Bond issuance proposed for metro funding in Hanoi and HCMC

As per a conclusion of the Politburo, the decision-making body in the Communist Party of Vietnam, on the development of Vietnam’s railway transport until 2030, Hanoi and Ho Chi Minh City must complete their metro networks within 12 years.

By 2035, each city must complete 200 km of metro.

Attending a workshop on the development of urban railway systems in the two cities held in Hanoi on Wednesday, Dang Huy Dong, president of the Planning and Development Institute (PDI), a member of the internationally acclaimed Vietnam Union of Scientific and Technological Associations (VUSTA), said central agencies need to create a new legal framework specifically for the two cities regarding metro development.

This includes decentralization and authorization for the two cities to issue urban criteria and standards and make their own procedures for adjusting plans related to metro networks in line with developing urban areas nearby metro stations.

The legislative National Assembly should allow the two cities to make the metro network plan along with TOD (transit-oriented development) zones near stations as public investment projects.

These projects would combine urban development and land auctioning to generate revenue for metro system investment. Each city would organize auctions for TOD project rights after assisting in land clearance.

Regarding financing, he proposed allowing the issuance of municipal bonds, project bonds, or other capital mobilization forms beyond the public debt ceiling each year and throughout the period until 2035.

Both cities should allocate US$1 billion, including half from their own budgets and the rest from the central government’s budget, to pilot projects in line with the “sandbox model,” which is commonly referred to as a “regulatory sandbox,” an approach used primarily by regulatory bodies to create a controlled environment where new financial services, products, or business models can be tested without immediately being subject to the full suite of regulatory requirements.

Dong believes that with these special mechanisms, it would take around 10 years to complete the urban railway network in the two cities.

A train conducts a test run on Hanoi’s Nhon – Hanoi Station metro line in 2022. Photo by VnExpress/Pham Chieu

Attending the workshop online, Vu Minh Khuong, a lecturer at the Lee Kuan Yew School of Public Policy in Singapore, presented data showing that delays in urban railway development significantly impact the socio-economic development of each country.

For example, traffic congestion annually causes losses of US$11 billion in New York, $8.2 billion in Los Angeles, and $7.6 billion in Chicago.

For Hanoi and HCMC, Khuong estimated a minimum loss of $2-3 billion for each city.

HCMC’s master plan includes eight metro lines and three ground electric train lines (or monorails) totaling about 220 km, with an estimated investment of nearly $25 billion.

Currently, line No.1 (Ben Thanh – Suoi Tien) and No.2 (Ben Thanh – Tham Luong) totaling over 30 km have been implemented using official development aid funding via the central budget. The remaining lines have not yet received investment.

As for Hanoi, its master plan said the city would have 10 urban railway lines, including nine main lines and one connecting satellite towns, totaling over 400 km.

However, to date, the city has only completed and put into use 13 km of the Cat Linh – Ha Dong line and is constructing 12.5 km of the next line that will run from Nhon to Hanoi Station.

At a city council’s session on Dec. 7 last year to discuss on urban transport, Hanoi chairman Tran Sy Thanh stated that the city recognized the issues with urban transport and has designed policies in the amended Capital Law to generate resources for infrastructure, including the metro.

“If we continue to build one metro line after one metro line, it will take 100 years to complete the 12 planned lines,” he said.

Around 10 days later, HCMC chairman Phan Van Mai addressed the same issue, also saying the city could take 100 years to complete the 200 km of metro routes it plans if policies were not changed.