Vingroup Withdraws from $67-Billion Railway Project
Vietnam’s largest conglomerate, Vingroup, has announced its decision to withdraw its investment proposal for the nation’s $67-billion North–South high-speed railway project. This decision was made to concentrate on other projects, following a reassessment of resources after being awarded major national projects.
Background of the Proposal
In May, Vingroup submitted a proposal for the 958-mile railway linking Hanoi and Ho Chi Minh City, promising to self-fund 20 percent of the project while seeking an 80 percent state-funded loan at zero interest over 35 years. However, the central bank expressed concerns over Vingroup’s high leverage and lack of experience in rail infrastructure, warning that the loan request and required guarantees could pose risks to banking stability.
Concerns and Criticisms
The finance ministry also flagged the proposal’s zero-interest terms and 30-year debt repayment schedule, servicing only at maturity, as equivalent to a state subsidy that could impact Vietnam’s credit ratings. These concerns, along with the need for "special state guarantees," indicated that the proposal might not be feasible.
Impact on the Market
The announcement of Vingroup’s withdrawal led to a decline in shares of Vingroup and its units, including developers Vinhomes and Vincom Retail, which fell 7 percent, and hospitality firm Vinpearl, which was down 3 percent. This decline dragged the benchmark index down 2.24 percent.
Other Interested Investors
In addition to Vingroup, other investors, including auto industry company THACO, Vietnam Railways, and Vietnam Investment and Development Group, have shown interest in the high-speed rail project. The government has stated that the winner of the North-South railway will be announced in January.
Conclusion
Vingroup’s decision to withdraw from the $67-billion North–South high-speed railway project allows the company to focus on delivering other large-scale initiatives. The withdrawal is not expected to impede the project’s progress, and the government is set to announce the winner in January. This development highlights the complexities and challenges involved in large-scale infrastructure projects, particularly when it comes to financing and risk assessment.
