can Tho railroad, and Bien Hoa-Vung Tau railway. In addition, there are
potential projects at Hanoi railway station, Giap Bat railway station, a
project to relocate Danang railway station, and a railway project linking
Haiphong international gateway seaport.
Of specific
interest is the north-south high-speed railway project under the national
railway development plan. Certain routes, such as Hanoi-Vinh and Nha
Trang-Saigon, are proven to have huge trade advantages, which are now a
magnet to foreign investors.
A draft law to revise the 2005 Railway Law will be
discussed at the National Assembly’s upcoming session in October, as a way to
attract more private investment in the railway industry. What are the new
incentives proposed in the draft law?
The draft
law is aimed at ensuring railway transport development is in line with the
market conditions, creating an open mechanism to attract private investment
and intensify global integration.
To make the
industry more attractive to foreign investors, we propose offering more and
higher specific incentives on land and credit in the draft law. For example,
we are proposing to support all site clearance costs for a new railway route.
In addition
to recently regulated incentives on land, investors of national railway
projects and metro lines will enjoy other incentives – including an exemption
of land use fees or land leasing fees for the area used for railway
infrastructure. They will enjoy reductions of land use or land leasing fees
for the area used for trade and service works.
The draft
law is developed to separate state management and state-owned companies’
management of business activities, and to separate infrastructure management
and transportation business. This means that investors are able to invest in
railway infrastructure, railway transport business, and the development of
railway industries. This will create healthy competition and more favourable
conditions for private investors, including foreign ones.
For example,
Vietnam Railway has for years been assigned to operate, manage, and maintain
the whole railway network, including rails, stations, transport business, and
railway infrastructure assets. This made it difficult for private investors
to join.
To create a
healthy business environment for all investors, we are proposing that the
state will take responsibility for management and determination of railway
infrastructure assets (for lease or concession), while businesses will have
rights to operate only.
Proper land
funding will also be prioritised for development of railway infrastructure
and industries. This is one of biggest concerns among foreign investors.
Vietnam is integrating deeply into the world’s economy
through the establishment of the ASEAN Economic Community, and the
enforcement of many free-trade agreements (FTAs). What are the future
prospects of foreign investment attraction in the railway industry?
Foreign
investment attraction in the railway industry is a challenge not only for
Vietnam but also many other countries in the world.
In general,
investors’ interests in the railway industry mainly focus on locomotives,
trade activities at central stations, and logistics services. Investment in
railway infrastructure is substantially sourced from the state.
Although the
country’s attraction of foreign investment in the railway industry has
remained lower than other sectors, future prospects look optimistic thanks to
the country’s open policies, especially the draft law, which is expected to
clear the existing barriers to private investment attraction.
Many
countries have legal framework on leasing and concession of railway
infrastructure. We will do the same to meet the market demand.
FTAs,
including the Trans-Pacific Partnership Agreement (TPP), will make Vietnam’s
economic sectors more attractive to foreign investors. And the transport
sector, including the railways, is not an exception.
VIR
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Thứ Hai, 3 tháng 10, 2016
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